HOMO ECONOMICUS? HE DEAD:

Markets are about psychology. If you can set a trend, then everyone will jump on board. The latest trend to seize institutional market's attention is for Environmental, Social and Governance investing (ESG), resulting in $2bn per day flowing into sustainable funds this year, according to Morningstar. Corporates are responding in the time-honoured way - peppering annual reports with copious mentions of sustainability, diversity awareness, corporate social responsibility, and how ESG "powers" everything decision they take. [...]

Last week saw extraordinary events in the oil market, as successful climate change protests shook the industry to its very core. Exxon had to give seats on its board to a tiny activist investor which won support from other holders concerned about the wobbly oil giant's "strategic direction" in terms of reducing emissions. Chevron submitted to investor demands that it takes climate change seriously. Shell was ordered to slash emissions by cutting production by millions of barrels per day, on the basis of "unlawful endangerment" after being dragged to court by Friends of the Earth's Dutch chapter. Total faced a similar challenge in France, but scraped by.

On the surface this looks like a victory for the planet, but the unintended consequences could be severe. If oil producers scale back on capacity or production to meet climate activist demands - the potential is to push the price of oil higher until declining demand from oil finds a new equilibrium. 

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