12 ms·

ESG should be boiled down to one simple measure: emissions

• robswc 4y ago
  ESG always seemed like a sham to me. One of those things that emerges when we've reached a point where there's more people than work to do. So new things like ESG gets invented, lol I get the principal behind it but its clearly just been gamed at the best and used as a weapon at worst.
• kodyo 4y ago
  So, "E."
  • SicSemperUranus 4y ago
    The article is paywalled, but this seems like a nothing burger. The point of ESG isn't to save the planet, it's to make the world a better place to live/work in. Union busting is bad for workers and therefore society at large. What's the article's point? That point shouldn't care about social issues? Agree to disagree I guess.
    • kfrzcode 4y ago
      > Union busting is bad for workers and therefore society at large.
    • JumpCrisscross 4y ago
      > What's the article's point? That point shouldn't care about social issues? The thesis is "because [ESG] lumps together a dizzying array of objectives, it provides no coherent guide for investors and firms to make the trade-offs that are inevitable in any society," that industry "is not being straight about incentives" and that "the various scoring systems have gaping inconsistencies and are easily gamed." Co-mingling E, S and G winds up focussing on nothing except making consultants rich.
  • bhauer 4y ago
    From the article: > It is better to focus simply on the e. Yet even that is not precise enough. The environment is an all-encompassing term, including biodiversity, water scarcity and so on. By far the most significant danger is from emissions, particularly those generated by carbon-belching industries. Put simply, the e should stand not for environmental factors, but for emissions alone.
• jballer 4y ago
  ESG should be boiled down.
• MattGaiser 4y ago
  Isn't a large part of the problem that you can make gains in one category by harming another? So to make mining more climate friendly, use kids in the Congo who do not require any gasoline? Or do it all with biodiesel so that emissions are lowered by CO2 reuptake by the plants, but the rainforest is bulldozed? Yes, they conflict, so you want to reward companies that effectively manage those conflicts, not casually trade one issue for another.
  • jballer 4y ago
    That’s the obvious criticism. Not to mention ability to generate a profit beyond those concerns. Proponents would argue that this a feature, not a bug.
  • FabHK 4y ago
    Yes, and addressed in the article: > ESG suffers from three fundamental problems. First, because it lumps together a dizzying array of objectives, it provides no coherent guide for investors and firms to make the trade-offs that are inevitable in any society. Elon Musk of Tesla is a corporate-governance nightmare, but by popularising electric cars he is helping tackle climate change. Closing down a coalmining firm is good for the climate but awful for its suppliers and workers. Is it really possible to build vast numbers of wind farms quickly without damaging local ecology? By suggesting that these conflicts do not exist or can be easily resolved, ESG fosters delusion.
• olivermarks 4y ago
  ESG was quickly gamed by the geniuses who financialized countless now zombie companies. When Blackrock are pulling back on ESG because it's hurting profits you know the end is near. https://www.ft.com/content/48084b34-888a-48ff-8ff3-226f4e87af30 https://www.ft.com/content/48084b34-888a-48ff-8ff3-226f4e87a...
• axblount 4y ago
  I think Tariq Fancy does a good job of breaking down why ESG and sustainable investing as a whole is bunk: https://medium.com/@sosofancy/the-secret-diary-of-a-sustainable-investor-part-1-70b6987fa139 https://medium.com/@sosofancy/the-secret-diary-of-a-sustaina... He also summarizes his thoughts on Doug Henwood's podcast: https://podcasts.google.com/feed/aHR0cHM6Ly9zaG91dC5sYm8tdGFsay5vcmcvbGJvL3JhZGlvLWZlZWQucGhw/episode/aHR0cHM6Ly9zaG91dC5sYm8tdGFsay5vcmcvbGJvL1JhZGlvQXJjaGl2ZS8yMDIyLzIyXzA2XzMwLm1wMw?ep=14 https://podcasts.google.com/feed/aHR0cHM6Ly9zaG91dC5sYm8tdGF...
  • evmar 4y ago
    The Economist podcast had an episode on ESG (likely related to the article) and they had Tariq Fancy come on that podcast: https://www.economist.com/esg-pod https://www.economist.com/esg-pod
  • olddustytrail 4y ago
    Having started to read the "breakdown" I'm unsure I want to listen to the podcast. Any chance of a tldr for that? The linked blog is too purile for my taste.
