Different lipstick won't change the nature of the ESG pig

 Environmental, social and governance (ESG)  investing is a concept originally cooked up in 2005 at a UN conference. It's of a piece with the Great Reset initiative devised by the World Economic Forum in 2020, and which has newly crowned British King Charles III among its enthusiasts.

It's all very top-down and collectivist. Our pointy-headed betters have assessed the prospects for humankind and determined that it must be steered en masse into a course that is more "fair," "equitable," "green" and "sustainable."

A couple of months ago, I noted here at LITD how it is being used to circumvent government policy or court decisions that aren't to its proponents' liking:

 . . . now that the Supreme Court has said that the EPA overreached in trying to tell coal companies what kinds of products they could offer in the marketplace, those who want you to believe the global climate is in some kind of dire circumstance are going to use ESG as the next available weapon to assault our liberty:

Bill McKibben, the influential head of the climate pressure group 350.org, explains why the left has so promoted the ESG movement — which judges corporations’ performance based on environmental, social and governance metrics — to force companies to put on the straitjacket of unworkable climate controls.

“Convincing banks to stop funding Big Oil is probably not the most efficient way to tackle the climate crisis, but, in a country where democratic political options are effectively closed off, it may be the only path left,” he writes in The New Yorker.

What McKibben is saying is that because climate extremists aren’t getting their way at the ballot box, they will embrace the ESG approach, which is modeled after a union tactic called a “corporate campaign.” Under it, unions pressure firms to follow the union line or face damage to their company’s reputation and alienation from propagandized employees. Not willing to bear the immediate costs, many companies give in. After seeing Tesla dropped from “approved” lists of ESG companies, Elon Musk sadly concluded that ESG has been “weaponized by phony social justice warriors” and is now a “scam.”

You didn't think they were going to fade away quietly, did you? 

The bad taste in the mouth where ESG is concerned has been spreading:

A number of sustainable investing champions say it’s time for the “ESG” label to be shelved and replaced by something less likely to draw attacks from both the political right and left.

Robert Eccles, a professor who’s spent the past 12 years researching sustainability at Harvard Business School and now University of Oxford’s Said Business School, says the term “just doesn’t have value anymore. Let’s change the conversation.” 

“I’m happy to not use the term ESG,” he said in an interview, referring to environmental, social and corporate governance issues. “People are so invested now in hating ESG for reasons that don’t really have much to do with ESG.”

It turns out that defining ESG with any kind of specificity is a lot harder than using the Milton Friedman gauge of a business's health: is it showing a return on owners' investment?

Industry veteran Sandra Carlisle, who’s head of sustainability at $58.6 billion Jupiter Asset Management, said ESG remains poorly defined and inadequately regulated, making it confusing for investors and companies to understand. It’s also left investors in the dark, just when they need more clarity, says Leslie Samuelrich, who’s spent a decade in sustainable investing and is president of Green Century Capital Management.

“It’s time for the industry to explain what ESG means and what it doesn’t mean, to maintain its credibility,” she said. Samuelrich, whose Boston-based firm oversees about $1 billion, says ESG is about using relevant material factors to measure how a company handles risks. “It isn’t ‘sustainable,’ ‘green’ or ‘making an impact.”’

Meanwhile, ESG continues to take up an ever bigger chunk of financial markets. McKinsey & Co. estimates that more than 90% of S&P 500 companies now publish ESG reports. And according to Bloomberg Intelligence, ESG will this year exceed $40 trillionworth of assets. The amount allocated to sustainable investment funds reached around $2.5 trillion at end of June, research firm Morningstar Inc. says. Such figures suggest ESG is too entrenched to simply switch off. 

Before we go any further down this rabbit hole, it behooves us to consider the current situations of three countries that went all in for ESG:

Sri Lanka was the poster child for ESG investment and has suffered the brunt of these principles. Their most recent prime minister just resigned in shame, following months of protests and unrest stemming from the country committing to net-zero carbon emissions by 2050 and halving its nitrogen use. 

 

Ghana also took the “E” prong too much to heart, with its government agreeing to raise $5 billion with international capital with Green, Social and Sustainability (GSS) Bonds. Now experiencing runaway inflation, largely due to these GSS bonds, the country is hoping to be bailed out by the International Monetary Fund (IMF).

 

  The Netherlands similarly adopted a new continent-wide Sustainable Finance Disclosure Regulation (SFDR) to boost ESG investment and is now experiencing one of the highest inflation rates in the European Union. This was precipitated by the Dutch government approving a multi-year $21 billion plan to sharply cut ammonia and nitrogen emissions 50% by 2030 which requires one-third of farmers to kill off their herds and shut down indefinitely.

Much has been made of late about how progressivism has shifted from a focus on class struggle to identity politics militancy, but we should take heed of the fact that its tactics for imposing its aims remain those that James Burnham noted in his 1941 book The Managerial Revolution.  It was written at a time when totalitarianism was reaching fever pitch in Europe. However, a number of lefties in the West saw that herding humankind into the collectivist pen to bring about their secular vision of a harmonious world could be achieved by the creation of a revolving door through which corporate managers, government bureaucrats and ivory-tower visionaries would pass as they were needed in particular roles.

I might also add that this is yet another example of why post-America can't have nice things. The Trumpists have seized on the general public's realization that collectivist do-gooderism is a crock, and bastardized it into a lexicon of "globalist elites" and "taking care of our people" when their own prescription is nothing more than rank protectionism. Their vision of what ought to be is as vague as the progressives'.  Their strength as an influential force lies in in their ability to imbue serious public-policy and cultural matters with a yee-haw vibe and conjure images of pitchforks and torches.

The actual antidote is what it's always been: a free market informed by Judeo-Christian morality. 

But it is encouraging to see developments such as this backing away from ESG. 

Eventually, proven verities win out over bizarre schemes. It's often a twisted and rocky road to that point, and the story is never over, but it's reassuring to see that common sense isn't dead.