Last month, the Financial Times’ Moral Money and Unhedged newsletters featured the so-called whistleblowing of Tariq Fancy, ex-head of Sustainable Investing at Blackrock, who left after a year’s tenure in early 2018. “The whistleblower who calls ESG a deadly distraction,” and “The ESG investing world is dangerous,” were based on Fancy’s three-part essay posted on Medium, The Secret Diary of a Sustainable Investor.

Robert Armstrong’s precis in Unhedged does Fancy a favor by unearthing his main points from the original essay (Exhibit A for the world’s desperate need for editors) and making a few he didn’t. To summarize:

• ESG investing volume is too small and weak to make any difference in the vast and socially impassive market
• A single investor’s funds are generally irrelevant and therefore powerless to really change anything
• Corporations aren’t going to change from primarily profit-seeking organizations to social benefit organizations
• That ESG is a dangerous distraction from effective climate change fixes such as a carbon tax, which people aren’t spending time on because they think their retirement savings are doing the job
• Fancy describes ESG as “wheat grass for a cancer patient”

ESG/impact investing/social investing is one piece and only one piece of a larger effort to alter incentives up and down the economy.

My observation is that most people who have long-term experience in this field would agree with aspects of most, if not all, of his points — the moral hazards, the inadequacy of accounting and reporting standards, the bare-knuckled, fraudulent cynicism on the part of the Business Roundtable and similar organizations, the lack of credible metrics, the overriding need for regulation – including, prominently, a carbon tax and the detachment of money managers and their clients.

Credit: Oscar Pozuelos

Fancy’s learning curve must have been too steep. It appears that he had little or no experience with any form of social/impact/ESG investing when he arrived, and, one year later, he managed to develop some critiques that are old news for veterans in the field. Thus, Fancy’s “secret diary” is an account of an opportunity squandered: while the critiques are known headwinds, most advocates would have disagreed with his conclusions about the “so what?” and the “now what?”

If we don’t adopt global accounting and reporting standards, for example, we won’t be able to regulate, because nobody will know what constitutes a basket and how many points you get for one, and for that matter, how big the court is and how long the game.

On that account, Fancy has nothing to say of much utility. ESG investing is keeping us from passing a carbon tax? Really? Let’s face it, while a carbon tax would be great, the U.S. Government has been unwilling or unable to act on climate basics, let alone a new tax. The reality that Fancy skates over is that we don’t have many viable options at this point, especially in this era of Citizens United. Enlisting big companies, including investment managers, pension funds, and sovereign wealth funds to the cause is one option, however inadequate or seemingly naive. They have access and outsized clout. State and local government and civil society is another, also inadequate by itself. Enlisting the help of some of the people who have been in the bureaucracy (yes, civil servants) and can enforce existing regulations is another. And yes, accounting, reporting, and invoking existing SEC regulations stack up to another — i.e., changing the infrastructure of the market. And extra-U.S. actors such as the European Union are regulating, and that will change companies and markets globally, including here.

Fancy should know that without the right infrastructure in place, the carbon tax will be an unenforceable red herring. If we don’t adopt global accounting and reporting standards, for example, we won’t be able to regulate because nobody will know — to borrow his bloodied basketball metaphor — what constitutes a basket and how many points you get for one, and for that matter, how big the court is and how long the game. There certainly will be no credible referees on the court. This is a “both/and” not an “either/or” moment.

While Fancy paints a picture of widespread derision among BlackRock’s rank-and-file investment management denizens, the piece leaves me with the uneasy feeling that his main point is that BlackRock’s and the investment world’s culture is greedy and shallow (but he, personally, is not, so he’s telling the world), and that this cultural imperative carries over to ESG. This is hardly “whistleblowing,” or even faintly surprising. And it’s disappointing that even given a difficult culture and his apparent unfamiliarity with the field, Fancy apparently was unable or unwilling to use his power or the substantial expertise on ESG within BlackRock to make positive change. Let’s hope that by simply publishing his “Secret Diary of a Sustainable Investor,” there will be more impetus behind broader efforts to do just that.

To me, ESG/impact investing/social investing — and just plain old investing, for heavens’ sakes — is one piece and only one piece of a larger effort to alter incentives up and down the economy.

An alternative? To use his clout and position (or even his diary) to move the field forward. For internal influence, Fancy could have tried to persuade (or found others who would persuade) Larry Fink to double down and organize his buddies (and the BRT) to lobby Congress for a carbon tax, to push for real climate regulation and require the immediate adoption of rigorous ESG accounting standards (SASB’s The Value Reporting Foundation and GRI, for example) for public company reporting, at the very least on material risk, which securities laws now require. And he could have been in touch with and working alongside others who also see the flaws but are forging ahead.

To me, ESG/impact investing/social investing — and just plain old investing, for heavens’ sakes — is one piece and only one piece of a larger effort to alter incentives up and down the economy and make forward motion to improve things, including what the current form of capitalism (whatever that is) looks like. Virtually all of impact investing’s long-time advocates think regulation of investment products, the market (in particular, carbon pricing), and the underlying enterprises that make the impact is necessary. We must push ahead on all avenues — all of which are imperfect — given the dire nature of the wicked, systemic crises we face.