Not only did Mr Kirk rely on dubious statistical methods to make his point that the stock market keeps rising as bad climate news becomes more frequent, but he also shows a remarkable absence of understanding of finance and how markets work. Markets do not process information that they do not have, and climate models and scenarios are not yet telling us what we need to know to understand the impact of climate risk on asset prices. This is why investors are increasingly demanding access to non-financial data about climate risks.
Mr Kirk considered that climate risks will be realised in the long term and probably with a fairly limited average aggregate loss given the offsetting of climate gains and losses. So, for a bank like HSBC that has a short-term and well-diversified balance sheet, there is not real point in him spending time on a subject that has no large impact on this balance sheet. This analysis shows unfortunately that Mr Kirk has not understood the very essence of his mission. As the head of responsible investing at a preeminent asset management firm,
Mr Kirk is in charge not of his own risks or of the bank's risks, but of the risks of his clients. HSBC AM's clients are longer-term investors than HSBC, because they have long-term liabilities like pensions and life insurance. For them, robust liability-hedging is at the core of what asset management should be all about. This liability-hedging objective results notably in investments in real assets that are not easy to diversify and are therefore very strongly exposed to climate risk.
Meanwhile he proposes without due care that the consequences of climate change can be summarised in an aggregate and limited loss of GDP, thereby presenting a morally dubious equivalence between the enormous cost that is likely to be borne by some people and nations, and the benefits of winners, who in principle could adapt to the irreversible and chaotic disruption of the planet's climatic system. Maybe he does not care that Africa, Asia, and Latin America will take a beating and lose many of the development gains they achieved in the past century. For Mr Kirk, 2050 could be the new 1850.
Responsible investors, beyond the losses incurred in their portfolio due to climate risk, also worry about the impact of their investments on the climate and their capacity to participate in an undisputed goal of limiting global warming, which is threatening our civilisation.
They care not only about Miami, but also about Mexico, Bangladesh or Venice being under water.
Many journalists and even politicians have expressed concern about Mr Kirk's suspension by HSBC AM, arguing that free speech is important in the public debate. We sincerely believe that they are missing the point. Mr Kirk did not enter the debate as a journalist -- who should be free to make any kind of comments as long as they have solid sources -- but as a high-level representative of a company that, through him, wishes to take its share in serving investors who are concerned about investing responsibly. What could be more normal than suspending him from a function that he does not really wish to perform?
Consult a copy of the open letter to Stuart Kirk.
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