Markets work on cycles; investors tend to be illogical and follow each other. Thanks to Sam Bankman-Fried, investors have realised that crypto is not money. Thanks to the collapse of British Volt, which 12 months ago was touting a £2.6bn investment, we know the default of the ESG $41tn market is underway.​ 

Jonny Mulligan

Markets work on cycles; investors tend to be illogical and follow each other. 

 investors have realised that crypto is not money. Thanks to the collapse of British Volt, which 12 

months ago was touting a £2.6bn investment, 

This is what economic and investment cycles are about; we are at the end of phase one, which will clean out a good chunk of the greenwashing grifters. The hubris of capital will continue to try and manipulate climate science and ecology; this year, their “green” portfolios will take a hammering. To win in this market, you need to respect the science and figure out what side of the transition you want to be on and cut through the spin.

The short-term could be better for retail investors, who were 

already down by 25% from misselling of article 8 and 9 funds valued at $4.18 tn.

 Significant knock and reduction of public faith in the climate transition. The long-term good for the science community, the real innovators and investors who base investment on fundamentals and capital returns and use climate science to indicate the long-term value will prevail. The burning of the greenwashing grifters in this cycle eliminates the short flippers with no interest in value, returns and climate transition.

Greenwashing grifters are not new. All markets at the start or end of the cycle attract parasites and voodoo-type characters. This is a bubble market like a dot com boom, a Dutch tulip market, and it is essential to get on the right side of the transition. While climate and biodiversity loss are real, and we need to respond urgently. Transition or successful response to climate can only be achieved with a significant shift in the current market understanding of the economic transition driven by climate. The simple fact is that science and capital are two different things. They influence each other but never touch; they interact but maintain different volumes. One is alchemy and chance the other is based on fact and reality.

Unfortunately, arrogant-bloated P.E. firms and ridiculous V.C. bets have dominated the last five years of the climate debate. The three letters ‘E. S. G’ rapidly became an indicator of significant fantastic-sounding initiatives; it didn’t matter as long as it sounded important, confusing, and costly.

It’s interesting watching the name call of ‘contributors’ to natural capital conferences and COP climate debates. All credible climate scientists focused on system change have been squeezed out of the discussion.

Attending these conferences is dull as all the prominent consultants and corporates have a shallow understanding of science and context and discuss ecology in accountancy terms. There is no debate because they have all paid so much sponsorship to attend. Still, watching the endless discussions about frameworks and disclosure is interesting as it is significant, while it needs to be more effective. That is, if the intention is to drive innovation and capital to address climate and biodiversity loss; if not, it’s an effective delay to addressing the real issues.

British Volt was founded in 2020, once valued at £700m

, promising a future investment of £2.6bn and 3000 jobs. This week it crashed with no product, revenue, identifiable I.P., a bunch of MOUs and announcements about future things and a 118-page website, 100 of which are all ESG. Apart from sucking up £100m of public money, the board’s most considerable success was the P.R. churn and the number of releases on its website. In the old days, one would promote something they had done or achieved, but that’s all changed. It’s all about what might or might not, and the story changes again. Exhausting.

The reality is that pure P.R., hype, and spin drive bubble markets in crypto and ESG. These grifter tools diverge from the underlying or lack of investment case. In truth, it is the playbook of 80% of the current significant ESG investments. When looked at cold and after the event, it is ludicrous. 

It’s as mad as someone flogging a trust barometer talking about purpose and meaning and addressing climate as a burning concern at Davos

. Trust cannot and will not be this fella’s legacy. He’s another greenwashing grifter. His revenue has come from the 

climate denial section of the capital markets and the fossil fuel

 industry, which is the baseline driver for all climate and biodiversity loss. In balance, having a client 

who knew about the climate crisis in the 1970s

 and then started denial must provide some significant insight. Good for him; maybe outright delusion, hubris, and Orwellian double-speak are the way through the polycrisis. (Which I note is the new Davos buzzword, which will generate a whole slew of analysts’ reports and nonsense)

