Umunna, who was a UK employment lawyer before being elected in 2010, will join JP Morgan in a newly created position that aims to unite all its ESG-related activities with clients, according to a memo seen by the Financial Times.

The position will make him one of the most senior black bankers in London’s financial services industry and a key part of a drive at the Wall Street giant to boost its environmental and social credentials.

The hire also comes just over a month after JP Morgan’s longest-serving board director, Lee Raymond, the 82-year-old former chief executive of oil major ExxonMobil, resigned from his role following sustained pressure on the bank from climate activists and investors.

ESG affects “everything from corporate finance strategies and investment flows to day-to-day operational decisions and capital allocation”, said JP Morgan’s Emea head Vis Raghavan in the memo. “Clients are looking at how they may need to adapt their business models.”

While never in government, Umunna was an influential British politician as shadow business secretary and member of the Treasury select committee. Two years ago, he quit Labour in protest at Jeremy Corbyn’s leadership and founded a new party called Change UK. After it fared poorly in EU elections, he joined the Liberal Democrats, but he failed to win a seat in the 2019 election.

The 42-year-old follows in the footsteps of numerous MPs in recent years. Last week, the FT reported that George Osborne, the former Conservative UK chancellor, is joining Robey Warshaw, a London-based boutique UK advisory firm. Sajid Javid, who held the same government office, secured a lucrative role advising JP Morgan last summer.

There have also been many transitions to finance by left-leaning Labour politicians. Shortly after stepping down as prime minister, Tony Blair took a £2m-a-year part-time role also counselling JP Morgan. In 2015, his political successor Gordon Brown became an adviser to Pimco, one of the world’s largest asset managers.

As an MP, Umunna was occasionally outspoken in defending UK companies from overseas acquisitions, which is an important source of revenue for lenders with global investment banking arms.

In February 2017, Umunna took to Twitter to blast Kraft Heinz’s aborted takeover of Anglo-Dutch consumer group Unilever, declaring “good riddance”. He wrote that the US food group’s owners “have a reputation for cost cutting in the short term at the expense of long-term investment, growth and — most importantly — jobs”.

JP Morgan was playing a leading role helping to finance the Kraft Heinz bid, multiple people with direct knowledge of the matter told the FT at the time.

Umunna’s appointment comes as part of ESG-related initiatives from JP Morgan, which has reported bumper profits through the coronavirus pandemic.

Last year the bank bowed to years of pressure from shareholders and activists to adopt a commitment in alignment with the Paris climate accord, and pledged $30bn in financial aid to help address racial inequality in the US.

In 2020 it was the top global underwriter of green bonds with about 6 per cent of the $544bn market — including deals for Adidas and Alphabet — and is reportedly helping arrange the UK’s inaugural “green gilt” sovereign bond.

However, despite those credentials, the US bank is one of the biggest financiers of fossil fuel companies in the world, according to data from the Rainforest Action Network.

Umunna will work alongside Rama Variankaval, who runs JP Morgan’s recently announced Center for Carbon Transition, which advises and provides financing for clients on sustainability. He joins from PR company Edelman, where he was co-head of ESG consulting.

This article originally appeared in the Financial Times here.

And, after all the talk from corporates and investors, they were undeniably beginning to walk the walk on this agenda. Anne Marie Verstraeten, UK country head of BNP Paribas bank, gave a flavour of the approach being adopted by large banking groups across Europe in the discussion I had with her recently at an event hosted by the Boster Group: “We are integrating ESG criteria into all our operational processes. It requires us to make tough decisions, for example on our lending policies, discontinuing support to the tobacco sector, adopting an exit for thermal coal over time…it has meant we have foregone revenues in the short term.”

That is not all. “We have had CSR filters in our credit decisions, and we have installed incentive schemes which govern 20% of the variable [compensation] of 7,000 employees relying on 9 CSR performance indicators” Verstraeten adds. BNP have been deploying these practices for some time – now many others have followed suit in 2020.

There have been six principal drivers of all of this. First, fund flows are increasing with sustainable investment funds surpassing $1 trillion in the second quarter of this year. Deloitte forecasts that ESG-mandated assets could make up to half of all managed assets in the US alone by 2025.

Second, investor activities across the ESG field have accelerated. It started with BlackRock announcing that all of its almost $7trillion assets under management would be governed by ESG considerations. It finishes with the Net Zero Asset Managers Initiative being launched this month with 30 of the world’s biggest asset managers – including Legal & General Investment Management and UBS Asset Management – setting the goal of achieving net zero carbon emissions across their portfolios by 2050 with interim 2030 targets. This will surely lead to changes in the operations of the huge number of corporates they invest in.

Third, policy makers are on the move. Mandatory ESG reporting requirements have increased to 600 globally, up from 383 in 2016 when the UN Sustainable Development Goals (SDGs) were adopted.  Up until now Europe has been setting the agenda, with the EU’s long-term budget and COVID relief package including increased spending on digital, security, green growth and climate change.

However, the advent of a Biden administration promises to herald changes in the US. For example, Treasury Secretary nominee Janet Yellen co-authored a report with former Bank of England Governor Mark Carney published in October, which said meaningful carbon prices are the cornerstone of an effective package of public policies that should incentivise a transition to net zero, alongside substantial public expenditures in greening economies. This is likely to be reflected in her approach at 1500 Pennsylvania Avenue. Perhaps the most significant government move was by China – the biggest carbon emitter in the world – with President Xi Jinping’s administration committing to achieve carbon neutrality before 2060.

Consequently, in its outlook for 2021 JP Morgan Asset Management expects a “flood of green infrastructure projects in the next few years to the tune of several trillion dollars” which will  present significant opportunities for investors.

