The Heartland Institute has published a study of ESG—the environmental, social, and governance movement increasingly adopted by companies and investors. Jack McPherrin calls it “one of the gravest threats facing the free societies of the world today.”
- “At its core, ESG is a social credit scoring system that ideologically aligned elites and subservient bureaucratic authorities have been developing to ‘reset’ the global financial system to their advantage, fundamentally transforming society in the process.
- “This is accomplished by altering traditional frameworks of evaluating businesses and assessing investment risk.
- “Rather than determining the creditworthiness and value of a business or industry based upon objective measures such as profit, return on investment, consumer demand, and other material performance measures, ESG’s architects seek to judge entities based upon subjective and difficult to quantify social and environmental goals.
- “These objectives typically have little or nothing to do with business success in the marketplace based on consumer demand expressed through their purchases.”
Image above by Aditya Vyas for Unsplash.com.
Is the ESG a threat to anyone except the companies and their shareholders who choose to go down that path? As long as I can choose where to invest my money, and as long as government does not force companies to have minimum ESG scores, what is my risk? Does government in any Western country require companies to meet minimum ESG scores? Given the choice of investing in competitors where one prioritized an ESG score and the other ignored ESG, I would gladly welcome that choice and go long the non-ESG company. I might even short the ESG company.
When investors begin to lose money with the ESG practitioners, I suspect that even those who support ESG in principle will invest their principal in the more profitable companies.