  • ZeroGravitas 4y ago
    Does he actually have a point in amongst the rambling name dropping I gave up hope somewhere around the Swedish Souffle anecdote and abandoned the article.
    • abirch 4y ago
      I'm a Dalio guy. He believes in this: https://www.bridgewater.com/research-and-insights/sustainable-investing https://www.bridgewater.com/research-and-insights/sustainabl...
      • WillPostForFood 4y ago
        He believes there is a lot of money to be made, so he he supports it enthusiastically. It doesn’t reflect on whether he thinks it is good for society or the planet.
• gnarbarian 4y ago
  ESG is a political compliance score. Fall out of favor with certain groups and your score will plummet, publicly tout an agenda around diversity and sustainability and your score will rise. The fact that Exxon (edit: oops I mean shell) has a higher ESG score than Tesla should be all you need to know.
  • greeneggs 4y ago
    MSCI ESG ratings: Tesla: A https://www.msci.com/our-solutions/esg-investing/esg-ratings-climate-search-tool/issuer/tesla-inc/IID000000002594878 https://www.msci.com/our-solutions/esg-investing/esg-ratings... Exxon: BBB https://www.msci.com/our-solutions/esg-investing/esg-ratings-climate-search-tool/issuer/exxon-mobil-corporation/IID000000002127471 https://www.msci.com/our-solutions/esg-investing/esg-ratings...
    • gnarbarian 4y ago
      I was referring to this which happened a few months ago: https://esgreview.net/2022/07/06/is-exxonmobil-really-more-esg-friendly-than-tesla-2/ https://esgreview.net/2022/07/06/is-exxonmobil-really-more-e... https://seekingalpha.com/article/4516270-tesla-exxon-mobil-sp-500-esg-how-does-this-work https://seekingalpha.com/article/4516270-tesla-exxon-mobil-s...
    • sjaak 4y ago
      Shell: AA https://www.msci.com/our-solutions/esg-investing/esg-ratings-climate-search-tool/issuer/shell-plc/IID000000002137074 https://www.msci.com/our-solutions/esg-investing/esg-ratings... Higher than TSLA
      • gnarbarian 4y ago
        also Tesla is only average for the automotive industry which is mind-boggling.
        • andrepd 4y ago
          Well why shouldn't they be? Most major auto makers are phasing out development of new ICE drivetrains, and phasing out ICE manufacturing altogether. Meanwhile Tesla is certainly not without criticism.
• mushufasa 4y ago
  Our startup takes a new data approach to transparency and granularity of ESG data to sidestep a lot of the criticisms of greenwashing, and help people understand. I don't think oversimplifying to one metric is an answer for all the people who care about other things (e.g. data privacy, corporate corruption, so many other issues). We have a little description of our approach at https://www.yourstake.org/info/noscore-esg https://www.yourstake.org/info/noscore-esg and we're hiring engineers! If you don't see something that fits you can still send your resume/portfolio to hiring@yourstake.org
  • megaman821 4y ago
    Alarm bells start going off whenever I see objective measurements with subjective or moral measurements. We at Evil Corp burned down half of the Amazon rain forest for a golf course, but we put a BLM banner on our website...so a B+?
  • SicSemperUranus 4y ago
    Would you consider candidates outside the US? e.g. in Canada?
• clairity 4y ago
  also note that CSR (corporate social responsibility) is public relations, not a moral or ethical position, part and parcel to the term 'greenwashing'. in the same vein as the article, we should stop talking about climate change in favor of pollution. climate change is vague, pollution is not. we can see and feel the effects of pollution, which makes it more likely that we can create a coalition to address it rather than this unspecific notion of temperatures rising. pollution affected us yesterday, affects us today, and will continue to affect us into the foreseeable future. in the 80s this framing was used effectively against acid rain (sulfur dioxide) and CFC/HFCs. coal plants are among the most impactful in terms of pollution, so if instead of arguing about 1 or 2 or however many degrees of temperature rise, we pour all that effort into getting rid of coal plants (principally with nuclear right now, some gas at the margin, and renewables gradually, as storage and transmission tech improve), we'd be able to make meaningful impact in the next few years, with a byproduct of also reducing carbon emissions.
