November 24, 2021
McGuireWoods London partner Marc Naidoo wrote a Finance Digest article discussing the sudden influx of ESG experts in the sustainable finance market, the rising competition among private sector advisors and financiers for the ESG spotlight, and the resulting lack of quality in some of today’s ESG experts. Naidoo, a debt finance partner, is a member of the five-person executive committee leading McGuireWoods’ ESG task force.
In the article, titled “The Rise of ESG Experts in Sustainable Finance,” Naidoo explained how some market participants are trying to create an ESG narrative by retrospectively filling portfolios with previous deals that can be considered sustainable. This has resulted in the emergence of the rebranded ESG market participant entering a market which has been stabilized by development finance institutions for decades.
The hazard, Naidoo cautioned, lies in industry groups that have rebranded themselves as ESG advisors, who then use their network to create a secondary market of financial participants who find it necessary to create rules and guidelines around sustainable finance, but who lack the requisite experience.
A market participant’s role is to guide the market into being credible and stable, regardless of where the participant is on the sustainable spectrum, he said. In order to do that, sustainability must be approached with patience and as the right thing to do instead of “spotlight grabbing and panic marketing so as not to miss the boon.”
“A patient approach, where we allow ourselves to learn will ultimately result in a stable and credible market where everyone can participate and add true value,” Naidoo said.