We see the same thing again and again in carbon capture and storage, clean tech, hydrogen etc. — hard-driven P.R., buzz words but no investment case, proof of concept or science-based facts. This is not unique. Only eight months a

go, Sam Blankman was sitting in shorts in the Bahamas

, selling the crypto illusion. Looking at the big announcements by wall street and P.E. firms is interesting. Dig deep. There is not much substance. The technologies are not based on context materiality or system change; if anything, they are cut from a 12-year-old kids’ school science book. Yes, there might be some merit in the idea, but the R&D curve is longer than the curve for climate action and any actual ROI. (The IRR is always fantastical). Technologies do not develop or respond to the bonus cycle or the fund managers. Science is unpredictable, iterative and takes time; it can’t be worked out on junior analysts’ excel sheets to boost a fund’s AUM or flog more sustainable pensions.

At some stage, British Volt pulled the old trick of putting a few titled people who did something in finance, industry and commerce and put them on the board. This was the cart before the horse, as the company had no product. The focus was to scale lithium batteries at pace; this is physics, challenging stuff, and takes time, R&D, and patience. So why not pay top university scientists to dig into the problem and develop the product before the marketing and the spin? (On the plus side, after all that P.R. and Greenwashing, those board members are well prepared to join 

that fella at Davos with his trust barometer

Over the last 12 months, various fund managers and investment banks have called me asking if British Volt is a good “ESG investment”, a stupid question. The real question is how long and what is the potential of commercialising lithium batteries and who will buy them if achieved. 

The other is the real ecological cost; these technologies are not an elixir

. Nevertheless, it reminded me of when I was in the room when the fella from “we work” came in with a slide deck of office buildings trying to say it was a technology company. He got away with it, more because of the embarrassment of the Soft Bank Group, but he did get away with it.

Unfortunately, there is no such thing as ESG; If you’re on the right in the U.S., it’s about anti …. well, everything and hard even to decipher. If you’re an accountant, it is trying to put a capital figure on something you think is a risk, but you need help understanding. If you are in an ESG rating agency, it’s about scrapping data from a company website and blackmailing clients to pay you for something they don’t even understand.

The markets need to stop subverting climate science for their gain. Some companies and technologies may or may not reduce climate, carbon and biodiversity loss, and others will not. Likewise, some companies may or may not hold their capital value as climate and biodiversity factors continue to rocket and those that will not. These are two very different valuation tools, risk lens and investment decisions.

In the short term, we will see a significant default and collapse of many of these ESG unicorns. They will run out of money; the crash will disappear. One must feel sorry for the employees and the investors who fell for the dream. Like the tech sector, they put their lives in the hands of this latest wave of chancers, But the market and individuals are getting smarter.

Unfortunately, this does not help the climate, fires, and biodiversity loss, and my climate science colleagues tell me in absolute terms that the planet has started cascading past 2.7C. This fact was verified by one of the most anti-science, 

climate-denying papers in the UK and the world.

 The positive is that in any market is that when the greenwashing grifters with their trust barometers get cleaned out, the wise, grown-up, more educated investors join the market. I am starting to witness this trend which makes sense.

Trust in science will drive investor trust

Investing is about trust, which trust barometers will never buy. Investors who want to invest in a science technology that will fix climate want to talk to scientists and ecologists. Not the fast-talking street kids flipping deals in time for bonus season. Why would someone who is smart join and take a nonsensical market based on ESG ratings which have contaminated any valuation? Why would a sensible investor back a £2m bet in a Mexican forest that may or may not exist?

ESG ratings are for companies on the point of demise

Why would a logical person invest capital in a company that has bought an ESG rating for

 50,000 dollars and masquerades and doing something good or green? While the reality is that the asset is in sunset mode, and using 152-page disclosure documents with windmills and a myriad of important-looking numbers will never hide the reality that it is a bust. Given its time and where we are in the climate transition, these companies are too large to change and too slow to adapt to their supply chains being burned and destroyed by climate fires. This is all that ESG ratings are. They are not a measure of value; they are a measure of demise, and the asset is already in demise. It takes a lot of those trust barometers to flog these sorts of assets, and the fella investing in them needs to be in the trust barometer echo chamber, or he’ll spot the con.

Stick to the fundamentals to make returns

To make returns in this market, you must understand that ESG is not an investment thesis. Instead, climate science needs to be the primary valuation tool. System change is the critical asset identifier. Then stick to the fundamentals. Companies only survive and provide investor returns if the investment fundamentals are in place. Then, they produce products that will sell in the market.