  • tracker1 4y ago
    Agreed... in the end, the "climate change" message is really about pollution... so should just talk about what can be its' own isolated issue that everyone sees, recognizes and cares about. Doom spreaders sound like quacks in general. It doesn't matter if it's Satan or Climate change... it just breeds skepticism. Keep the message on message. This is why a lot of people stopped/don't support the EPA and the Green movements. You can see, smell, taste and feel pollution. It's bad.. and even then, it's really bad in places that we frankly don't control. And we're shipping our waste overseas to be dealt with corruptly or worse, not at all. In my lifetime, the Grand Canyon went from being able to see across well on any given day... to a haze the obscures the other side... rolling in from California.
    • clairity 4y ago
      climate change has become a culture war meme topic, which is why it's time to change the perspective and leave that inanity behind, so that we can make meaningful change in our lifetimes (lest our lifetimes and those coming behind us become shorter and more painful). framing matters, and we the people need to grab the mediopolitical bull (who try to do all the pre-thinking for us) by its horns before we get gored.
• deleted 4y ago
  [deleted]
• giantg2 4y ago
  Considering almost all company's produce something to sell (even software or services) and those things rely on consumption and emissions, then shouldn't all companies be rated as net harmful or "C" or whatever?
  • giantg2 4y ago
    Why disagree without reply?
  • amanaplanacanal 4y ago
    Are you implying that it is impossible to be carbon neutral? Or are you saying something else?
    • giantg2 4y ago
      For most industries, carbon neutral is just marketing. Also, with international supply chains for many companies, most don't try to offset the carbon from their imports and shipping, only from their own production. Often times their products involve electricity, which is still predominantly emitting. It's like saying hey look at us being carbon neutral, but we're one step out of 10, the product will run on carbon based power for years, and the steps to be carbon neutral aren't really our steps but we pay someone to offset them.
    • spoonjim 4y ago
      Yes. Every company will be the direct or proximate cause of carbon emissions (products they buy in the course of operations, employees commuting, etc.)
• seltzered_ 4y ago
  It might be worth checking out what groups like R3.0 are doing around 'context based sustainability': https://www.r3-0.org/ https://www.r3-0.org/ https://twitter.com/bbaue/status/1549790831107792899 https://twitter.com/bbaue/status/1549790831107792899
• john_payette 4y ago
  https://web.archive.org/web/20220721132501/https://www.economist.com/leaders/2022/07/21/esg-should-be-boiled-down-to-one-simple-measure-emissions https://web.archive.org/web/20220721132501/https://www.econo...
• Maximus9000 4y ago
  I agree. Is there an emissions only ETF that I can buy into? (Not sure if this is mentioned in the article, it's paywalled for me)
  • second_planet 4y ago
    Plenty! Carbon collective takes a great approach https://www.carboncollective.co/portfolios https://www.carboncollective.co/portfolios
    • birdmanjeremy 4y ago
      I switched to Carbon Collective recently. Very happy with their approach and their transparency. A lot of ESGs are greenwashed, so it's nice putting my money somewhere I can actually feel OK about.
• function_seven 4y ago
  I sometimes toy with the idea of investing only in vice companies. Creating my own personal index and allocating across it. Sectors I'd include: Oil, gas, coal, tobacco, pharmaceuticals (but only makers of opiates), payday loans, gambling, etc. It's a bit sociopathic, sure. But if enough people sleep on these tickers, I might as well get 'em cheap and earn those dividends.
  • PaywallBuster 4y ago
    Might consider too, but at a first view, looks like subpar performance (and Casino stocks might go down further due to recession) https://www.etf.com/VICE https://www.etf.com/VICE ESG Orphans https://etfdb.com/etf/ORFN/ https://etfdb.com/etf/ORFN/
    • function_seven 4y ago
      Thanks. I'm constantly surprised how unoriginal my ideas are :)
      • x-complexity 4y ago
        Given that there's about to be 8 billion people in the near future, & the fact that multiple ideas can belong under the same general idea, it'll be inevitable that multiple people will come up with their own variations on a given idea that's new to them. TL;DR: You're one of today's lucky 10,000 -> https://www.xkcd.com/1053/ https://www.xkcd.com/1053/
  • FabHK 4y ago
    The article alludes to that: > The industry’s second problem is that it is not being straight about incentives. It claims that good behaviour is more lucrative for firms and investors. In fact, if you can stand the stigma, it is often very profitable for a business to externalise costs, such as pollution, onto society rather than bear them directly. As a result the link between virtue and financial outperformance is suspect.
    • 4y ago
• morelisp 4y ago
  How bad is the Economist's own ESG score after decades of laundering climate denialism?
