The Good, the Bad, and the Ugly

    Remember that breathtakingly cinematic sequence at the end of The Good, the Bad, and the Ugly, set to Morricone’s impeccable score? As with most Westerns, the long build-up culminates in a standoff. But it is not between a traditional clear-cut hero and a villain. It is between the titular trio: the (good) Man with No Name, (the bad) Angel Eyes, and (the ugly) Tuco[1]. Fascinatingly, even the ‘good’ one in this scenario is an antihero.

    It might be the relentless July heat and the buzz of an obstinate fly that transport my thoughts to the dusty Wild West. It is, however, the way the movie explores those moral grey areas on the American frontier that makes me think about that other (green)field, the relatively new world of sustainable investing.

    Browsing through the ESG-related news on a quiet high-summer week has its advantages. Rather than skipping the more detail-oriented reports and registering just headlines, there is time now to delve into examples. And the reading provides plenty of grey areas to explore, all pertaining to this new frontier of ours.

    What would you call, for instance, the L&G ESG China CNY Bond UCITS ETF? According to Alan Miller, CIO at SCM Direct, it should rank somewhere on the scale between bad and ugly. His verdict is unequivocal: “brazenly greenwashing and misleading investors.” The ETF holds precisely the same four Chinese government or quasi-government issuers as a typical non-ESG China government bond ETF, namely bonds issued by the Government of China, China Development Bank, Agricultural Development Bank of China, and the Export-Import Bank of China. “What fundamental ESG difference does it make anyway if you simply tilt between four different issuers of bonds, all of which are 100% Chinese government-owned,” wonders Miller. A highly relevant question indeed.

    On a different note, veteran fund analyst and investor Simon Evan-Cook, argues eloquently for the “goodness” of a mining fund of all things. The fund in question, Konwave Transition Metals, focuses on companies mining the raw materials needed to transition our economy from carbon-heavy to carbon-light, yet has “filthy ESG scores.” He laments the way all miners are being treated as villains by ESG-minded investors and urges us to remember that “if they don’t dig this stuff out of the ground, there won’t be any Teslas.”

    “If we blindly screen low-ESG-scoring funds out of our portfolios, we have to exclude this fund. In doing so, we hinder the fight against climate change and miss the chance to make good returns in the process. How is that right,” concludes Evan-Cook, posing another highly relevant question.

    Back in the old West, citizens were well-advised to look beyond the “Wanted: Dead or Alive”-posters and try to make up their own minds whether they should side up with a potentially crooked sheriff or root for an outlaw fighting for justice. Maybe we could learn a thing or two from them.



    [1] You might remember Tuco’s famous words, by the way, “If you work for a living, why do you kill yourself working?”


    Julia Axelsson, CAIA
    Julia Axelsson, CAIA
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.

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