Essay by Eric Worrall
Did Stuart Kirk’s presentation strip away a legal defence of feigned ignorance from financial advisors who sell dubious green investments?
Imagine if hypothetically in the early days of the frenzy which led to the GFC / Subprime Mortgage Crash, a senior banker had very publicly announced everyone who invests in Subprime mortgages would eventually lose their money, had explained in detail what the problem was, and had concluded that based on their carefully reasoned argument the investments had no genuine value. Then in 2008, when all the spinning plates crashed, everyone who purchased subprime mortgage products could have sued to get their money back. Bankers who sold subprime would have been open to accusations from lawyered up clients that they committed fraud, that they knew some of their clients would lose money, before they sold those high risk subprime financial products.
Stuart Kirk’s broadside attack on the green investment industry may have done just this to the green investment industry. His attack may have stripped financial advisers who sell dubious green investments of their legal cover.
Why HSBC’s response to Kirk’s climate speech was damaging to responsible investment
In a bid to manage the PR fallout from the explosive presentation on climate change by head of responsible investment Stuart Kirk, HSBC’s blunt response may have done more damage to public discourse than his comments themselves.
By Daniel Flatt
May 26, 2022 updated 27 May 2022 9:56am
- After Stuart Kirk, HSBC Global Asset Management’s head of responsible investment, argued that climate risk was overplayed, his comments were swiftly disavowed by HSBC’s top executives and he was suspended.
- Many are sceptical about the assertions by HSBC group CEO Noel Quinn and others in the leadership team about the group’s view on climate risk and its commitment to achieving net zero.
- Several institutional investor groupings preferred not to comment to Capital Monitor on the situation, but Kirk had raised several important points worthy of further debate.
What a difference a 16-minute presentation on climate change makes. The now-infamous speech by Stuart Kirk, head of responsible investment at HSBC Global Asset Management, last week on why investors have more things to worry about today than they do in 20 years’ time might well be remembered for a similarly long period.
What is less likely to stick in the memory is the financial group’s response. It should do, though, because it was an equally brazen act of self-defence that will have wider ramifications for how financial institutions tackle public discourse on climate change.
Without raking over the finer details – as has been done expansively already – we will underline one thing: Kirk made it abundantly clear he believes climate change is real, but it is not a financial risk worth worrying about.
The resultant public outcry was huge. Many investors and climate experts – and others besides – voiced their horror on social media at what they felt was an ill-conceived point of view. What’s more, existing and prospective clients of the firm are seen as likely to increase their due diligence of asset managers’ climate strategies as a result.
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Read more: https://capitalmonitor.ai/opinion/hsbc-response-to-kirks-climate-speech/
If you haven’t watched Stuart Kirk’s presentation, I strongly urge you to do so – it might not be there forever.
If Stuart Kirk’s devastating accusations are correct, in my opinion his words could be interpreted as suggesting the inputs to financial models which predict a demand for the climate investment products currently being sold are being heavily manipulated to produce a preconceived outcome. Stuart appeared to claim he is being “pressured” to add unrealistic assumptions to climate financial models, to “move the needle” on predicted economic harm from climate change.
If there turns out to be no genuine need for green climate investments, and that fact was hidden because as Stuart seemed to suggest, bank financial models are being heavily manipulated to create a fake impression of need – Stuart has effectively let the cat out of the bag.
Stuart’s presentation means there is public domain evidence of problems. Financial advisors can no longer claim they were as surprised as everyone else, if the value of the green investment products they are selling collapses.
Anyone who loses money on green investments potentially has a strong case, if they try to sue their financial adviser to get their money back. All they need to do is point to Stuart’s presentation, and argue that anyone with expert knowledge of the climate investment industry should have been aware there were problems, at the time the investment products were sold. At the very least Stuart’s presentation is prompting “increased due diligence” – more detailed oversight of the assumptions which are being fed into the future value projections of climate investments.
Note I’m not an investment advisor or a lawyer, so please don’t quote me on your lawsuit – but I think there is a real possibility that when people look back on the history of green investments, Stuart Kirk may quietly be recognised as the hero who saved us from the worst of the coming green GFC, the banker who put the pebble on the rails of train green before it reached its full potential as a global economy wrecking investment bubble.
