Until a few months ago. Stuart kirk was at the top of the financial world. World. He was a high ranking executive at the multinational investment bank.

Hsbc. Making hundreds thousands if not millions of dollars per year. But his career came crumbling down as the bank suspended him. And he was ultimately forced to resign.

He may now be unemployable in the industry. So what happened did he make a bad trade that cost the bank billions of dollars did he commit some kind of embezzlement or corporate espionage. No he did something far more dangerous. He told the truth this may kirk attended an investment conference hosted by the financial times.

He gave a presentation titled why investors need not worry about climate risk. This immediately drew the wrath of the financial and media elites. Who almost immediately started calling him a nut job in a climate denier in his presentation. Kirk never denied the science.

Behind climate change. All he did was question the current consensus around esg investing. Environmental social and governance or esg for short is the idea of investing in sustainable companies like electric vehicle makers while avoiding unsustainable investments like oil companies in recent years esg has become perhaps the hottest buzzword on wall street with large asset managers like hsbc. Blackrock and others collecting millions of dollars in fees from their so called sustainable investment funds stuart kirk's criticism of esg investment represented a direct challenge to this lucrative business model in this video and podcast.

We'll look at what stuart kirk said in his controversial presentation and try to figure out the real reason that hsbc suspended him to understand the controversy around stuart kirk's speech. We first have to understand esg pretty much all the large asset managers on wall street and in london. Offer esg focus investment vehicles. Which seek to invest in companies with favorable environmental social and governance characteristics.

The most talked about component of esg is environmental aspect and particularly climate change. The idea is to invest in the green energy transition for example. An esg fund may invest in wind farms or other zero emission energy sources. They will avoid oil producers and other companies.

Which are not consistent with the net zero future. While many people would prefer to invest in green energy companies for moral reasons at the end of the day. The primary goal of investment is to make money to convince you to buy into these esg funds. They need to convince you that the sustainable stocks and bonds will produce competitive.

If not superior returns. So how do they do this they say that the effects of climate change will be so catastrophic that governments will be forced to implement extreme environmental regulations. Such as restricting the extraction of fossil fuels. All the oil rigs will become stranded assets with little or no value because they're not allowed to extract oil on the other hand green energy companies will benefit from government subsidies.

So in the long run. They should outperform. All the while the asset managers will make a killing by collecting their management fees esg funds typically have higher expense ratios than more traditional passive investment funds and that brings us to stuart kirk kirk was hsbc's global head of responsible investing which is one of the esg focused divisions within the bank's asset management unit. But surprisingly he disagreed strongly with much of the general consensus he had three main criticisms around esg firstly.

He thinks that catastrophic climate change. Forecasts are overhyped secondly. He thinks that societies will be able to adapt to a warmer climate and finally. He says that unsustainable companies can still be good investments.

We'll go through each of these points. One by one i completely get that there is a competition for funding. I completely get that at the end of your central bank career. There are still many many years to fill in you've got to say something you've got to fly around the world to conferences.

You've got to out hyperbole the next guy. But i feel like it's getting a little bit out of hand as the esg landscape becomes more and more competitive people resort to hysterical hyperbole to explain why the world is going to end unless we start investing in green technology now for example in 2021. There's a spec called climate change crisis. Real impact acquisition corporation.

Financiers use climate change as a tool to raise capital from investors. There's also a social aspect to it when kirk said at the end of your central bank career. There are many years to fill in he was referring to mark carney carney. Is the former governor of both the bank of canada and the bank of england.

After retiring. He became a climate activist going around the world to talk about sustainable investing. If you're a member of the financial elite. The path of least resistance is to hop on the climate.

Bandwagon and talk about the impending armageddon. You can get invited to speak at davos and other rich people clubs. Which become an echo chamber serving to amplify the conventional wisdom about esg stuart kirk doesn't deny that climate change is real he just doesn't believe in the doomsday scenarios. As you think society will be able to adapt for example.

One of the biggest impacts of climate change. Is rising sea levels and the increased flooding that this can cause in coastal cities. Many cities are trying new and innovative solutions to mitigate the impact for example china is building so called sponge cities. The idea is to have green areas around the city that can absorb water in the event of heavy rainfall or a storm surge this can prevent catastrophic floods.

The point is people can find innovative solutions to adapt to just about any problem. Even as hurricanes and other extreme weather events have increased over the past decade. The number of deaths caused by these natural disasters has declined substantially when skilled by population size the world has never been safer than it is today and this takes us to perhaps the most controversial part of his presentation. So who cares if miami is six meters under water in a hundred years.

