Figuring Out Which Companies are Naughty or Nice

ACORN International

Quebec City    Even as the Brexit landslide seemed to be building in the formerly United Kingdom, the European Union leadership was piecing together an ambitious plan to achieve climate goals by 2050.  Their plan was to reach net-zero in carbon emissions at that point in a sweeping economic transition.  Some countries like Poland that still depends on coal for 80% of its electricity production were balking at embracing the process, but leaders of the EU seem willing to put billions of euros where their mouths are and help financially grease the changeover.

The new head of the European Central Bank, Christine Lagarde, is also arguing for policy initiatives that would use monetary and banking policies under their supervision to push forward on climate change as well.  She’s not alone.  The Bank of England also is saying something similar.  In the United States, the arguments are still raging with the latest shot being President Trump twitter bashing the child campaigner, Greta Thunberg, and telling her to “chill,” of all things, in a spit fight over climate warming.

All of them want to figure out which companies are cleaner or dirtier than others, but that’s not easy.  The so-called ESG scores for companies, which stands for environmental, social, and governmental factors, are still a long way from an exact science.  A good example is the fact that ESG investment funds reportedly have the fifth largest set of investments in Saudi Arabian firms, who are pretty much the opposite of climate change crusaders.  One of the commissioners on the US Security Exchange Commission was quoted calling the current state of ESG ratings little more than “Labelling based on incomplete information, public shaming, and shunning wrapped in moral rhetoric,” which hardly counts as an enthusiastic endorsement.

Don’t get me wrong.  I would love to see a unified score that allowed all of us to follow benchmarks for corporate performance on all of these issues involving responsible behavior.  The full page, glossy ads in national magazines, the endowed chairs at big universities, and droning claims of good deeds on public radio from oil, chemical, drug, and other companies trying to convince us that they are so-called “good” corporate citizens could be thrown in the garbage can, if we had a good, independent set of measurements where there was common agreement on which companies had been naughty or nice.

Sadly, we seem to have none of that.  We have different rating companies competing for what is estimated to be a $3 trillion dollar set of investments tracking ESG and from what I read here and there, all of them are using different standards and categories.  Since many of the companies aren’t exactly enthusiastic about being tracked closely, they aren’t helping provide accurate and timely data either, so we end up with a crapshoot pretending to be science.

Most of us aren’t investors of course, but a real rating system would eventually trickle down to us as consumers where those of us at the bottom could join in putting the squeeze on the bad companies and just maybe, miracles never cease, get some help from the big investors joining us at the top.