Stuart, you’re my hero mate.
So now many more investment managers will be able to say “RCP 8.5” with real feeling!
He’s wrong about what he calls “the science”, as well as our “need to adapt to climate change”, by which he means “manmade climate”, which doesn’t exist. But at least he pooh-poohs the idea of a “climate emergency”.
Supposedly really smart folks making mega bucks off of a “science” which has no basis in reality, as being the fault of humans and controllable by just the right application of technologies not yet invented nor proven.
Quite simple, really. Stuart Kirk just exposed another element of the scam, and it will likely kill it for the entire field of grifters.
Hopefully, he has good security cuz they will come after him. One way or another. Kirk has destroyed their cash cow and they must make an example of him.
Just sayin’.
Speaking of fraud…
https://www.cfo.com/risk-compliance/2020/01/solar-firm-owners-charged-with-massive-fraud/
BLM must have used this scam as their template.
“.. are being heavily manipulated to produce a preconceived outcome.”
This tactic has worked incredibly well with regard to making junk science seem legitimate, so its application to junk investments is not surprising.
For the sake of general prosperity, I wish Start Kirk’s presentation was significant, but I don’t think it was. ESG investors are there to get their share of political redistribution of wealth, and “moral money”, etc. is just window dressing. The only thing I would do as an investment manager is add some sort of disclaimer about “scientific uncertainty” and, as always, keep my eye on the nearest chair for when the music stops.
ESG – Emissaries of Satan’s Gloom
Due diligence is malignant cancer to the false narratives fraudsters are pushing. Cancelling sane voices like Stuart outs them as swindlers.
The brainwashed need to be taught that censorship only serves to retard human development. Those who engage in it are supporting authoritarian control to the detriment of freedom and well being.
“Imagine if hypothetically in the early days of the frenzy which led to the GFC / Subprime Mortgage Crash, a senior banker had very publicly…explained in detail what the problem was, and had concluded that … the investments had no genuine value.”
We don’t have to imagine as Peter Schiff’s now infamous speech to the Mortgage Bankers of America conference in 2006 clearly spelled it all out. Worth watching if only to see how nobody learned much from that collapse!
Watch his brilliant forecast here. Amazing economics lesson.
Correct, and many Wall St. firms WERE SUED successfully, because they had different departments in the same company pushing the CDO’s (Collateralized Debt Obligations) to one group of clients as good investments while another department was warning other clients that they were bad investments. That was fraud.
Standard & Poors and other ratings firms were sued over their valuations that were way too rosey, especially for the less valuable and much more risky tranches, but got away with it as they were merely “opinions” for investors to consider.
Lehman Brothers (bankruptcy) and Bear Stearns and Merrill Lynch (fire sales) went bust basically overnight from being multi-billion asset companies, with huge amounts of sub-prime MBS/CDO asset holdings being a large reason.
The sub-prime marketplace had feasted on selling homes that new homeowners could often not afford. No or below-market interest rates via 3 and 5 year ARMS, even reverse-collateral loans were made, with the hope that future rates or higher home prices (higher collateral value, lower loan-to-value percent) would make it all work out. When it didn’t, the crash came almost overnight.
September of 2008 was the month with the largest total of ARMS (3 and 5 yr) renewing at higher/normal rates, and the On-Time Payment rate plummeted. US housing mortgage payment rates were historically around 98% each month, and September came in at 96%. Some tried to spin it as only a 2% reduction, but it was in fact a 100% increase in non-payment, and the crash was on. Eventually on-time-payment dropped to as low as 94%. MBS-backed securities such as CDO’s often dropped by 30-50% in market value, destroying billions and billions of assets and company valuations as a brutal result of daily mark-to-market accounting rules for financial firms.
There were lots of people that saw this coming, just not enough to do anything about it.
AIG was paid a total of USD182bn to avoid going bust.
The lesson there is to be too big to fail.