The media was quick to pick up on this comment as it makes for a shocking headline on the surface. It does seem pretty bad to say that you don't care that a major city will be 6 meters under water. But before you crucify the man it might be worth listening to the sentence. He says right after that amsterdam's been 6 meters under water for ages.

And that's a really nice place. We will cope with it. Amsterdam is a coastal city. That has an elevation of two meters below sea level despite this it's a perfectly functional city with a population of almost one million.

This is because they have a sophisticated system of dams dikes and artificial sand dunes. Which protect the city from storm surges cities like miami have decades to come up with similar systems. As sea levels gradually rise in fact coastal florida. Real estate prices have been surging in recent years.

The people paying five hundred thousand dollars for single family miami homes clearly don't think the city will be destroyed by climate change. Kirk's final and perhaps most important point is as follows. Even if you believe that climate change will force governments to completely ban fossil fuels within the next 30 years that does not make them uninvestible when here is oh what about stranded assets and oh my goodness gracious me what matters is those stranded assets versus the value of the underlying business take something very simple like a pe. What happens when you buy something on 10 times.

That is not growing. All you analysts. You are basically getting your money back. After 10 years of earnings per share right you are paying 10 years.

Worth of earnings per share for a company. So let's imagine for the sake of the argument. That that is the earnings per share profile of of of your industry. And then sharon is right the world ends and the bars go go deep red at the end for most companies with stranded assets and even for tech.

Their valuation does not take into account anything that happens after about year 20. According to hsbc's analysis. The average price to earnings ratio for the coal industry is six after just six years. A representative coal company will generate its entire market cap in earnings as a shareholder you'll make back the entirety of your investment from year seven onwards you're playing with the bank's money and it's highly unlikely that the coal industry will go to zero even within the next 10 years.

Global coal demand has stayed roughly stable over the past decade declines from advanced economies. Like the us and eu have been largely offset from growing demand in countries like china. And india. The fact of the matter is that coal provides a cheap way to generate electricity and fuel the industrialization of poor countries.

Even if the green transition does happen and 30 years from now the grid is completely changed to renewable energy. You still may be better off investing in fossil fuel companies over the past year. The xle oil etf has increased by 43 while the icln green energy etf has decreased by 13 that's because oil prices have risen dramatically if you invest in an esg fund that excludes fossil fuels you would have suffered massive underperformance the clean energy transition will take a long time especially in developing countries that don't have the money to buy electric vehicles or solar panels and during this multi decade transition period fossil fuel companies can continue to generate returns for shareholders. The difference between stuart kirk and the esg hard lines is that kirk views.

The world as it is not as he would like it to be the international energy agency. Forecasts that oil demand will increase every single year until at least 2026 mostly driven by non oecd countries like china and india at the same time aggregate investment in new oil wells has declined. This is partly because of esg concerns. Which have caused some oil companies to shift their spending to renewable energy.

This along with russia's invasion of ukraine have contributed to skyrocketing oil prices. Which is a massive windfall for oil companies. There will be some fossil fuel companies that do well and some that do poorly there will be some green energy companies that do well and some that end up being frauds as an asset management executive. It was stuart kirk's job to find investment opportunities across the entire spectrum of stocks.

And he wasn't against sustainable investing. He just disagreed with the hyperbole. Which has become all too common among the esg establishments. Because there are thousands of opportunities out there.

We have a trillion dollar car company that nobody at the ft predicted five years ago. Including myself and um. They're the sort of opportunities. We need to invest in all around the world i agree in the just transition.

I agree with the opportunities that exist in all these facets of technology. But it's a good thing. It's nothing to be ashamed or scared about i rest my case enjoy your coffee. Thank you very much after giving his presentation.

There is almost immediate outrage from the media. Who called kirk everything from a nut job to a climate denier. This is despite the fact that he never once said. He didn't believe in climate change.

After just three days. Hsbc caved to the pressure and suspended him a few weeks later he officially resigned the hsbc ceo threw kirk under the bus by saying he completely disagrees with him and that the bank is committed to a net zero future. According to the financial times. Who hosted the event hsbc had given prior approval for kirk's presentation.

This is quite telling as it suggested. The problem wasn't the content of the presentation. But instead the public reaction against it hsbc recently launched. What they call a new generation of sustainable etfs.

If people listen to stuart kirk's criticisms of esg. They may be hesitant to invest in these funds. We may never know the exact reason for kirk's suspension. But we do know that hsbc is a profit maximizing institution.

It would be naive to think that commercial interest didn't play a role. The case of stuart kirk shows that nobody is safe from climate. Canceled culture. Even if you're a high ranking executive.

Nobody is allowed to question the consensus of the esg mafia alright. Guys that wraps it up for this video. What do you think about stuart kirk. Did you deserve to be suspended let us know in the comments section below.

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