The ESG Canary

The ESG Canary

On this Delta flight to Atlanta we are in the new first class configuration. There are things to commend it and things not to like. On the plus side, everyone has their own cubicle with a big-screen TV. I cannot see anyone in total, just a small slice here and there, except for Kim, who is across from me in the center section. If she was not with me, there would be the center partition to put up and keep things private for me. Those are the good things. The bad things are that these seats are just Ike the Jet Blue lie-flat seats, they are like sitting on a board and they are narrow to the point of just being wide enough to fit into, but certainly not luxuriate in. I think I prefer the older, more plush, less private and less lie-flat seats of first class, but, hey, that’s not my call anymore. If I can fit, I can make it through any flight. I don’t sleep on planes anymore anyway.

Directly in front of me is a young man traveling with an attractive young woman who is sitting in front of Kim. I first noticed them while boarding because they each took the complimentary sanitizing cloth and spent a long time wiping down every nook and cranny of their cubicles. Kim handed me a wipe and she and I wiped a few surfaces, but nothing like what was going on in the row in front of us. This guy has on a black tank top and has the 20-year old physique to make that look work for him. I haven’t really noticed the woman, but the guy is hard to resist from an imagination standpoint. What I mean is that everyone has a story and I, like many people, like to imagine what some people are about. What makes this guy so interesting is not just his body and look, but also his clean-freak habits and his hair. He has one of those closely-cropped sidewall haircuts with a bit of a mullet under his black backwards cap. He’s wearing a black N-95 mask, as any style-conscious and germaphobic dude might do. But a little later I see him without his cap and he’s sporting sort of a full Mohawk. No visible tattoos (they are so 1990’s), but a Mohawk. When I see a guy like that, I can’t help myself, I assume he’s got a rich father who is sponsoring the first class travel. Dad lets him cut his hair like he wants, but would not approve of physical disfigurement with body art. I know he could be a musician or just a very savvy day-trader, but I always assume he is a son of generational wealth rather than self-made. I’m sure I am as wrong as I am right, but that’s where my mind goes.

If I am right, this kid is due at some point in the next ten or so years to come into some meaningful portion of that $12 Trillion of wealth transfer that is just around the corner as the baby boom generation shuffles off their earthly coil. I spent six years running a global private bank, so I had lots and lots of time and opportunity to think about the wealth transfer phenomenon. We even ran a program called Wealth With Responsibility that was a way of offering a softer-side service to our wealthy clients to help them with wealth transfer issues, philanthropy and how to pass along their better values to their descendants. It’s probably one of the reason I always liked the George Clooney movie, The Descendants. It deals with the pangs of inherited wealth and the responsibilities that come with it. Inherited wealth has been an issue for me ever since. When my mother died a few years ago, I told my sisters I didn’t want any of it (it wasn’t really a vast estate since my mother lived to 100 and never had that much anyway). I wanted to avoid any squabbles with my sisters and since I probably had more than they did, it was easier and better for me to just let them have it. It also allowed me to maintain my position on my high horse that I don’t care for inherited wealth and that it doesn’t do anything for kids but fuck them up. I didn’t mean that about my sisters, but I generally believe kids only find happiness if they accomplish things so that they make their own wealth. I’m sure that’s far too much of a generalization, but I tend to think that way.

Last Fall while teaching my Advanced Corporate Finance course, I had a guest lecturer who is a friend from our motorcycle group. Her name is Ann and she is now the Chairman of a large, public company. She was speaking to the class about the difference in public company finance since her background is that of being a CFO. I also expected her to cover some governance issues which only a public company board member might be able to impart. She did a good job in the class (teaching was something she had not done a lot of prior to that) overall, but what really jumped out at me were her comments about ESG. ESG is one of the hottest acronyms in the corporate world these days. It stands for Environmental, Social and Governance issues and it is the new standard for corporate policy, strategy and culture. It is about corporations acting responsibly. What Ann told the class was that it was a very serious issue to public boards and therefore to public company management. During my career, socially responsible investing or green investing was certainly a “thing”, but it was a “nice to have” rather than a “need to have”. In those days, such socially responsible investing came with trade-offs to profitability, so companies had to really want or need to go there. Ann implied that had changed and that the reason it had done so was that young investors who were the recipients of their piece of the wealth transfer pie cared about the principles of ESG, whether they were environmental or social or some combination.

I’m not so sure I believed that at first, but it was very meaningful that someone in such an important and powerful position, someone with a CFO orientation that was steeped in the ways of serving the shareholder over other stakeholders would take such an “enlightened” view. My conclusion was that the issue deserved more exploration. As I began preparing for this coming semester’s course on Law, Policy and Ethics, a mandatory course at USD for all MBA students, I read some other syllabi to get my bearings. I didn’t see ESG on those syllabi, but I saw topics that sounded a lot like the broad definition of ESG issues. So, I decided to add ESG as one of the fourteen lecture topics for the class since Ann thought it was such a big corporate policy deal.

That has caused me to start reading up on the subject so that I can be sure to formulate for the students some quality discussion about it. I have lined up three guest lecturers, a conservationist working to return the bighorn sheep population to the wilderness in Colorado, an ex-flight surgeon (Air Force Colonel, retired) who is all about public health, and an entrepreneur who built a business helping companies measure and guide their corporate culture. I have also read everything McKinsey has recently published on the topic, and it has all pretty much blown the top of my head off. Things have come SO far in this arena that I almost think Ann was understating it. It isn’t just important, it is imperative to the corporate future.

And here is the thing that makes me say that ESG is the canary (as in the canary in the coal mine). When corporate America (which is probably behind the curve of corporate Europe and yet probably ahead of the curve of corporate Asia) cares this deeply about the concerns of the younger investors of the world and that E, S and G are what they care about, then there is hope for our world yet. It is easy watching the Republican Party go into deep denial on social responsibility, democracy and even the truth overall and then get feeling that we are regressing and there is no hope for humankind. But wait, as goes General Motors (or maybe Tesla today) goes, so goes the nation. There is hope for us yet. I feel better knowing the guy with the Mohawk is being COVID careful and will someday be telling his investment managers to divest big oil and anyone NOT sponsoring democracy.