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.

Buy my new book and learn to argue against the regime: Everything You Believe Is Wrong.