What are ESGs?

What are __?

ESGs have been around for well over a decade and have become a hot topic in recent years. However, a surprising number of people still have yet to hear about these three letters. The acronym stands for Environmental, Social, and Governance. Currently, ESGs are meant to be a way for investors to know which companies to invest in if they don’t want to invest in certain companies that some might deem as being “socially or environmentally irresponsible.” ESG scores are given to companies based on certain criteria. Environmental criteria can range from a company’s energy use to their treatment of animals to its disposal of hazardous waste and many things in between. Social criteria look at a company’s business relationships. These would be things like working with suppliers that hold the same values they claim to hold, whether the company donates a percentage of profits to the local community, considering the health and safety of a company’s working conditions for its employees, and one that seems to pop up everywhere: diversity and inclusion—which encompasses a lot of the “wokeness” we see from businesses such as diversity trainings, hiring less qualified people of specific minority groups over more qualified candidates, and products that aim to virtue signal. Finally, governance is to help investors know about a company’s potential for conflict of interests in their choice of board members, whether political contributions are used to obtain unduly favorable treatment or engage in illegal practices. For some, this might all sound great at first, but many people who have looked into ESGs have been getting really worried. There’s a lot of questions like who decides which companies deserve high ratings and low ratings? How are these scores figured? And, what if ESG scores start getting applied to people?

As it turns out, ESGs don’t really do what they are supposed to do. For one, investors who invest in companies with low ESG scores (lower ESG scores are considered more favorable) the worse the return on the investment. In The Journal of Finance, University of Chicago researchers Hartzmark and Sussman found no evidence supporting that high-sustainability funds outperformed low-sustainability funds. Not only this, but Professor of Finance at Santa Clara University Meir Statman said in a statement, “In the long run, ESG investors are likely to earn lower after-fee returns than non-ESG investors.”

These lower returns are believed to be due to businesses focusing more on ESG scores to attract investors that want to feel good about the companies they invest in and focusing less on profits to benefit investors financially. However, maybe that’s the price to pay for more environmental sustainability and social justice. Except, maybe not. It was noted in an article in Harvard Business Review,

“Researchers at Columbia University and London School of Economics compared the ESG record of U.S. companies in 147 ESG fund portfolios and that of U.S. companies in 2,428 non-ESG portfolios. They found that the companies in the ESG portfolios had worse compliance record for both labor and environmental rules. They also found that companies added to ESG portfolios did not subsequently improve compliance with labor or environmental regulations.”

So, glowing corporate ESG scores are being given to some of the worst offenders of environmental and social issues, which begs the question, who exactly is giving out ESG scores? It is not Elon Musk, who recently made the news for contemplating purchasing Twitter. The Billionaire CEO had used the social media platform on April 3 to blast ESG scores, stating, “I am increasingly convinced that corporate ESG is the Devil Incarnate.”

PragerU reported that Tesla had three self-proclaimed ESG watchdogs rate the company, giving three very different scores, suggesting that there is no definitive way to measure an ESG score. Not only this, but social and governance can hold heavier weight than environmental—especially, it seems, when it comes to political ideology. Tesla, which works to create electric cars so we are not reliant on fossil fuels has a worse ESG score than Lockheed Martin, the largest defense contractor globally, making money off of missiles and high-end fighter aircrafts—making money off war. According to a report by The Hill Journalist Kim Iversen, “ESG scores are based on what neo-liberal elites consider to be moral and good…. The score is political.”

So, which company is at the very top? As it turns out, Bill Gates founded Microsoft Corp. And Microsoft and Lockheed Martin have something interesting in common—both are partners of the World Economic Forum (WEF), something that Tesla is not. While some companies that partner with WEF do have worse ESG scores than Tesla, one of the main things noted to be hurting the company is Musk’s “eccentric and unusual governance” of the company according to an article on Your Green Wealth. WEF has been the organization that has been making a lot of people talk about “The Great Reset.” When asked about which company stands out as doing “especially well when it comes to tackling climate change,” Chief of the WEF Klaus Schwab highlighted TotalEnergies, a French oil company. He stated in a Business Insider interview, “Total is one of the 70 companies that the World Economic Forum brought together to commit to report on the ESG metrics we have developed with the International Business Council, under the guidance of Bank of America's CEO, Brian Moynihan, together with the Big Four audit companies.”

Earlier in May, Tesla was kicked off the S&P 500’s ESG index, and Musk tweeted out a variety of thoughts. In one post he said, “In the past I voted Democrat, because they were (mostly) the kindness party. But they have become the party of division & hate, so I can no longer support them and will vote Republican. Now, watch their dirty tricks campaign against me unfold…”

In another, he said, “Exxon is rated top ten best in world for environment, social & governance (ESG) by S&P 500, while Tesla didn’t make the list! ESG is a scam. It has been weaponized by phony social justice warriors.”

So, the biggest businesses and wealthiest people are behind ESGs—a scoring system that seems to have a left-wing political bias. Not only this, but many people have noted the similarities of the ESG scoring system with China’s “social credit” system, which ranks citizens and punishes them with throttled internet speeds, flight bans, and more should they be deemed “untrustworthy” by the Communist Party. It is a system that ranks Chinese citizens on almost everything they do in day-to-day life. From how long they play videogames to how well they drive. What they shop for and how much of what they shop for. What they say online and who they associate with online. There are 23 million Chinese citizens already blacklisted and the number is growing. And the WEF is wanting to implement a similar social credit system worldwide by 2030, and they have a tagline to go with their big ideas, “You’ll own nothing, and be happy.”