Next, Covid-19 has clearly intensified scrutiny of companies’ ESG performance. BNP’s Verstraeten says that with the pandemic “things are now accelerating”. She notes that “this convergence towards doing good and investing towards good for the planet, towards society, is now front and centre for everyone.” She is right. The pandemic has proved to be a test of whether companies will deliver on past promises – like in the declaration made by the US Business Roundtable in 2019 – to consider all stakeholders, not just shareholders. JUST Capital found that signatories to that statement outperformed their peers on several measures, including on providing paid sick leave and free PPE.

Covid-19 has redirected investor focus on how companies approach social risks, including human capital management and supply chain working conditions. In addition, employee voices are louder, pressing for change in employer policies on issues including employee health and safety, pay, and benefits. Following activism against systemic racism – with the impact of the killing of George Floyd having real impact — investors and ESG rating agencies are pressuring businesses to accurately track racial diversity and make the information publicly available. Good.

Verstraten says: “I don’t go to a CEO forum without it actually having on its agenda.. CSR, ESG, how are we delivering on the bold commitments that we have made.” In the latest survey of institutional investors by Edelman (where I am the global co-lead on ESG) 72% of investors say they have started to put portfolio investments that do not meet their Diversity & Inclusion thresholds on watchlists.

Finally, younger generations of investors – millennials in particular – are still in the vanguard of this movement. Sustainable investing divisions are said to be amongst the most sought after postings by new recruits joining leading investment houses.

Tom McGillycuddy, 32, from Wigan in the North West of England typifies this generation. “Because I had come from a working class town with working class parents, being the first in my family to go to university, I just thought I needed a career that seemed stable and gave me the opportunity to have money” McGillycuddy explains. So, having worked in a local branch and a call centre of Barclays in Manchester, in 2011 he successfully applied to and joined Barclays’ investment bank in London after leaving Lancaster University.

After a couple of years at Barclays Wealth and Investment Management, two competing thoughts were swirling around his head: “It was around the time of Bob Diamond and there were a lot of people in the senior part of the organisation who I was very inspired by – they had a real ‘can-do’ attitude and were talking about Barclays as if we were going to take over the world” he says. “As a 22-23 year old, who had come from Wigan working in a call centre in Manchester I thought that was the best thing to hear.”

But McGillycuddy soon started to question what he was doing and why: “I had this new thing coming into my head, which was me starting to question what the purpose of my work was, what am I really doing here, is there more to this than just earning fees, profit, revenue as the driving and only factor of what we are doing?” This was in 2013 and McGillycuddy observed that “nobody in the industry seemed to be thinking in those terms as far as I encountered – I began to feel slowly detached from what I was doing.”

This took McGillycuddy on a journey, via a four year stint in impact investing at Wellington Investment Management, to co-found and launch Tickr in 2019 with fellow Barclays alumni, Matt Latham. Tickr is a sustainable investing platform that makes it simple for retail investors to invest as little as £1 a month. Tickr invests their customers’ monies in various sustainable funds and customers get to choose from investment themes including “disruptive technology”, “equality” and “climate change”. They have plans to create their own exchange traded funds into which they will invest customers monies in the future.

Having launched in mid-2019 Tickr is now already approaching 100,000 customers, who put in £180 on average every month into their investment pot. By the end of 2021 Tickr expects to be investing hundreds of millions of pounds for customers – 99 percent of them are millennials. This is what the future looks like – expect to see a lot more action from the next generation in 2021.

The former shadow business secretary and MP for Streatham was the bookmakers’ favourite to succeed Ed Miliband during the 2015 Labour leadership contest.

His decision to withdraw from the race, which was later won by Jeremy Corbyn, shocked political commentators. But Umunna said at the time he was uncomfortable with the increased level of scrutiny and attention the job would bring to him and his loved ones.

Looking back, the experience proved to the 42-year-old that politics can be a rough sport and that it wasn’t a career in which he wanted to spend the rest of his life.

“I knew soon after I joined the House of Commons I was never going to be a lifer,” says Umunna during a video call from his London home.

“I wasn’t going to retire there or do a long service like Ken Clarke. When I entered politics, I didn’t have a young family and I wasn’t married. Politics puts an unfair burden on your family and I knew it wouldn’t be a long-term proposition for me.”

After bowing out of the Labour leadership contest, Umunna spent another four years in the party before leaving to form the centrist and pro-Europe Independent Group in February 2019 with seven other Labour MPs.

But the defection was not to last long. Just six months later, Umunna was on the move again, announcing he would vacate his Streatham seat to fight for the Cities of London and Westminster constituency in the 2019 general election for the Liberal Democrats.

Having failed to win the seat from the Tories – Umunna lost out by just under 4,000 votes – the decision to leave politics was made for him.

“A lot of people spend their lives trying to get into the House of Commons, and I was lucky to get in at a relatively young age. But I think you do have a certain shelf life and be prepared to pass on the baton,” he says.

It wasn’t long before communications giant Edelman came knocking on his door with an offer to lead its ESG consultancy for Europe, the Middle East and Africa.

Instead of speaking to constituents, Umunna’s day is now filled advising corporate clients across the globe about how to incorporate ESG. He has been in the job for less than six months, but admits he is already working “flat out”.

“If it wasn’t for lockdown and the pandemic, I would have spent a quarter of my working month on the road,” he jokes. “I’ve met half of my colleagues face-to-face.”

Luciana Berger, the former Labour MP who helped establish the Independent Group with Umunna, is once again a colleague. Berger joined Edelman a week before Umunna to lead its advocacy and public affairs team.

Umunna is no stranger to the City. Before embarking on his political career, he worked at Credit Suisse in an anti-money laundering role and completed a stint in the back office of the equity derivatives group at JPMorgan.