P.S. Never trust a grifter with a trust barometer; trustworthy people don’t need to advertise or promote their trust.

illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

British Volt £2.6bn sparks out - this is the start of the $42tn ESG default

Capital decisions and outcomes have again trumped climate. The Glasgow Financial Alliance for Net Zero has had problems from the start. If crucial questions on its integrity and objectives are not answered, it risks being nothing more than a misdirection project.

The judas moment Mark Carney faced with the leaders of certain global banks is a significant personal knockback. The 

by Tom Metcalf, Alastair Marsh, and Natasha White which broke the news, was short. The real story is a little more detailed and confirms months of rumours and whispers circulating within policy circles of the sustainable finance industry of London and New York.

At the time of the announcement at COP26 - UN Climate Change Conference, 

project. Over the last year, it is apparent that climate and carbon scientists have been battling with the capital markets side of Glasgow Financial Alliance for Net Zero (GFANZ). Behind the scenes, via the political lobby, the pushback from banks has been to water down the UN Environment Programme 

 Thus allowing the banking sector to keep coal in their portfolios and remain members of GFANZ. The 

August 2022 intervention of Carney, Mike Bloomberg and Mary Schapiro was ignored, and banks doubled down on changing the rules.

In a week of contrasts, U.N. secretary-general António Guterres

all developed economies to tax the windfall profits of fossil fuel companies”

 it appears the financial sector wants to retain the right to provide them fresh capital. If true, there is a significant credibility gap with the financial sector’s commitment and honest desire to fix the climate challenge. If you are serious about climate, you can’t be serious about making money out of coal.

Carney has undoubtedly been sold a kipper. Yet, I believe he has integrity and needs to be supported. What is revealing is how he was hung out to dry by certain sections of 450 global banks representing $139tn of assets which make up the GFANZ consortium. It sets up the questions which need to be asked first of Carney, then of the banking consortium and goes to the credibility of the whole project.

Should GFANZ be considered a serious solution for solving climate change?

Who asked or influenced the U.N. to roll back its race for zero and GFANZ membership and target plans, which include a requirement to stop funding coal?

What tangible evidence can the GFANZ consortium provide demonstrating the reallocation of capital?

Should we continue to engage with GFANZ and its consultations, or is it just a playbook to delay the climate transition?

Another knock to the integrity of the financial system

2022 has been another bad year for the credibility of the banking industry in the climate space. While some genuine teams and professionals are trying to do good and can be trusted, there are not enough of them. The sector continues to be in the theoretical mode, with promising headlines, while climate requires action. The lack of movement is evidenced by the paltry level of actual climate disclosure any member of GFANZ has publicly made.

Tariq Fancy and Stuart Kirk dared to step out of the machine and call out the evident failings. Desiree Fixler went further with the DWS Group 

greenwashing revelations to lift the veil on the sector’s cognitive barriers.

 These are significant moments from people I believe will be recognised as contributing more than many of their former colleagues in addressing the capital markets approach to climate change. They can not be ignored as they were inside key institutions. They took on financial loss, personal pressure and professional discomfort to provide greater insight into how the investment and banking communities address climate.

The banking sector has failed with basic assurance

Academics like Daniel Cash, Julian Kölbel Florian Berg and others have long challenged the utility of ESG ratings for having any connection to climate science or impact. The industry has remained silent over the practice of ESG rating agencies. It is widely understood within sustainable finance that ESG ratings are a fallacy. These illusionary reports will never deliver the double dividend of capital and reducing climate impact. They enable market gaming and ‘greenwashing

. Yet ESG ratings remain the primary tool (access point to capital) that GFANZ banks use to construct ‘ESG’ capital transactions, funds and sell ‘green bonds’ to their clients. On the plus side, there have been some 

“greenwashing raids” and litigation cases by regulators 

on certain financial institutions. Still, the collective silence from GFANZ members on these crucial issues remains dense.