  • FabHK 4y ago
    Source? I cite from Wikipedia: > The Economist supports government action on global warming. In 1987 the paper called for a price on carbon emissions. In 1997 it wrote that the United States showed 'dangerous signs' of using the developing world as an excuse to do nothing about global warming. In 1998, The Economist expressed its view that global warming may be a catastrophe that warrants much spending to reduce fossil fuels, but before this, climatologists need a stream of reliable data. In a December editorial before the 2009 United Nations Climate Change Conference, The Economist declared its view that the risk of catastrophic climate change and its effect on the economy outweighs the economic consequences of insuring against global warming now. https://en.wikipedia.org/wiki/The_Economist_editorial_stance#Global_warming https://en.wikipedia.org/wiki/The_Economist_editorial_stance...
    • deleted 4y ago
      [deleted]
• throw0101a 4y ago
  I think Cullen Roche has a good take on this. For example: > 2) The secondary market is a bad place to enact change. The intelligent defense of ESG is “by reducing the demand for a stock we can increase its cost of capital and impact its operating performance.” This is true to some degree, but I think this is dramatically overstated. For instance, the firms in the S&P 500 are all large established firms that have more than enough capital to finance their operations. They aren’t using the secondary equity markets to fund their operations. In fact, most firms have so much capital that they’ve been net buyers of stock in the last 50 years. So, this puts the cart before the horse. The better way to think of public companies is to think of them like horse betting. We can bet on the horses, but secondary market purchases are just private exchanges, not cash issuance to firms. As a result, betting on the horses doesn’t change the outcome of the race. Similarly, our secondary market purchases and sales have a far smaller impact on the firm’s operations than we might think.¹ * https://www.pragcap.com/my-view-on-esg-investing/ https://www.pragcap.com/my-view-on-esg-investing/ > Look, I completely understand. I want to invest my money, beat the market AND do what I feel like is right. But be really careful buying into the narrative about how ESG funds outperform. In most cases they aren’t being benchmarked properly and you’re just paying higher fees to chase performance that isn’t even as good as it’s advertised as. * https://www.pragcap.com/sorry-but-your-esg-funds-probably-suck/ https://www.pragcap.com/sorry-but-your-esg-funds-probably-su... A good interview I found on the topic: > Alex’s book, “Grow the Pie: How Great Companies Deliver Both Purpose and Profit”, was featured in the Financial Times list of Business Books of the Year for 2020, and he is a co-author of “Principles of Corporate Finance” (with Brealey, Myers, and Allen) for the 14th edition to be published in April 2022. He was named Professor of the Year by Poets & Quants in 2021. * https://rationalreminder.ca/podcast/192 https://rationalreminder.ca/podcast/192 It may be better to do non-ESG investing and use the "excess" returns to fund advocacy groups that will push for political change in the area that you wish. All the oil and coal barons are funding climate change denial messaging for example. Further, if you're a stockholder of a "bad" company, you can vote for motions that the company to change its policies to become a "good" company. If you only own "good" companies, they're already doing the "right" thing. You want to 'reform' the ones doing the "wrong" thing.
• m463 4y ago
  "ESG is an acronym for E nvironmental, S ocial, and G overnance. ESG takes the holistic view that sustainability extends beyond just environmental issues."
• BenSahar 4y ago
  Gotta love opinion articles that cite nothing to support their views.
  • FabHK 4y ago
    The newspaper has a 10-page special report on ESG, mentioning sources (it does not "cite" them, because it is a newspaper, not an academic journal). The linked article is the one-page summary ("leader").
• mullingitover 4y ago
  ESG exists because there's a market for that form of equity. That market is willing to buy equity that might even underperform the rest of the market, because it explicitly does perform in the metric these buyers care about. There are already options if you strictly are focused on emissions, so I don't think this article is meaningful. The Economist is right-leaning and would certainly love to distract ESG equity buyers from their pesky concerns about social and corporate governance. My guess is that the target readership for The Economist is executives, and they would certainly love to make ESG scrutiny of their ballooning compensation go away.
  • Quenty 4y ago
    Not to comment on the rest of the comment, but apparently the Economist is not right leaning? Do you have a source for that? https://www.allsides.com/news-source/economist https://www.allsides.com/news-source/economist
    • ZeroGravitas 4y ago
      They're sort of sane, educated, privileged business elites writing for other educated priviliged business elites. To most lefties that gives a slight right-wing bias, even if they aren't ranting demagogues going on about foreigners. To less sane and educated right wing people, that makes them seem like "the liberal elite" and so they see them as left. They do seem to have pivoted towards an American audience somewhat more recently, which means they're sucked into the whole anti-woke thing, which these articles veer worrying close to.