But it was the decade he spent as a corporate employment lawyer at Herbert Smith, now Herbert Smith Freehills, where Umunna got his first taste of some of the work he is now undertaking at Edelman.

“At Herbert Smith I was on the front line of the S and the G and advised companies on employment law issues, mostly M&A work,” says Umunna.

Umunna also spent time on parliament’s influential treasury committee, elected to the role by his Labour colleagues who were keen on someone with a City background, and could sit on such a prominent forum in the wake of the financial crash.

“There was a feeling they needed someone being on the committee as a Labour member, but who also understood business and how the City worked,” he says.

“There was a lot of discussion at that point about culture and behaviour in banking. I had worked on the service agreements of the C suites at some of the big investment banks. So I got to work as a practitioner on the S and the G.”

Umunna is adamant he has “absolutely no intention” of returning to politics, believing he can make more of a difference in the corporate sector than from within parliament.

“I don’t miss it,” he says.

“You have as much capacity to affect change in a private sector setting as you do in the public sector, partly because nation-state governments have become emasculated with globalisation., he says. “Capacity as a middle-ranking minister in a government of a country with 65 million people to do big change — given these big cross cutting global currents — is much more limited.”

He points to his friend Nick Clegg as a case in point. The former Liberal Democrat leader and deputy prime minister left politics in 2018 to take up a global affairs role at Facebook.

“Whatever you think about what Nick has done joining Facebook, I think he has more influence in his role as one of the core people driving Facebook than he did as deputy prime minister of the UK,” says Umunna.

Umunna says the argument for stakeholder capitalism has only strengthened in the years following his stint as shadow business secretary, when just a handful of business leaders such as Lazard’s Ken Costa and Dominic Barton at McKinsey were making the case.

“I remember going to a dinner with CEOs and chairs of FTSE 100 companies at a City figure’s house with Ed Miliband. He got a roasting from those in attendance, who accused him of being a Marxist for arguing for a more responsible capitalism,” recalls Umunna.

“What is amusing now is the very same people are now rocking up at Davos talking about stakeholder capitalism or writing op-eds about it.”

One reason Umunna may be so busy is that Covid-19 has “turbo-charged all three strands of ESG”, he says.

“Even before the pandemic, there was Extinction Rebellion and the MeToo movement. I don’t think it’s a moment. ESG is here to stay.”

With government Covid relief packages closely aligned to social and environmental goals – Chancellor Rishi Sunak recently announced the roll out of the UK’s first sovereign green bond — Umunna sees a big opportunity for financial services.

“If we have data that irrefutably shows ESG is a powerful driver of alpha, it will attract more inflows and we will get the capital allocations we need to address the world’s problems,” says Umunna.

One problem Umunna argues needs to be addressed is the woeful lack of ethnic diversity across financial services.

He recently threw his support behind the 10,000 Black Interns initiative, which sees UK companies committing to offer 10,000 internships for Black graduates over the next five years.

Former Conservative prime minister David Cameron and Labour peer Baroness Amos have also backed the plan.

“If you work in this world, you can take for granted the experience and the global nature of it. But if you’re a kid who’s never been in that environment, being in that world for an hour can make a massive difference,” he says.

Umunna got his first taste of the financial sector visiting the equities trading floor of Goldman Sachs in New York as a 13 year old, thanks to a family connection.

Later that year Umunna was back on the trading floor, this time at UBS in London as part of a school trip.

“It was then I realised I wanted to work in the City and that environment,” he says.

“It’s tangible stuff that can change people’s lives.”

CV

Born
17 October 1978

Education
2001-2001 Nottingham Law School, Legal Practice Course
1997-2001 Manchester University, Law

Career
2020-present Head of ESG for EMEA, Edelman
2010-2019 MP for Streatham. Various parliamentary roles, including member of Treasury Committee and Shadow Secretary of State for Business, Innovation & Skills.
2006-2010 Lawyer, Rochman Landau
2002-2006 Lawyer, Herbert Smith

The former politician, once tipped as a future Labour Party leader, seems happy in his new life leading the environmental, social, governance (ESG) offer at the agency he joined in July. His role includes advising business leaders on ESG ‘audits’, embedding ESG factors into decision-making, strategy and culture, and managing ESG issues relating to corporate transactions.

The contrast to the frenzied nature of his year in 2019 is stark. Alongside fellow Labour MPs – among them his new Edelman colleague, Luciana Berger – and Tory rebels, Umunna triggered something of a political earthquake when he quit Labour to be one of the founders of anti-Brexit centrist party The Independent Group (later Change UK) amid criticism of Jeremy Corbyn’s leadership of Labour. He joined the Liberal Democrats after Change UK’s demise and failed to be elected MP for Cities of London and Westminster in the General Election.

The 41-year-old’s latest challenge marks a return to the corporate advisory world for Umunna, who worked as a solicitor in the City of London before becoming MP for the south London constituency of Streatham in 2010.

Umunna, who served as Shadow Secretary of State for Business, Innovation and Skills under Ed Miliband, was seen as residing on Labour’s right wing; not instinctively antagonistic toward business, but wary of the excesses of totally unregulated capitalism. This, coupled with his legal and corporate advisory background, makes him an intriguing appointment for a role at Edelman that is growing in importance in the age of corporate purpose and heightened social activism.

Umunna declined to discuss his recent political experiences or critique specific politicians, so unfortunately our conversation yielded no revelations about Corbyn or Change UK, or the strategies of current political parties. What it does reveal are fascinating insights from a senior political insider’s perspective as we talk about the nature of ESG and how PR firms have adapted to the new reality – which, he says, has been “turbo-charged” by COVID-19, the Black Lives Matter protests and other movements. Linked to the theme of this edition of PRWeek, and as one of the most high-profile BME figures currently working in UK comms, Umunna also reflects on his experience of racism.

