The problem with climate change, says ROBIN POWELL, is not that we aren’t aware of the facts. The people with the power to act on it — politicians, business leaders and so on — generally are. The problem is they don’t take responsibility. By resisting calls for reform, the investment industry and those who are supposed to police it are acting in much the same way.
A shorter version of his article was originally published on Money Marketing.
The new documentary I am Greta is a remarkable film. It tells the story of Greta Thunberg — the schoolgirl who sat alone outside the Swedish Parliament to highlight the lack of action on climate change and ended up inspiring a global protest movement.
Watching it, what really struck me were the similarities between Thunberg’s struggle and the growing campaign for a fairer, more transparent investing industry.
Unequivocal evidence
In both cases, the facts speak for themselves. For the last 30 years or so, scientific studies have consistently shown that climate change is happening and that human beings are almost certainly responsible.
Similarly, studies have repeatedly shown that competitive investing, whether through stockpicking or market timing, benefits the industry but not the consumer. Over the long term, once costs are factored in, the vast majority of active investors will underperform a simple index tracker.
On active investing as on climate change, the evidence is unequivocal.
Failure to take responsibility
The problem with climate change, says Thunberg, is not that we aren’t aware of the facts. The people who matter — politicians, business leaders and so on — generally are.
Nor is the problem that they don’t talk about it. They talk about it all the time.
The problem is that they don’t take responsibility. They give the impression of being concerned while not doing nearly enough about it. If anything, their actions preserve the status quo instead of changing it.
All talk, little action
The investing industry acts in much the same way. It talks about the need for greater transparency and lower costs. It holds endless consultations on how investor outcomes can be improved.
But where’s the action? UK fund managers now manage more than £1.3 trillion. Yet despite making profits of around 36%, the industry has steadfastly avoided sharing any economies of scale with its customers.
In the meantime, financial advisers and investment consultants continue to claim they can beat the market, while providing zero proof that they’ve managed to do so in the past.
Yes, there are positive signs as well. It’s true, for instance, that certain media outlets are now taking a more consumer-focused approach. But they’re still in the minority, and all those clickbait articles about the latest “hot” stocks, funds, sectors and themes to invest in just keep on coming.
Most people I speak to know the score. They mean well and they know things have to change. But for whatever reason — and it usually has something to do with commercial self-interest — they are actually quite happy to keep things as they are.
Time to wake up
A fascinating aspect of I Am Greta is the insight it gives into Asperger’s Syndrome. It’s a condition which Thunberg insists she doesn’t suffer from but simply has. One of the traits it has given her is “laser focus”.
She even suggests, at the end of the film, that tackling climate change would be more manageable if we could all be a little more “aspergic” about it — a little more laser-focused.
After all, she says, “the climate crisis has already been solved. We already have all the facts and solutions. All we have to do is wake up and change.”
Exactly the same could be said of investing. We know the facts. We have the solutions. Let’s just get on and do it.
ROBIN POWELL is the founding editor of The Evidence-Based Investor. He works as a journalist and consultant specialising in finance and investing, and as a campaigner for a fairer, more transparent asset management industry. He is the founder of Ember Television and Regis Media. You can find him here on LinkedIn and Twitter.
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