Hermes Investment Management CEO Saker Nusseibeh has warned investors ESG policies are "missing the point" over "populist" changes in consumer habits and government environmental policy, which will have "huge ramifications" for shareholders.

In the firm's Q4 note, published on Monday, Nusseibeh highlighted media interest in the recent Intergovernmental Panel on Climate Change (IPCC) report, which warned a 1.5 degree celsius increase in global temperatures could result in catastrophic climate change, as evidence consumers and government attitudes are changing.

He said: "The UK government has now realised it needs to not only get in line with society on this issue, but incorporate it into regular policy discussions and legislation.

"If it was to react to the IPCC's call and begin enacting laws aimed at preventing the advance of manmade climate change, it would have huge ramifications for thousands of companies - and their shareholders.

"The most important political decision of our time is yet to be taken, but when it is, it will have a profound impact not just on markets, but on how each of us lives our lives - and I don't think many investors have figured this out.

"This is not about ESG. It is about the momentum that is changing society's consumer habits.

"It has already started and it is going to be big. We are going to see a profound shift in what people buy and how - this shift is coming soon, and at pace."

Nusseibeh added that while it is easy to see the impact changing public policy and consumer habits might have on sectors like retail and fossil fuel firms, which will face a "stranded asset problem", ESG policies must evolve to understand the full impact.

He explained: "What is less easy, is the ability to model the business impact of a revolution in customer demand, taste and consumption.

"Not enough attention is being paid to how significant this shift will be, not just to global retailers, but their entire supply chains too.

"My daughter tells me that although the stance Hermes takes on ESG is commendable, in the grand scheme of things I am "missing the point'.

"I increasingly think she is right."

Going forward, Nusseibeh said Hermes must be "responsible investors", with regard to both the planet and customer, by acting as "stewards of capital" engaging with the companies it invests in with regards to "their plans to adapt to changing consumer demands".

He added: "This type of populist movement is bigger than anything we have seen before, and has the power to unite - rather than divide - society.

"It is up to us as investors to see it coming - and keep one step ahead."

This article first appeared at Investment Week