ESG Scores Are A Grift

ESG Scores Are A Grift

It didn’t take long for DIE and “climate change”, slithering slimy sly beasties, to mate and produce an abomination in the eyes of science: the ESG Score.

Environmental, Social, Governance scores, that is. As one source says:

Simply explained, an ESG score is a measure of a company’s exposure to long-term environmental, social, and governance risks that are often overlooked during traditional financial analyses. These risks include things like energy efficiency, worker safety, and board diversity, all of which can have significant financial consequences.

Here’s what our beneficent loving government wants to do.

The Federal Reserve has taken a major step in the direction of facilitating an ESG compliant monetary network that effectively acts as a parallel system to that of the Chinese Communist Party’s infamous social credit scoring system….

In other words, The Fed is working with the big banks to monitor their ability to comply with the ruling class’s preferred enviro statist technocratic tyranny.

The unaccountable people behind the American money printer claim that this exercise is “exploratory in nature and does not have capital consequences.”

Passing by that, the ESG score makes a sort of sense. If you’re making bets on stocks, and you see the Woke Undead Army have worked themselves into a frenzy over the “lack of representation” on company boards for its Favored Victim of the Month, then you had best pay attention to those firms that are determined to remained sane. Their price could plummet, at least in the short term, for the Undead control governmental thumb screws.

Similarly for “climate change”. California banned the sale of gas and diesel vehicles because they ran out of virgins to sacrifice to Gaia. Who knows what they will ban next? Well, if the company you want to go long on does business in the Wokest state, you’d had better make a good guess of the next banned thing. Your company could be the one that makes it, or needs it.

On the other hand, shorting stocks with poor behavior could work, too. If you want to profit from your culture willfully plummeting off a cliff.

This all supposes ESG scores reflect reality, which is as likely as professor unironically wearing a MAGA hat to teach her class in Women’s Studies.

For we have to ask who computes these mysterious numbers? And what is the best way to buy them off? Like companies used to do with Al Sharpton, race hoaxer and shakedown artist extraordinaire? Or do rating agencies now only accept Bitcoin?

Our source says:

While there are hundreds of rating agencies that provide ESG scores, some of the prominent ESG score providers include Bloomberg ESG Data Services, Dow Jones Sustainability Index, MSCI ESG Research, Sustainalytics, Thomson Reuters ESG Research Data, S&P Global, ISS ESG, Vigeo/EIRIS, Fitch Ratings, and Moody’s Investors Service.

So they’re all in on it. Everybody hungry to have their ESG be the ESG score. One big grift.

Here’s what the score is comprised of in the environmental aspect:

Environmental issues include can include factors such as:

Carbon emissions
Climate change vulnerability
Water sourcing
Biodiversity & land use
Toxic emissions & waste
Packaging material & waste
Electronic waste

Some of this is sensible. It pays to know whether the company in which you are invested is dumping toxic waste, and what local government agencies think about it. Since you can’t check all details on all companies for yourself, or not easily, you farm out the work to a rating agency. Fine.

But then comes the over-simplification and over-certainty of transforming “Toxic emissions & waste” into a single-number score—in three silly categories: Leader, Average, and Laggard (sheesh). That problem, the desire to compress all information to one number, is rife in our culture, but that is how these rating agencies make their living.

Once a score exists, and the rules of its compensation become known, or are teased out of available evidence, then it’s easy to game. That’s where the grift comes in. Companies are tempted to juice “climate change” commitments to get better scores, and suck up to rating agencies, which can then speak favorably about those companies, which drives investment. And et cetera.

What’s funny is the people who invented these things are at war among themselves. This is particularly hilarious:

One major event is the war in Ukraine, where environmental and social values are colliding. Europe is loosening climate objectives and reverting to fossil fuel use to ban Russian oil, leading to increased fossil fuel use across business sectors.

Simultaneously, Russian-backed Sberbank (ETR:SBNC)(AKSJ.F) has sparked outrage as it was highly rated by both MSCI ESG research and Sustainalytics as of December 2021. The bank scored especially well on data security and governance compared to Western lenders.

Oops. Somebody slipped up, because the elite know they can’t be seen saying anything nice about Russia.

So “MSCI and Sustainalytics have now downgraded or suspended Sberbank and other Russian government-backed companies.”

The ESG scores are thus like Oscars. They might have started as merit-based, but are now only measures of political alignment.

I’m not often in agreement with Scott Adams, but in one cartoon (pictured on the main page), he accurately described the sanity of ESG scores.

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  1. MJ

    This is terrifying. Sorry. God help us.

  2. Hagfish Bagpipe

    The fun never ends when the circus comes to town.

    Until the clowns pack up their tents and high-tail it out of town’s smoking rubble.

    Then the fun ends.

  3. Leo

    If a company doesn’t have a good ESG score it might get metaphorical rocks thrown at it. Black rocks in particular.

  4. Years ago I investigated Canadian companies’ ESG scores. It turned out every single one of the 60 biggest companies was considered virtuous on one list or another, i.e. completely meaningless as any investment decision-making tool.
    At it’s origins there was some sense to assessing ESG to predict company stock and financial performance. The key was that every sector had very specific, narrow and different factors e.g. for a mining company, environmental factors matter a lot, social not so much, whereas for a retailer, social factors, both on the employee and customer sides were critical and environmental was a minor consideration.
    It’s only when the climate crazies subverted and corrupted ESG to mean only one thing – climate change virtue-signalling, that it ceased to have any investment usefulness.