What was the background to you joining Edelman UK?

It was never my intention to serve as a ‘lifer’ in the House of Commons. Having spent, I suppose, just under a decade working as a corporate employment lawyer working at the coalface of the ‘S’ and ‘G’ part of ESG – the social and governance side – and having done a decade holding a variety of senior positions on the opposition benches leading on policy directly related to ESG, I wanted to return to doing financial services and capital markets work, but doing ESG advisory work. Because that, in essence, is what I have been doing as a practitioner, and as a public policy person, for the best part of two decades.

It was very much on the horizon, actually, before I left the Labour Party. It seemed to me that if you wanted to build an ESG consultancy, Edelman was definitely the firm to do that and was in pole position to build something new and successful. It has done some pretty substantial work for firms on ESG.

The conversation [with the agency] started way back in January, not necessarily on either side with a view to me joining Edelman. I knew [EMEA chief executive] Ed Williams already, so I had a conversation with him about the next steps, post-politics; and that ultimately led to me – very quickly, actually – coming in and meeting some of [Edelman’s] UK leadership. In so far as ESG was concerned, there was a complete meeting of minds, and since then very much a kindred spirit, and a partner in arms, had been appointed to lead the ESG offer across the Americas: Heidi DuBois. We’ve been globally co-leading the ESG push for the firm. What I’ve been struck by is how international the work is. I’ve already been working on pitches with several of our offices.

There’s been a huge growth in this area in recent years. What’s your take on it?

The first speech I gave as Shadow Secretary of State for Business in 2011 was to an audience at Bloomberg, where I was making the case for responsible capitalism and how we foster an environment in which companies deliver shared value – value for shareholders, but also other stakeholders in society, and a sense of mutual dependence between those things.

We were lambasted, as you would expect, by our political rivals at the time for being anti-business, but also by a number of leading figures in business for being anti-business – for suggesting you should take into account the wider group of stakeholder interests when making business decisions.

I particularly remember going to the house of a City grandee in Kensington that had been organised for [then-Labour leader] Ed Miliband and myself. A group of around 15 CEOs, chairs of companies and leading financial institutions were there, and they gave it to us with two barrels for daring to question the consensus around the primacy of shareholder value. We were told how we didn’t understand it, we didn’t get it. I remember coming out after the dinner and I saw a group of people outside the front of the house and I immediately thought they were photographers, so I was on my guard. But actually it was the chauffeurs of the fleet of cars that had brought the young business attendees to the house.

It did make me think: for all the claims that we didn’t really know what we were talking about, these people… I’m sure some of them have come from quite humble beginnings, but they are leading a life which is very different from many people, and if anybody might be out of touch it might possibly be them.

The Brexit referendum result… was quite an epiphany for a lot of them. I had a lot of them say: “We thought we were in touch with our customers and our employees, but actually you were right, we do need to change the model of capitalism because it’s not going to bring enough for people and they are very angry.” Now, some of the very same people who attended that dinner, you can read op-eds by them – and no doubt see quotes from them at this year and last year’s Davos gatherings – and they’re making the case for stakeholder capitalism and now what people call ESG.

So I think circumstance, public anger at the system of globalisation that has, admittedly, lifted hundreds of millions of people out of poverty in the developing world, but in developed economies hasn’t delivered the goods for enough middle- and lower-income families… that has led to a reassessment of how we do business.

And that has been turbo-charged by COVID-19, it’s been turbo-charged by the aftermath of [the killing of] George Floyd, and arguably before 2020… the Me Too movement and Extinction Rebellion also came to change the context in which we’re all operating.

What do you make of how some corporations and brands have reacted to these challenges in practice?

First of all, do you have a choice to intervene and speak up on debates in your country that affect your customers, employees and other stakeholders in a profound way? Our Trust Barometer data shows you do not have a choice any more – there’s an expectation that CEOs and companies should speak up on certain issues because people buy into the value and also the values of your brand and your company. And the data’s got stronger throughout the pandemic. That’s the first point.

The second point is that when you intervene, you have to have credibility and authority and, ultimately, trust in order to intervene effectively.

I’ll give an example of where this can sometimes go wrong. Nike, in the aftermath of George Floyd, was pretty vocal in its demand that we need to change the way we do things in society and promote greater race equality. But immediately, of course, people looked at Nike’s board and saw it was an all-white board and it wasn’t very diverse – and that’s for a brand many people would argue has associated itself with Black culture for a long time.

When you do intervene and do things? You’ve got to be able to show, where’s the beef? And that’s where ESG is important, because if you can not demonstrably show how you’ve integrated other stakeholder factors into decision-making it undermines your credibility. So all of the world events, and the context in which we’ve been operating, has given a lot of urgency to companies sorting out their ESG profile. That’s pretty big.

The third thing is, recent events have certainly shone a light on inequalities in a vivid way, partly because we’ve got the technology and social media that really brings these things into view in a way that I don’t think we’ve seen with previous crises.

The exacerbation of inequality that will have come with the pandemic, potentially, will make us an even more polarised and divided country… and you could probably say the same in the United States too. That’s going to be very tricky terrain for corporates to navigate. That said, I definitely think lessons have been learned by business from the way in which they dealt with the last crisis, which was to try and carry on – particularly in the financial services sector – as if they can just return to business as usual. I think there’s a recognition that things are going to be different and there’s an added sensitivity.

So if you are, for example, a corporate that has benefited from state financial support, like through the furlough scheme, and then 12 months down the line you attempt to do a share buyback, a dividend payment, or you put in place what is perceived to be a very generous pay package for your corporate leadership, that is going to be extremely controversial. And that’s just for starters.

