FLASH FRIDAY: ‘Super League’ Collapse Carries ESG Lesson

FLASH FRIDAY is a weekly content series looking at the past, present and future of capital markets trading and technology. FLASH FRIDAY is sponsored by Instinet, a Nomura company.

There was uproar in Europe this week when 12 soccer clubs announced they would be forsaking their communities and centuries of history to form a European Super League. Fans were outraged that the dozen clubs would be permanent members of the league regardless of their performance, while smaller teams would lose the opportunity to reach the top level of the game. 

The scheme collapsed after the English clubs faced protests from their own supporters ahead of matches and even JP Morgan apologised for arranging the financing for the scheme, saying it had misjudged how the deal would be viewed by the soccer community. 

Three of the English clubs involved – Arsenal, Liverpool and Manchester United – are owned by Americans and there has been much commentary on the difference between European leagues, with promotion and relegation, and the protected US franchise system. Under the Trump administration there was an equally big gulf between Europe and the US on environmental, social and governance policies when he pulled the US out of the Paris Agreement to rescue emissions. 

The gap has narrowed as President Biden returned the US to the Paris climate agreement on his first day in office and named John Kerry as the US Special Presidential Envoy for Climate, a new position on the National Security Council. In addition Brian Deese, who leads the National Economic Council, was previously head of sustainable investing at BlackRock.

On Earth Day, 22 April, President Biden hosted 40 world leaders in a virtual Summit on Climate. The European Union released its taxonomy for sustainable finance and The People’s Bank of China updated its taxonomy bringing it closer to Europe. 

Financial institutions also marked Earth Day. The Glasgow Financial Alliance for Net Zero (GFANZ) was launched by Mark Carney, UN Special Envoy on Climate Action and Finance, Kerry and Janet Yellen, US Treasury Secretary. 

The alliance brings together more than a 160 firms responsible for assets in excess of $70 trillion from the leading net zero initiatives  across the financial system to accelerate the transition of the global economy to net zero emissions by 2050 at the latest. It includes 

43 banks from 23 countries with assets of $28.5 trillion who have formed the Net-Zero Banking Alliance (NZBA).

State Street Global Advisors, Trillium Asset Management, and Coutts also joined the Net Zero Asset Managers Initiative bringing its membership to 87 members with assets under management representing over $37 trillion. 

However, consultant Arthur D. Little has warned that while ESG and sustainable finance are hot topics in the financial sector, much of the debate and discussion is often still too theoretical and they need to move as quickly as possible toward practical implementation. The consultant said: “We are at the beginning of a new era of ‘sustainable money,’ in which the rules of the game are going to be very different from those of the past.”

Financial institutions need to make sure they understand these new rules and the requirements of the society in which they operate. Otherwise they will find themselves suffering the same fate as the so-called Super League. A well-deserved collapse.