A recent Bloomberg article, covered by NewsBusters, shows the Environmental, Social, and Governance (ESG) investment trend that has gained popularity in the business world in the last few years is not a profitable bet for investors, nor will it guarantee any of the environmental promises made. The Bloomberg analysis shows that the “woke” ESG movement is a scam.
The NewsBusters article, “Bloomberg Columnist Smacks ‘Apostles’ of Woke ESG Movement,” describes the paywalled Bloomberg piece, agreeing with the position of writer Adrian Wooldridge. NewsBusters says that Wooldridge “blasted the ESG movement and its super-woke cousin, the diversity, equity, and inclusion movement (DEI).”
The two movements “powered leftist investment giants like BlackRock Inc., State Street Corp., and Vanguard Group Inc. “
The Heartland Institute has also revealed the ESG movement as a farcical and cynical attempt to cash in on green movements and wokeness, resulting in the suppression of fossil fuel development, while providing little or no environmental or social benefit.
ESG investment funds are targeted portfolios that choose to invest only in companies that meet established environmental, social, and corporate governance goals set by woke activists and elite fund managers. Instead of investing based on traditional economic performance indicators, like, profits, return on investment, long or short term stock performance, record of repaying loans, etc., investors look at a company’s stated commitment to goals such as, net-zero carbon dioxide emissions, union membership, gender and sexual diversity in the board room, and other distinctly progressive positions. Banks and financial institutions apply ESG scores to often unwitting companies, and a low score can mean your business is passed over for investment.
Fearful of losing out on cash flow, businesses pledge to go green—even if they don’t deliver functionally, instead relying on carbon offset purchases. This does not reduce emissions, and it also is only feasible for larger companies.
It is a lose-lose for investors, the public, and the environment. Bloomberg columnist Wooldridge explains, in reality “companies in ESG investment portfolios violated more labor laws, paid more fines and had higher carbon emissions than those in non-ESG portfolios sold by the same institution.”
As Heartland Daily News writer Eileen Griffin revealed, here, ESG portfolios are actually riskier than others, citing a Wall Street Journal report that found the average volatility of funds in the S&P 500 is 15.04 percent, while ESG funds sit at 15.46 percent. A half of a percent may not sound like a lot, but when large amounts of money are invested, it’s a real consideration. It moves markets when the U.S. Federal Reserve Bank raises or lowers interest rates by half a percent, and an additional half percent return on investments overtime makes a huge difference in retirees’ pension funds performance. ESG funds, Griffin says, are also more expensive than others, and since there is no global standard of measurement for their performance, the lack of information makes them a riskier bet.
It is becoming more common for some media sources and public figures to show skepticism towards ESG investing. Even major U.S. banks and climate-alarm friendly publications like the Wall Street Journal have expressed concern that ESG does more harm than good, as pointed out by Climate Realism articles here, and here.
In addition, numerous states have also begun to wake up to the damaging effect of ESG-focused investment. States like Texas, Kentucky, Oklahoma, Florida, West Virginia and others, have already either passed legislation blocking the de facto social credit score system that is ESG, or have withdrawn their public pension funds from fund managers lobbing for ESG mandates and investments and fossil fuel divestment. At least 19 other states have proposed similar legislation.
These are positive steps. One can only hope media outlets like Bloomberg and NewsBusters continue to publicize the false equity and environmental claims made by ESG directed funds and companies, and their poor economic performance.
Linnea Lueken is a Research Fellow with the Arthur B. Robinson Center on Climate and Environmental Policy. While she was an intern with The Heartland Institute in 2018, she co-authored a Heartland Institute Policy Brief “Debunking Four Persistent Myths About Hydraulic Fracturing.”