When you were in politics, how much cynicism was there about this kind of thing among politicians?

A lot of ESG actions were lumped in with corporate social responsibility and often were perceived to be PR exercises as opposed to something more substantial. The interesting thing in the last few months is that in major businesses and professional services organisations, you’ve got people moving from core parts of the business into ESG and/or sustainability leadership positions, which illustrates how important and fundamental to most of these businesses ESG has become. It’s become much more threaded into corporate decision-making. It’s not just been used as an add-on: “We do a bit of philanthropy.” Philanthropy and CSR have their place and are very important, but this is something most people would agree is a much bigger and more substantial change.

What do you make of the standard of political discourse and political communications at the moment?

My read is that the set of skills and capabilities required in a pandemic are so at odds with what it takes to take high office, and the skills needed to do the role in normal times, that it was inevitable that there were going to be mistakes made and the ship of state was not going to sail calmly, because it’s having to sail through incredibly choppy waters.

And, of course, on the one hand you could be a victim of your own success. I think the initial ‘stay at home’ communication and advice will prove to be among the most effective government communications ever.

But now you’ve got the flipside of that, which is that we do need people, as safely as possible, to return to work. I’m sitting here in Edelman’s office, but I’m looking out onto a ghost town downstairs on the street, and it’s pretty quiet. It’s a very difficult terrain to navigate. It should become more straightforward for the simple reason that we’ve got much more data on how this virus is behaving, who it affects, who it doesn’t affect.

At the beginning of the pandemic my second daughter was born and we adopted very stringent safety measures. We went straight into isolation as a family, we wiped down everything we brought into the house. We were absolutely on it for every single detail because we were unsure of the impact on newborn babies at that stage, whereas now we know that – never mind newborns, [with] children more generally – figures would suggest the risks are nothing like what [we thought] they may have been. That makes a difference.

So, as this thing evolves, hopefully we’re in a better position to tackle it – and the same could be said of the Government.

Has the ‘revolving door’ criticism (of ex-politicians who move straight into corporate jobs) come your way much, and what do you make of that?

I haven’t had it at all, funnily enough. I think [there are] a couple of reasons why. I came from a City background – I went from university to a City law firm working for big multinational companies, and so it’s not as if I went from politics into the corporate world having not been there before. And secondly, in my work, the public affairs part of what I do is minimal.

Do you have any reflections on racism and diversity, and your own experiences that inform the way you look at these issues?

I don’t really want to talk about the industry, because my only experience is Edelman, and it wouldn’t be a true reflection of the industry as a whole. But I would say that generally, I don’t think that you can disentangle issues of race from issues of class.

Sure, I’ve faced obstacles, I’ve faced racism, but I think my experience as somebody – a mixed-race guy [with] a middle-class background – is going to be very different relative to somebody who came from my father’s background – a Black, Nigerian, working-class guy. I think to just see the race issue, the obstacles it presents to people, in isolation from class issues doesn’t really do justice to the injustice that there is.

When I started my career in the City in the early 2000s I was at a progressive City law firm which has generally been in the vanguard of these equality issues, in my view. And I have lots of affection for Herbert Smith [Freehills, the international law firm where he worked from 2002-2006], but there were 600-700 fee-earners and I was one of three Black people when I left. To be frank, I think there’s been quite a bit of progress since, but, my gosh, across all those different professional services disciplines, I think there’s some way to go.

I’m proud to be led by Richard Edelman, for whom this is a big issue. He has made some pretty concrete commitments about what we are going to do as a firm to make sure we look like the communities we wish to speak to and interact with for our clients.

What are your expectations for the Edelman ESG offer? Do you have concrete goals for the future?

At the moment the practice is led out of two hubs: London and New York, which is unsurprising because it’s rooted in capital markets and financial services work, and those are the two main global financial services centres.

We are adding to the team literally week by week because of the interest that there is. The ambition is that we build a market-leading ESG consultancy practice, which is global.

If a year on from now we’ve got a fully functioning, fledgling consultancy operating globally, led out of the two main hubs, with capability in every major financial centre in the world, then I think we’ll be very happy.

How is PR different from your expectations?

It has been really fulfilling, returning to a global professional services firm and working with some incredible minds for some brilliant clients.

I kind of feel a bit guilty for saying it, but I haven’t looked back and thought: “Oh my God, I really miss what I did before.” As I said, it was a privilege to serve, but I really don’t miss it.

A return to politics is not very likely, then?

[Laughs] People say: “Never say never,” but I can honestly say that I can never envisage that happening. I’ve done that.

You have a particular shelf-life in politics and I think it’s important that politics refreshes itself with new people, and that should not be one where figures from previous eras come back.

I’ve started a new chapter and I don’t want to go back to the old one.

This article originally appeared in the 15 September 2020 edition of PR Week UK.

However, some remain wedded to the old orthodoxies, accusing ESG investment and stakeholder capitalism of delivering inadequate returns and no meaningful change for society as a whole. 

This is nonsense. ESG investors seek to avoid companies that exacerbate the world’s problems and increase risk, and instead look to direct capital to those that provide solutions, reduce risk and drive up long-term value. Taking against this common sense approach is, at best, a challenge. So the sceptics’ case against ESG investing usually rests upon the construction of numerous straw men.

First, there is the claim that ESG advocates assert that shareholder returns can always align with the social good. But, in reality, ESG investors’ starting point is different: the mitigation of risk.

As indicated by Edelman’s regular survey of institutional investors, a company’s ability to manage ESG factors is widely viewed as a proxy for prudent risk management, and with good reason. Earlier this year, Société Générale examined the impact of ESG-related controversies and found that in two-thirds of cases a company’s stock experienced sustained underperformance, trailing peers over the course of the following two years.