Most people know the next part, but it’s essential for the record. The excuse of ‘concerns around’ legal issues is a diversion and an insult to the informed. The bank’s calculations are based on the cost of ‘stranded assets and the loss of capital returns from coal. If the sector is to achieve any of the GFANZ net zero or 

 the industry needs to wean itself off the current boom of fossil fuel extraction. High inflation, the energy crisis, increasing interest rates and a falling stock market are straight-line profit decisions. Put simply; there is more profit and less risk in fossil fuels than in climate transition. Capital decisions and outcomes have again trumped climate.

System change is too hard for the banking and finance sector

Since the launch of GFANZ at COP26 - UN Climate Change Conference, 

the planet has blown through seven of the nine planetary limits.

 We are at a higher than 50% chance of going past 1.5 C, and some analysts and scientists, including Pietro Peter Altermatt in a 

 believe we already have (A fact, ecologically and economically more severe than any other, that received less media coverage than the GFANZ PR launch).

The GFANZ members have to leave money on the table

In the period since the hyperbolic announcement of COP 26, the banking consortium has realised the decarbonisation and system change of large companies and assets is tough. Their internal analysis demonstrates it is either:

a. unprofitable or impossible while maintaining current levels of capital return, or

b. their risk committees are too scared to shift capital allocation and invest in the more minor low-carbon innovations and companies that will drive the transition.

Either way, they must leave the capital on the table, hence the backpedalling and the lobbying to keep coal in their portfolios.

The reality is that from the start, GFANZ has been a utopian dream. If the objective was for banking CEOs to dominate the headlines and COP 26, it was a success. The PR machine and the hyperbole that has been polished indeed sounded sincere. Going through the details of the stated targets of GFANZ, there is a realisation that the project lacks credibility. There is little evidence that it is anchored on science-based metrics or ecological realities. The science-based methodology used to measure the GFANZ member's path to net zero remains an enigma. No gradual cap on the use of carbon credits, which enables banks to outsource carbon with no system change, has been published. The primary data sets that enable the GFANZ transition plans remain unclear.

I know some of the GFANZ team’s work and the banking side’s contributors. They know the science and capital markets. They get climate and understand the issues. These are talented, bright people, many of whom I trust. Which is why the cognitive and intellectual shadowboxing resplendent across all the GFANZ reports and consultation documents is puzzling. The documents lack anything new. Where is the obvious line comparison between capital input and climate reduction output?

No revelation, no purpose, no direction setting

At this stage in the game, the IPCC and climate scientists have identified the problem and the solution. The only job for GFANZ is to direct the capital. Unfortunately, the ‘insights’ provided by GFANZ offer no direction or agenda setting on this critical point. 

The most recent document on transition plans is nothing more than a rehash of TCFD or a reworking of the old circa 2010 output produced by the Carbon Trust in the U.K.

What’s the fundamental objective of GFANZ?

At this point, the supporters and signatories to GFANZ need to question the fundamental objectives and outcomes. With an army of consultants and a consortium of banks sitting on $132bn for decarbonisation, why are the output and ideas so mediocre? Are we doing coal or climate — because we can’t do both?

Is GFANZ part of a ‘misdirection’ playbook?

It has been suggested in some quarters that GFANZ is nothing more than an elaborate shop front, a climate delay mechanism and or what the 

 have termed ‘misdirection’. (Misdirection’ is to focus the audience’s attention on engaging topics unrelated to companies’ core business operations)

Knowing some of the individuals and some of the better climate banks involved in GFANZ, I hope this is not true. However, given recent events, some might be correct in thinking the financial industry, and indeed the GFANZ advisors, have adopted the ‘tobacco, oil and gas playbook’ to distract, delay and dissuade.

Given its size, the reverence extended to the personalities, and the capital GFANZ can leverage to promote and market itself, the project will continue to gain headlines. The events in 

 leave more questions to be answered and leave a significant credibility gap for all involved.

. Illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

Carney’s New York moment questions the credibility of GFANZ. Is it coal or Climate?

Jonny Mulligan is the Founder of The Martello Advisory Capital and M&A Advisory. Our mission is to use science based metrics to direct capital to the innovative impact businesses and projects that will drive the transition to the low carbon, low climate impact economy.

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Carney’s New York moment questions the credibility of GFANZ. Is it coal or Climate?

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