Follow your money

In an appeal to environmentally conscientious investors, Turkey issued a US$2.5 billion green bond last month, attracting a rush of global interest and selling to investors predominantly in the United States, the United Kingdom, or Europe. A green bond is a financial instrument—and a category of socially responsible “ESG” investment—used to raise capital for environmentally sustainable projects.

It all coincided with a tough reelection campaign for Turkey’s president, Recep Erdoğan, whose rule has become increasingly autocratic since he took office in 2014: After a coup attempt in 2016, Erdoğan purged his critics from the judiciary, military, police forces, civil service, universities, and news media. The U.S.-based Freedom House—whose annual report is broadly considered a gold standard on political liberty in the world—has meanwhile downgraded Turkey’s ranking from Partly Free to Not Free; and the Committee to Protect Journalists now considers it the planet’s fourth-worst jailer of reporters, behind Iran, China, and Myanmar. So why are socially responsible Western investors now bankrolling Turkey’s government with an ESG bond?

Marcos Buscaglia is the founding partner of the consultancy Alberdi Partners, the former head of Latin American economic research at Bank of America Merrill Lynch, and the author of the forthcoming Beyond the ESG Portfolio: How Wall Street Can Help Democracies Survive. To Buscaglia, the answer is that for every ethical issue they may be thinking about, they’re not thinking about democracy—and for these investors, that may end up being more than an ethical problem …

John Jamesen Gould: Let’s start with the technical question: What are ESG investments, exactly, and how do they work?

Marcos Buscaglia: The idea of socially responsible investment—the idea that ethical considerations, beyond financial returns to shareholders, should also govern investment decisions—has been a theme forever. In the West alone, there’ve been major campaigns in recent decades to promote divestment from Apartheid South Africa, for example, or from tobacco companies.