This is because businesses do not exist in isolation from the communities in which they operate. They need people to buy their products, staff their workplaces, provide a supportive environment, and so on.

Indeed, they need climate change to be reversed. If it is not, that will certainly not be conducive to profit making. Companies’ licence to operate is granted by citizens through democratic government, and will necessarily be circumscribed and jeopardised if the interests of customers, employees, suppliers and local communities are not properly accounted for. 

At Edelman, we recently published a study of the critical role that the public expects brands to play during the pandemic.

A majority of respondents said they had already punished companies they perceived to be doing the wrong thing, with a third saying they had convinced other people to stop using a brand they felt was not acting appropriately.

Millennials are particularly activist, at a time when a transfer of assets worth tens of trillions of dollars to this cohort is under way. Among this generation, almost nine in 10 wealthy investors say a company’s ESG record is an important consideration in their decision about whether to back it or not, according to Bank of America.

Critics also like to claim that, in constructing portfolios, ESG investors are obsessed with exclusionary screening and divestment from certain industries such as fossil fuels.

In truth, ESG investors deploy a range of approaches, including negative screening, norms-based screening against minimum standards, and positive screening. And when it comes to fossil fuels, there is a recognition that while cleaner alternatives to coal can be deployed at scale — which would justify an exclusion of the entire sector — the same cannot be said with regard to oil and gas, where incentives to transition can be more productive.

You also hear the claim that ESG investing and stakeholder capitalism is against the law, as it may conflict with the financial interests of retirement plans.

The law firm Skadden recently produced a memo for Harvard Law School that debunks this line of argument, making it clear that directors’ statutory mandates and fiduciary duties allow for stakeholder interests to be taken into account.

ESG sceptics often wrap up their case by saying it is not the place of companies to seek to change the world, but for politicians and governments to regulate and set the right rules. This should be taken with a lorry load of salt. Many of these sceptics are disciples of the economist Milton Friedman who argued for deregulation and minimal state intervention in the market.

So critics do not want companies to act — and neither do they care much for governmental action. In short, theirs is a recipe to do nothing when a flawed system has been short-changing investors and citizens for far too long.

This article was first published in the Financial Times on 2 September 2020.

Shillman posed the question – “do [fund investors] want the board of directors and the managers of your companies to spend time and energy on environmental, social and governance issues or do [they] want them to spend all of their time and energy on increasing the value of [their] shares?”  His response: “I’m rather sure that an overwhelming number of them would choose the latter.”  Many would argue the data shows unless you do a good amount of the former, you can’t deliver on the latter.

That said, it would be wrong to describe Shillman as an ESG sceptic – it is rather more complex than that.  He believes the integration of ESG factors in corporate decision making is important and he takes pride in Cognex’s impressive track record in this regard.  But he believes it should be left to companies to determine whether and how they integrate ESG concerns, not institutional investors. 

Shillman wrote the above in his company’s 2018 Annual Report.  There has obviously been a lot of water under the bridge since then.  A new consensus has emerged that the ultimate beneficiaries of funds – citizens – expect large, institutional fund managers to do precisely what Shillman argued against, when it comes to investing their life savings, looking after their pension pots, and so on.  It is clear – the aftermath of Covid-19, and the reaction to the tragic murder of George Floyd in the US, have turbo charged the focus around ESG, and lifted the prominence of the “S” and the “G” in ESG. There is no doubt the #MeToo campaign and backlash against fiscal austerity before 2020 had an impact before this too.

Over summer, we carried out a survey of over 22,000 respondents in 11 markets as part of our ongoing Trust Barometer.  This underlined the importance attached by the public to the ESG profile of businesses today.  It revealed that in the face of the Covid-19 pandemic, people want brands to protect the well-being and safety of their employees and suppliers even if it means suffering big financial losses until the pandemic ends (90%).  After the death of George Floyd shone a light on racial injustice and precipitated statements of solidarity with the black community from business leaders, respondents said brands in the U.S. must first get their own house in order by setting an example within their organization (64%), by reflecting the full diversity of the country in their communications (63%) and by making products accessible and suitable to all communities (61%).  The consequences of businesses not meeting expectations now are stark – for example, 60% of all respondents said they will buy or boycott a brand based on its stand on racial injustice. 

Furthermore, investors increasingly do not see ESG integration and financial returns as an either/or choice but two sides of the same coin.  Our latest Investor Trust survey of 607 institutional investors, representing investment firms that collectively manage over $9 trillion in assets, had 54% of respondents stating that ESG initiatives led to a favourable impact on growth and 47% saying it boosts the return on investment.  A good example where a poor ESG profile damages the financial standing of a business is the UK fast fashion chain, Boohoo, which lost a third of its market value in July after controversies relating to its supply chain were exposed.

This is all corroborated by data on ESG funds flows this year.  Refinitiv’s Sustainable Finance Review shows that in the first half of 2020 nearly $200bn in sustainable bonds was issued globally – an increase of almost half, year-on-year, and double the amount raised in H1 2018.  Remarkably much of this growth took place in Q2, when the pandemic was at its worst, with $130bn raised, the highest quarterly amount ever.  Likewise social bond issuance has rocketed  with already more than double the total amount raised in 2020 than for the whole of 2019, driven by capital raising for COVID-19 related recovery efforts. 

This trend is only likely to continue.  Millennials – those born between 1981 and 1996 – were significant drivers of the growth in demand for ESG products, long before the Covid era started and their influence is set to escalate.  According to a 2018 U.S. Trust Insights on Wealth and Worth® survey, 87% of millennial high net investors say a company’s ESG record is an important consideration in their decision about whether to invest or not.  And there is a huge, inter-generational transfer of wealth currently ongoing with around US$24 trillion expected to come under the control of millennials from this year.

