One of the most recent tools of the woke left is to put artificial pressures on the market to bring companies into line with their commandments. It comes in the form of what is referred to as an environmental, social and governance (ESG ) score.
Profit versus loss, and credit history, are only a part of the puzzle, according to the wokesters. Some virtuous body of do gooders get to evaluate a company against completely subjective standards, and recommend investment capital to whoever they like. This is from US News:
The score allows investors to gauge the company’s intentions of how they treat their employees, how the board makes decisions or if they have environmental consciousness top of mind. A company facing a number of lawsuits over environmental or human resources practices, for example, may have a low score and may be seen as not upholding the integrity of the ESG model.
Bear in mind that companies already have to comply with environmental laws, OSHA standards, Equal Opportunity rules and on and on. So the ESG score would be something above those already established standards.
It might be better to think of this in another way though. If a company does go nuts with woke standards, it will most likely not be as profitable as a company that doesn’t. This then, is a way to level the playing field, and penalize the less woke companies that prioritize shareholder profit. To illustrate my point, Harvard Business Review asked the basic question:
How have investors fared? Not that well, it seems.
To begin with, ESG funds certainly perform poorly in financial terms. In a recent Journal of Finance paper, University of Chicago researchers analyzed the Morningstar sustainability ratings of more than 20,000 mutual funds representing over $8 trillion of investor savings. Although the highest rated funds in terms of sustainability certainly attracted more capital than the lowest rated funds, none of the high sustainability funds outperformed any of the lowest rated funds.
For the woketards, this is an unfair comparison. They would say that ESG provides valuable intangibles like employee happiness, and a more sustainable something or other. Here is what the same HBR article referenced above says:
There’s also some evidence that companies publicly embrace ESG as a cover for poor business performance. A recent paper by Ryan Flugum of the University of Northern Iowa and Matthew Souther of the University of South Carolina reported that when managers underperformed the earnings expectations (set by analysts following their company), they often publicly talked about their focus on ESG. But when they exceeded earnings expectations, they made few, if any, public statements related to ESG.
So it isn’t really about the intangibles either, it’s really just a cover for underperformance.
How does this all relate back to Elon? Well, if a high enough profile person points out the obvious fact that the emperor is really just a fat naked dude, people may start to listen. To wit:
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.
— Elon Musk (@elonmusk) May 18, 2022
And then, for the meme smackdown:
Despite Tesla doing more for the environment than any company ever! pic.twitter.com/ImxrhnRepj
— Elon Musk (@elonmusk) May 18, 2022
I agree that Algorithms are always flawed because it’s a human attempt to encode a subjective opinion into logic. Investopedia defines Corporate Social Responsibility (CSR is similar to ESG) as operating in ways that enhance society and the environment instead of contributing negatively to them. It makes sense that when all other factors are equal, including profitability and otherwise, that people would want to choose to invest in companies that are making a positive impact in the world.