  5. Milton Hathaway

    The socialist left reliably displays several defining characteristics – arrogance with a complete lack of self-doubt, total unconcern and unawareness of unintended consequences, and a complete detachment from the average citizen who’s quiet labors make their world possible. As a result, they can always be counted to take things way too far, way too fast. They self-devastate and self-immolate, for which we should thank God.

    ESG scoring seems particularly stupid on their part, simply because it a measure, a number, a grade. Numbers can be correlated. The lefties love the concept of grading others, of course, but they neglected to consider that the graders are thus exposing themselves to being graded. When ESG scoring collides with human nature, and predictably fails to accomplish their intended goals, articles will be written with charts showing all the negative correlations.

    I predict we’ll be seeing a lot more articles like this one:

    It’s interesting to realize that people who now call themselves “woke”, by the new definition, are about as un-woke as you can get, by the old definition.

    And as usual, Dilbert really is a documentary. Scott Adams can be an odd duck, but he has an uncanny insight into corporate inanity. The engineers I know are all convinced that Adams has a spy in their company.

  6. Uncle Mike

    For HB:

    They’re selling postcards of the hanging,
    Painting the passports brown.
    The beauty parlor’s filled with sailors.
    The circus is in town.

    The Wokey Doakers are hellbent on destruction of the golden goose, upon which they ironically depend utterly. The Fed is committing hara-kiri, falling on their swords with a vengeance. No useful, rational, social good is too good for the Composter in Chief and his rabid jackal pack.

    As the market plummets and the American economy slip-slides into oblivion, Wall Streeters will be leaping once again, making a splash on Broadway like a watermelon truck driven off a bridge. They see the future, and it isn’t bright.

    Head for the hills, guard your seed, hunker in your bunker. The world will end with a bang, not a whimper.

  7. Johnno

    I have some cream to sell you that will improve your ESG sores!

    You heard me!

  8. Vermont Crank

    Like rust taking an object of value to ruin, the establishment never sleeps in devising news ways to cast us into penury or prison.

    All we have to do to restore Morality, Constitutionalism and Subsidiarity is to vote Republican.

  9. Ann Cherry

    The beauty of phrases like “Environmental”, “Social”, and “Governance”, is in their UTILITY: they can mean anything; therefore, they mean nothing, and so they mean everything. Got that? For further explanation, just ask our Veep.

    Let’s go ahead and accept their premises, and apply ESG scores to THEIR projects, companies, and investment opportunities. But instead of only scrutinizing ONE THING, life-giving Carbon Dioxide emissions, which they call “carbon” to make it sound dirty and smudgy, let’s rate THEIR projects on THEIR “ESG” scores, without picking and choosing only for pet causes (CO2! Nitrogen! Methane!), and using REAL environmental and social standards:

    For example, at or near the top ‘O the heap, are their beloved WINDMILLS: how do they REALLY measure up? When it comes to “minerals and metals for a low carbon future” it looks like poor Mother Earth is about to get pillaged and plundered:

    One 3-MW turbine contains:

    335 tons of steel.
    4.7 tons of copper.
    1,200 tons of concrete (cement and aggregates)
    3 tons of aluminum.
    2 tons of rare earth elements.

    “Minerals and metals for a low Carbon Future: the need for ‘Climate Smart Mining’ Kirsten Hund Sr. Mining Specialist World Bank”:

    The “Environmental” aspect of the ESG score on windmills must also be downgraded because they kill birds and bats (which are vital pollinators), and because, together with the vast mega-transmission lines to bring power from windmills to homes, they have enormous land-use “footprints”.

    Where are the environmental studies on windmill and solar farms? Mostly they don’t exist, or focus only on “reducing carbon emissions.”

    By the same token,

    “Electric hybrid cars use twice as much copper as non-hybrid cars
    the green economy is now driving demand for new minerals & metals – electric car example. The FT this week reported that Lithium is growing at 10% per year. Doubling every 7 years!

    “…Electric hybrid cars use twice as much copper as non-hybrid cars, and the average hybrid car consumes 19 major mineral groups sourced in over 50 countries; including the above noted Rare Earth Minerals”

    This is too long, so let’s skip the “Social” aspects of their “Green” schemes, other than to say, “Made in China or its allies, and sourced from third-world slave labor, who are often children.”

    How does THAT score on your ESG and DIE ratings? Show us the math on why slave labor is necessary for “affordable green energy” and we’ll show you an 18th century plantation owner who felt the same way about cotton, sugar, and indigo.

    As for the “Governance” score on their Green Schemes, just know that the weather is always your fault, and the only solution is more Communism.

  10. arthur Foyt

    This goes beyond politics and into pure dictatorial control.
    Do what your told to do or we will ruin you.

  11. Ann Cherry

    But wait, there’s more…..Netherlands is shutting down the largest natural gas field in Europe and bringing its coal plants back online:

    “Europe faces a critical shortage of energy this winter. It has a big gas field that could replace the natural gas supply it lost due to Russia’s invasion of Ukraine. But it won’t use that rich gas field and is shutting it down. Instead, Europe is burning more coal — including dirty lignite coal — and even that won’t be enough to fill unmet needs, due to supply bottlenecks. Coal generates much more pollution than natural gas.

    The sprawling Groningen field, beneath the windmill-dotted marshlands of the Netherlands, is Europe’s largest natural gas reserve. It holds enough fuel to replace what Germany once imported from Russia, reported Bloomberg News.

    But instead of supporting Europe, as a brutal winter approaches, the field is being shut down, merely because of tremors similar to the tremors that fracking for natural gas produces all the time in states like Oklahoma.”

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