So the truth is that in this post-pandemic world, it is actually the free market which is demanding ESG factors are integrated into corporate business decisions – fund managers are simply following the orders of investors.

The former frontbencher, once touted as a future Labour party leader, will be advising the capital markets and financial services arm of Edelman on topics such as audit, embedding ESG factors into decision-making and managing corporate transactions.

“Whereas in politics you do the theoretical side, I wanted to roll my sleeves up and get involved at the coalface,” Mr Umunna told the FT. “I’m a capitalist but we need a different model for capitalism.”

Mr Umunna is one of many high-profile appointments at recently created ESG divisions at UK banks and consultancy groups. The coronavirus pandemic and the protests that followed the police killing of George Floyd have also forced companies to put sustainability, resilience and diversity at the heart of their recovery plans.

New appointments include EY’s managing partner and chairman Steve Varley who stepped down to lead the company’s ESG efforts earlier this year.

Mr Umunna, a 41-year-old former corporate employment solicitor, believes the trend “isn’t just a fad”. 

“We’re not in the business of helping people greenwash, this isn’t just an aesthetic thing — it’s got substance,” he said. “The financial argument is getting louder [and] ESG conscious companies which take more of a long-term view and prepare for these types of big systemic risks are just much better placed, and I think that’s been borne out by the crisis.”

The former shadow business secretary said he supported the new £3bn energy efficiency package that chancellor Rishi Sunak will unveil on Wednesday, saying “it’s a no-brainer for the treasury to prosecute a recovery with sustainability at its core”.

Mr Umunna left Labour last year to form a pro-EU centrist group called Change UK — which dissolved after 10 months — before switching to the Liberal Democrats ahead of the December general election.

“It was always my intention to return to the private sector at some point, I was never going to stay in the House of Commons for decades,” Mr Umunna said. 

Of Keir Starmer’s performance so far as leader of the Labour party, Mr Umunna said that “competent opposition has been lacking over the past 5 years, so good scrutiny has been vital” but that the “next role will be to spell out a social democratic vision and that has barely begun”.

He also indicated he would not be backing Mr Starmer at the next election. “I’m not going to be changing parties again, I’ve done plenty of that in my time,” he said.

Hugh Taggart, Edelman UK’s general manager of corporate affairs, said: “In a time of such profound change, we couldn’t have found a better person than Chuka to spearhead our ESG offer and advise our clients. Chuka is a deep and analytical thinker [and] a passionate campaigner for a fairer society.”

Having lived through that, it has been refreshing to see so many, particularly in business, waking up to the reality of what has been happening over the decades to so many families of black heritage in the US, UK and elsewhere in the wake of the murder of George Floyd in Minneapolis.  There is no denying the impact on all of us of what happened to Floyd. Yesterday, it led protestors – of all races and backgrounds – to tear down a statute of the 17^th century slave trader, Edward Colston in Bristol, the UK’s sixth biggest city.

In the past most business leaders would have run a million miles from an issue like this. Not this time. Many have broken their silence to speak out. CEOs, from Amazon’s Jeff Bezos to Zoom’s Eric Yuan, have queued up to condemn what has happened. One can lambast business for only now having acknowledged what has been going after all these years, or you can focus on the positive – welcome their voices to the table and encourage them to do more and act. I prefer the latter.

As John Streur, CEO of Calvert Research and Management – one of the biggest responsible investment companies in the world – said last week, systemic racism is an ESG (environmental, social and governance) issue but the ESG investment community has failed to properly address it. “Responsible investors have come to trust ESG research and investment strategies to avoid investing in corporations that are lagging on taking needed action to address human rights violations and to take real action to drive needed change” he said but “as a group, we are failing to meet these needs.” Streur argues that more forceful action is needed by investors, company leaders and boards. He is right. 

Companies are corporate citizens which pay taxes – this in turn helps fund policing. Nevermind the clear moral imperative to act, business leaders have duty to act when the fundamental human rights of groups in society – which make up substantial numbers of their employees and customers – are being violated, as is the case here.

However, for the plethora of CEOs’ statements to be credible and not to be seen as tokenistic, PR driven gestures, they must be backed by the right action. Predictably, the statements have been followed by scrutiny of what companies have done about race inequalities in their own backyards – for starters, when the statement comes from a CEO on an all white board with an all white executive team, it totally undermines the authority of the company concerned, as Nike has discovered. So what should businesses do? Here are some things to think about (this is not an exhaustive list)…

There is no point making any comment on the outrage of Floyd’s killing and in support of the Black Lives Matter movement unless the whole of the board and senior executive team subscribe to the sentiment and want to do something about it, because without their buy-in, change is unlikely to happen. Stamping out racism – direct or indirect – in any organisation is a collective endeavour.

Be brutally honest about why the firm has only chosen to pipe up about such issues now. In the UK, where fewer CEOs have said anything about the Black Lives Matter movement, CEOs might want to explain why their companies did not speak out after the racist murder of the black teenager, Stephen Lawrence, in 1993 and following the publication of the report of the Stephen Lawrence Inquiry in 1999 which found there was widespread institutional racism against black people in Britain. The truth is COVID-19 and modern social media has helped shine a light on continuing race inequalities like never before and it has brought a big reality check to a lot of people.

Look at your own company’s diversity statistics, publish them if you don’t already do so, and come clean about why they are not what they should be, particularly in your boardroom and with regard to your executive leadership team. Don’t be shy of admitting unconscious bias and a tendency to recruit and promote in one’s own image, where that is an issue.  