It is happening now in the UK with electricity retailer Bulb Energy but small change (so far) compared with AIG.
It is likely that Australian electricity and gas retailers, without generators, will suffer liquidity issues. The wholesale prices of electricity and gas have quadrupled this year and there is a limit to how fast these increases can be passed on to consumers – looming liquidity crunch.
It seems ridiculous to me that politicians would have us spend trillions of today’s (tomorrow’s) dollars using today’s technology to fix a problem expected to occur decades away according to prognosticators who’ve been wrong on virtually every single forecast. We went from horse and buggy to landing on the moon in about seventy-five years. There is NO reason to think we won’t have the technology then to fix whatever problem eventually arises if indeed it ever actually does.
wrong thinking. there is also no reason to think we will always find future break throughs in technology. I agree with the rest of your take.
I don’t think “break throughs” in technology are necessary, nor were they mentioned. In time, human ingenuity and the free market creates new technologies, adapts, engineers, and replaces the obsolete and un-economic and along and along fixes serious problems as a matter of course, not task force.
I have some concern that significant resources are being misdirected.
The energy squeeze is happening again now. The western world is not investing in fossil fuels at the rate needed to satisfy immediate needs. There is massive wasted investment in technology that uses more energy than it generates.
Every once in a while, someone burdened with integrity and a reluctance to misinform, can’t resist the opportunity to tell an unpopular truth. Fortunately the truth always finds a way to the surface of human thought.
Why the “if”. The whole GHE stuff is pure nonsense. It follows that any investment based on this rubbish is also nonsense.
Earth has remained habitable to a myriad of lifeforms for billions of years due to the process of deep convection. Open ocean surfaces cannot exceed 32C with the present atmospheric mass and will not exceed 30C for more than a few weeks. Deep convection is the reason water remains as liquid over a large portion of the globe.
China has realised that wasting resources on weather dependent energy is a dumb idea. They have refocused on coal and onward to nuclear.
That was a spectacular presentation, but did people notice the very muted applause at the conclusion. No wonder this poor bloke has been suspended. I’m sure he tossed up with to tell the truth or to lie and follow the HSBC company line in putting his presentation together. Well done to this very brave man. And his last slide was an absolute corker. It just doesn’t matter, stocks will keep going up at 6%pa regardless of the climate emergency rubbish.
So who are you going to believe? The outrage of global governance and climateering data mangler twitterati or a guy who heads “Responsible Investment” for one of the world’s global investment banking giants?
He deserves a huge thank you from the investing public. He didn’t have to stick his neck out on this for his own account. He just happens to be a scrupulously honest fellow who can’t bear to remain a silent promoter of sanctioned fraud.
The beauty and power of his indictment of phoney climate risks is the simplicity of his analysis using everyday, fundamental financial arithmetic. Using a very conservative GDP growth rate to the year 2100 means the economy will increase from 4x to 10x today’s and using economists’ environmental damage costs of 3.6% to 5% of 2100’s GDP won’t even be noticed!
There is nothing for a critic to get a grip on! All they can do is shout and scream and cry and bang their shoe on the table on twitter. Now that’s the kind of parry, thrust and wit we can count on from those who want to govern our lives.
Let’s hope this will help stop wasteful misdirected capital for religious reasons.
‘ suggesting the inputs to financial models which predict a demand for the climate investment products currently being sold are being heavily manipulated to produce a preconceived outcome.’
No… no… don’t say… a hockey stick appearance?
The financials are determined by the government policy and regulatory framework rather than by a free market and sensible planning of energy infrastructure.
The government can stay dishonest and irrational far longer than you can stay solvent.
Whether long term global warming exists, is caused by anthropogenic co2, or would be harmful to any meaningful degree is largely meaningless.
An excellent presentation.
The truth hurts too much for most left leaning folk.
Will someone tell me a bit more about this catastrophic climate change and planet heating we are experiencing.
Will someone tell me why the 1990 temperature predictions from models were just so wrong.
Will someone tell me why we have to accept that changing raw temperature data from decades/centuries past is good scientific practice.
The CO2 horseshit has to stop.