    • AnnikaL 4y ago
      The AllSides report you linked to cites a Pew survey that found that "the majority of The Economist readers hold political values to the left-of-center," which I think might reflect left-leaning social values more than economics. AllSides themselves even say that their readers disagree: > As of August 2018, 608 AllSides readers agreed with this media bias rating, while 1,302 disagreed. Of those who disagreed, the average said The Economist has a Center media bias. I think that differences in economic vs. social issues as well as The Economist's international perspective make it difficult to categorize on a simple left/right metric. They claim[0] to support lots of positions that seem socially left-leaning to me as an American (drug legalization, gay marriage in 2004, repealing the Second Amendment), but OC seems to be talking more about economically left-leaning positions ("scrutiny of their ballooning compensation"). [0] - https://www.economist.com/the-economist-explains/2013/09/02/is-the-economist-left-or-right-wing https://www.economist.com/the-economist-explains/2013/09/02/...
• verisimi 4y ago
  > Three letters that won’t save the planet But which are the letters that will?! That the planet needs saving is baked into whatever answer is about to be provided...
• dial9-1 4y ago
  ESG is a social credit score system in the making. The federal reserve prints out new dollars by the trillions and then uses their new-found fake money to manipulate the market in order to further their agendas
• tracker1 4y ago
  Pay-walled, so only got the summary... but even "emissions" isn't a simple calculation... do you include the electricity generation you get your power from? What about emissions on what went into something you buy? The mining, processing, shipping, refining, manufacturing and distribution of the final product, and many component hierarchies in play? Depending on how you look at something, getting an electric car is a horrible thing to do. Even then, is that better or worse than charging it at night from a coal power plant? The problem is, there is not simple solution, as pollution in general is not a simple problem. Reducing direct emissions is part of it... but shifting from fossil fuels with a high energy, low energy cost, to then use batteries, with their own environmental impact on material construction, refinement and recycle/destruction... and then getting that power (charging at night) from electricity that comes from a coal power plant with worse energy cost than the original material you were burning anyway... is it really a net positive? That doesn't even count a corporation's indirect influence... are the bulk of the workers driving an hour each way each day? Where does the energy at play come from. I'm a strong proponent of nuclear power in the near term... and getting water distribution to combine multiple sources of electricity and natural resources for hydrogen as a primary fuel source for ground vehicles. I think a lot of the woke efforts in and of themselves are short sighted, and not very well thought out at all though.
  • FabHK 4y ago
    Do car emissions get attributed to the car manufacturer, or the petrol stations?
    • OJFord 4y ago
      Or the owner? (Which could be a company of course, in case you're thinking that's a cop-out.)
  • WalterBright 4y ago
    > but even "emissions" isn't a simple calculation Yes, it is. Tax the fuel on its carbon content at the point of sale of the fuel from the refinery.
• kova12 4y ago
  Also change the name and make sure people who screwed it up are not allowed anywhere close to the new thing
• aaron695 4y ago
• effnorwood 4y ago
• Proven 4y ago
• LatteLazy 4y ago
  20 Years ago maybe, but it's too late for an emissions based solution now. We need to mitigate and adapt now...
• vivegi 4y ago
  Why would focusing on just one measure be the right approach when the UN (i.e., its member countries) have agreed on 17 sustainable development goals? Focusing just on emissions isn't sustainable! This just doesn't make any sense. If we take goal #1: No Poverty or goal #4: Quality Education #8: Decent Work and Economic Growth as examples, how does one reduce everything to emissions? Emissions is probably one thing related to goal #13: Climate Action, but somehow handwaving it as the only one of import sounds dubious. https://sdgs.un.org/goals https://sdgs.un.org/goals
  • hedora 4y ago
    We’re facing climate change induced economic collapse in a few decades. Zero of the 17 goals are achievable if we don’t solve that problem. If the UN claims it can’t see that, it is because it is bought off.
    • vivegi 4y ago
      That argument doesn't hold. Yes, climate action is needed. But, for many countries that have to lift their populace from poverty, 'goal #1: No Poverty' and 'goal #2: Zero hunger' may carry higher weightage as they tend to their immediate and short/medium term objectives. Unfortunately, there is no long-run without considering the short-run.