Over a third of our largest listed companies in the UK are likely to miss the target to have at least one director from an ethnic minority by 2021 according to the government sponsored Parker Review. During my several years of working as a corporate lawyer in the City London – which likes to boast about being the world’s leading, international, financial centre – I was almost always the only face of black heritage in the room. At every gathering of senior business leaders I spoke to as Shadow Business Secretary whilst serving in Parliament, I cannot remember there ever being another black face in the room either. Unless these problems are acknowledged, you can’t address them.

As the Parker Review pointed out, developing candidates for your pipeline and planning for succession in a systematic way is crucial. Companies must put in place systems to identify, nurture and promote people of colour within their workplaces to ensure there is a pipeline of Board capable candidates, and they should ensure their managerial and executive teams reflect the importance of diversity to their organisations. The data in 2020 does not support the nonsense which is parroted about there not being sufficient black candidates for senior roles – there are plenty if you look for them. If your head-hunters tell you there aren’t enough black candidates, get rid of them and find better recruiters. 

The City is surrounded by incredibly diverse boroughs but the workplaces there look nothing like the communities around it in inner-London like Lambeth where I grew up. By all means make donations to charities working to reduce race inequalities and get far more involved in community action initiatives in those areas, but what are you going to do to ensure more young black people from those communities make it into your work places, deal rooms and trading floors? 

Advanced, which is the third largest software company in the UK (I am a non-executive director on its Board) has a recruitment process which is completely non-biased, not based on your CV or background.  We have two tests for candidates to complete from which we recruit and we then focus on internal mobility – training these people through our own training programmes and moving on their career. Last year over 60% of all vacant roles in the business were filled internally through people progressing. More of this kind of thing is needed across the corporate landscape to break down barriers to progress.

Above all, whilst social justice demands there be change, shareholder value does too. In their recently published report on diversity, McKinsey found that in the case of ethnic and cultural diversity, top-quartile companies outperformed those in the fourth one by 36% in profitability.  Put simply: if you allow race inequalities to persist in your company, it will adversely impact on the bottom line.

The role of business in rebuilding out of this crisis and fashioning a new kind of innovation economy where productive businesses, the state, and citizens work together to create wealth, reduce inequalities and ensure that globalisation works for many more people is vital – it would be impossible without enterprise.  You enter public service to make a positive difference to as many lives as possible – the truth is, during my time parliament, I came to realise that there is even more capacity to do this in the private sector, which is why it was always my intention to return to it.

Of course, there are different business models, practices and behaviours.  Since my time as Shadow Business Secretary I have been a vocal advocate of long term value creation, as opposed to the fast-buck, and of firms that not only seek returns for shareholders and investors, but prioritise looking out for other stakeholders – employees, customers, suppliers and communities – as well.  It is for this reason that ensuring environmental, social and governance factors (“ESG”) are properly integrated into corporate decision making is so important. Afterall, business and society are mutually dependent – there is no such thing as a “free” market given that the private sector relies on the state to maintain our roads, provide a digital infrastructure, sustain a national health service and so on.

This perspective is based not only on hard evidence but also life experience.  I was born into a family of entrepreneurs and would have not had the opportunities I had were it not for the power of enterprise.  After leaving full time education, I spent just under a decade working as a corporate employment lawyer – at the coalface of the “S” in ESG – in the City and for industry.  I then spent a decade in various senior roles in Parliament leading on public policy which had ESG at its core.

This is why I am now throwing my energies into working as a strategic corporate advisor to companies on business-critical issues that impact on reputation and their narrative – ESG in particular.

The first steps in this new chapter have involved me working with three companies, mainly in a non-executive capacity, to help their leaderships build value in the long term for investors and shareholders, in addition to delivering for other stakeholders and society as whole. Each seeks to maximise returns for investors but are conscious that this must go hand in hand with delivering shared value for stakeholders and society too.

Advanced is the UK’s third largest software company and I sit on its board as a non-executive director.  Advanced is the UK’s third largest provider of business software and services, with a £254m turnover, over 19,000 customers and 2,400 employees with operations in the UK, Australia, Canada, France, India, Ireland, and the US.  During the pandemic it has paid all staff for their time in isolation, whether sick or at risk but unable to work from home – even those who fall outside of the sick pay policy which include those still within their first six month probationary period.  As a signatory to the Social Mobility Pledge, Advanced has a radical recruitment process which is non-biased and not based on one’s CV or background but on candidates completing two aptitude tests.

Signal AI’s Artificial Intelligence-powered solutions provide communications professionals, compliance and risk experts, in-house and agency teams, and senior business leaders with the information they need to be in the know. The company, for whom I’m working as an advisor, has raised over $49.5 million in investment from four funding rounds and has over 150 employees.  At the start of the lockdown the company gave every employee £200 in order to help them adjust to working from home, and a fruit and veg pack.  They also offered their services free to parts of government to help the country deal with corona virus.

Finally, at the start of the year I was delighted to join Digital Identity Net UK, which is a UK-curated company that provides consumers with a single gateway to the validated identity data held about them by their banks and other trusted custodians of transactional and behavioural data. This empowers the consumer to leverage their identity, decide who has access to it, and how they share it, to build a better quality of digital life.  The founders believe corporate responsibility is entirely compatible with significant revenue and profit generation so the firm will fund a Social Benefit Trust, with a progressively defined portion of profits, to promote wider social benefit by charitable giving There is a special social purpose clause written into the constitution of the company and the investor base is diverse, not dominated by any one individual or organisation.

I am looking forward to working with these great, innovative companies, and with others, investors and shareholders – here and abroad – in building a new stakeholder economy in the wake of the crisis in the months and years ahead.