From the Editor’s keyboard;
The backlash in the USA against ESG (Environmental, Social and Governance), such as legal moves in the State of Texas to restrict financial institutions from using ESG investing criteria, raise questions about the relevance of sustainability data. Recently Vanguard offered investors the chance to avoid pro Net Zero or ESG companies, as they carried an inherent risk of losing money in say social good or equity projects, which obviously are unlikely to generate a profit at the end of the cycle.
This move by Vanguard caused howls of outrage from WEF aligned NGOs, media outlets and companies of course, but it does mark a tipping point for Western capitalism itself. In the Middle East, Africa and most of Asia there are no real considerations for ESG or climate change, people there are just busy trying to survive by whatever means possible. In World War Woke, the world’s poor are mere pawns in this game, where the wealthy pretend they care about “outcomes” as they amass even more money, control and micro-manage people’s lives. Case in point, the recent World Cup where slaves died to build the stadiums and millionaire commentators and players played rainbow armband Top Trumps off the pitch.
So should rich people with money have the freedom to choose where that cash is invested? That is the crux of the ESG debate.
As set out in the latest edition of The GRI Perspective, the debate over Net Zero’s actual value to the planet polarizes ESG into left-wing ‘woke’ versus conservative ‘anti-woke’ terms. The GRI adds; “when a balanced viewpoint is taken, it’s clear that ESG considerations are a key aspect of how asset managers fulfil their fiduciary duties towards investors and other stakeholders.”
Thing is, it isn’t clear. Making a profit should be the aim of asset managers, minimising the impact on the planet is a good thing too. But modifying consumer behaviour in a particular way, via woke marketing and employee/workplace policies is nothing to do with investment. It is social engineering, a different thing entirely and an overhead, an expense – not a profitable investment.
DOES ESG ADD VALUE?
Proponents of ESG state it can have significant value enhancing effects on a business, such as those related to climate or social equality, but the recent poor ticket sales for woke Hollywood films, or the boycotts of UK retail companies that allow men who identify as women into female changing areas, all highlight the damage that ESG policies can do to brands.
It is fashionable for insurance brands to sign up to all ESG, Net Zero, Stonewall etc. causes, but some of these decisions may well backfire one day. Many people can see that wholesale gas and electricity prices are back to pre Ukraine levels and they understand that high energy prices are nothing to do with the market value, they are a direct result of brand values, ESG policies and the woke agenda. Consumer resentment is bound to increase as retail prices for energy increase for no good reason.
The same thing will happen to insurance brands if they agree to charge drivers of non EV cars more to insure their vehicles, and that is something which many left wing politicians and activists are seeking to do. By punishing drivers of petrol and diesel cars to suit the climate change activist agenda you risk boycotts, protests and online abuse. Brands should think carefully before issuing statements such as EV cars are inherently greener. They may not be. They require tons of water, electrical power for factories, rare mineral mining, slave labour and global distribution involving huge carbon consumption. The drain on National Grid systems may lead to blackouts, social unrest and problems over battery pack disposal in the future. Critical thinking is better than blind worship when it comes to greener futures. The big picture isn’t clear yet.
Eelco van der Enden, CEO of GRI added:
“While there can be ideological disagreements over ESG, if we listen to both sides and stick to the facts then common ground can be found. Instead of focussing on what is ‘woke capitalism’ or not, we need a rational discussion on what is good business practice. And the simple truth is that sustainability and effective risk management are completely aligned.
Responsible stewardship means taking care of the fiduciary duty towards stakeholders, society and the environment. In the long-term, you cannot run a successful company in a dysfunctionality society, or a failing planet. That is why ESG-savvy companies tend to make sound investment choices.
Proportionality in decision making is key. Often it is not ESG that politicizes business, but politicians who politicize ESG.”
There is a balance to be struck between the consumption of resources and unchecked capitalism. This is a separate issue from much of the wokery that infects modern business, which is actually about dividing people into groups which hold a Special Victim Card. That bitter process of social division, coupled with a wealth transfer to the super rich elite, will sow the seeds of conflict which does far more damage to planet Earth than failing to recycle an e-scooter battery.