Major institutional investors and chief executive officers of large multinational corporations have begun to distance themselves from the so-called ‘movement’ called Environmental, Social and Governance standards or ‘ESG’.
No less personages than Larry Fink, CEO of the multi-trillion dollar asset manager BlackRock and Jamie Dimon the boss at U.S. banking behemoth J.P. Morgan Chase have made an about-face. Both now downplay ESG dogma, proclaiming that publicly traded corporations should, as their primary goal, seek to maximize profits.
ESG is an attempt to wrest control of corporations from shareholders and the managers that shareholders entrust with their money. Traditionally, that money has been put to work earning profits, which are either distributed as dividends to shareholders or reinvested to improve or expand operations. It is Capitalism 101.
ESG is backdoor socialism where capital is allocated according to government edict.
The ‘E’ part is principally concerned with compelling companies to adhere to a ‘Green Transition’ agenda that demonizes carbon dioxide as pollution (without real evidence). It seeks rather impossibly to end human emissions of co2 and methane under the obscure labels of ‘Net Zero’ and “Net Zero 50”.
The ‘S’, Social, part, is mainly the essentially reverse discrimination social justice policy commonly known as Diversity, Equity and Inclusion, ‘DEI’, which seeks to redress issues regarding the under-representation of minority groups in hiring and promotion.
The ‘G’, governance, is the least damaging of the 3 letters, focussing on companies averting unethical or illegal practices or involvement with unsavoury regimes.
These ESG standards comes at the expense of overall returns on investments (usually propelled by corporate profits). Other important matters are: the Green Transition will raise prices for consumers and harm important industries, such as oil and gas exploration and production, utilities and pipelines; discriminatory and employee-demoralizing practices inherent in DEI; the inconsistent standards in ESG ratings of companies; the violation of professional investment manager codes of ethics and standards of conduct; and, not least, that adhering to ESG criteria unnecessarily lowers returns, thus short changing public and private pension plans.
Also undermining the Climate Apocalypse storyline driving the ESG/Green Transition crusade are conflicting studies that contradict the most negative temperature assertions. Dire predictions of doom are continually proven wrong. For example, heat waves in 1911 and 1936 surpassed this year’s, and occurred when CO2 levels were substantially lower than today’s. Solar panels and wind turbines are not recyclable and are far from being ‘Green’. They require either fossil fuel or nuclear energy as backup power, as batteries and other energy storage are too expensive to make ‘Green’ power reliable, as Germany and Texas sadly found out.
ESG is toxic to economic growth and social harmony and dozens of U.S. States are passing laws forbidding their governments from doing business, such as banking, with companies hewing to ESG doctrine. Their principal concern is that ESG is a guise for covert neo-Marxist control of private firms and the financial instruments that fund them -such as stocks, bonds, loans, leases and mortgages.
Canadian investors and political leaders need to catch up with their American counterparts and fight back against ESG. Alberta and other provinces, along with consumers, investors and pension beneficiaries, will be hurt badly if ESG’s warped precepts prevail.
Ian Madsen is the Senior Policy Analyst at the Frontier Centre for Public Policy