Have you heard this new acronym/term? ESG. It stands for Environment, Social Governance. It’s very dumb. Here’s why:
In case you might be new to planet earth, businesses have operated for centuries with one specific goal; to make money. Shocker I know but that goal is apparently under some sort of attack from the socialists. This time is by way of this new dumb metric that was entirely made up called ESG.
First thing’s first, this entire thing is made up and unnecessary when it comes to the greater goal of making money. In the modern age, publically traded companies have LOADS of different metrics that are aimed at telling investors whether or not it’s a good company to hold stock in. Various analysts and think tanks put out various analytics about a company’s performance as it related to its revenue, profit, dividends, etc. Those metrics are helpful when looking to maximize your portfolio’s profits.
ESG however, is a new metric that is seemingly entirely arbitrary with no real direct correlation with the value of the company or its earnings. Briefly, here’s the “official” definition of ESG:
Environmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights
Investopedia
Ok cool, but why? Well because apparently, we’re trying to incorporate feelings into budgets and bottom lines.
NOW, there are people that might think… “Ok that seems unnecessary but why would it be dangerous? You don’t have to use the info if you don’t want…”
Fair. AND because the cancel culture woke police argument is easily made by people who have seen this sort of this happen, I’ll spare you that detail.
BUT HERE is why I think it’s actually dangerous. Rent-Seeking…
Rent seeking is an economic concept that occurs when an entity seeks to gain added wealth without any reciprocal contribution of productivity.
Investopedia
IF we start taking ESG scores seriously, the danger doesn’t lie in wall street’s decision to invest or not. The true danger lies in whether or not the government gets involved. IF ESG scores catch on, it can move investors to certain companies that will shift their focus, not to revenue based on sales to the population but instead based on revenue generated to suck up to the government. If a high ESG valuation leads to more government purchasing and investors take notice, that’ll hasten the slow march to socialism that we’re currently on; where the government is the end all be all because it makes the wokes feel good.
