by Richard M. Reinsch II, Activist Post:
A unification of forces has produced the array of Environmental, Social, and Governance (ESG) policies that have fervently emerged across Europe and in America in the past two decades. Broadly defined, ESG promises environmental activism, egalitarianism across races and genders, and an aspirational commitment to social justice, enforced in and through corporations. How should we think about this incredibly skilled and powerful movement that has enlisted our largest and most successful corporations in its efforts, along with a host of transnational institutions, NGOs, and national and subnational governments? Is ESG an actual threat to free institutions, most notably markets and civil society? Or, as advocates contend, do ESG policies provide better pricing and risk factors to what are dangerous, risky, and environmentally unsound practices? Will ESG help us to both earn money and do well by serving people and the planet?
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Answering these questions in a compelling way is Paul Tice’s The Race to Zero: How ESG Investing Will Crater the Global Financial System. Tice spent decades on Wall Street working for JP Morgan Chase, Lehman, and BlackRock. This book’s critical analysis of ESG highlights that the entire financial industry has been co-opted in a giant swindle by an aggressive global scale humanitarian ideology. On almost every page Tice illuminates a tremendous con job being perpetrated in full sight of finance professionals, who know better, but lack the courage to state clearly that ESG’s promises are fraudulent in operation, destroy investor wealth, and enrich discrete groups of players who sharply influence the allocation of capital under ESG. That effort has required Wall Street professionals to “willingly suspend disbelief and forgo the traditional financial approach” of “comparing leverage metrics, cash flow margins, and earnings momentum.” Instead, they are now “sizing up carbon footprints, checking on water and electricity usage, and making sure companies are paying their ‘fair share’’ of corporate taxes.”
In general, ESG follows the trajectory of efforts by the progressive left to replace a free, voluntary, and competitive society and its institutions with centrally ordered institutions on behalf of social justice and a plethora of auto-generating rights. In many respects, ESG is just another version of top-down coordinated efforts by progressives to engineer their preferred society. ESG’s variation on left-progressive ideology, Tice observes, is sustainable investing, that “subjective environmental, social, and governance factors should drive corporate policy and investment decisions, as opposed to objective financial metrics and returns.” Primary elements hold the sustainable, salvific ESG glue together: ending global poverty, preventing climate change, and striving for social justice, generally. Of these elements, Tice observes, “climate change remains the highest-priority ESG issue.” The ideological urgency it adds to the entire concept of sustainable investing has made resisting the sweep of ESG incredibly difficult for financial institutions and professionals.
As Tice notes early in the book, “the master ESG list is kept, not by financial market participants, but rather by an informal working group comprised of the United Nations (UN), the World Economic Forum (WEF), liberal politicians, academics, environmental activists, social justice warriors, and the media.” The list itself, typically of progressive ideology, changes and evolves. But the constant is sustainable investing, which “redefines all of the core tenets of progressive ideology over the past 100 years as corporate policy goals and investment criteria.”
ESG reveals that we confront ideology and the desire to seek rents by “doing good” with other people’s money. That mixture reinforces a phalanx of organizations convinced that their efforts would save the world, so long as they have access to a steady stream of institutions delivering capital and rents in their preferred fashion. Attempting to diminish greenhouse gas emissions is incredibly expensive, of course, so the grand narrative must drown out any voices pointing to feasibility, accountability, and consequences.
Tice stresses that ESG’s plan for integrating capitalism into its objectives has always involved replacing shareholder capitalism — a central tenet of American corporate law — with stakeholder capitalism. Tice notes the foundational 1987 Brundtland Report, which built its recommendations for sustainable capitalism on stakeholder theory. The two became a natural fit. The former provides the grand narrative needed to reset capitalism for ideological purposes, that is, a market system that leaves no carbon footprint, generates little pollution of any kind, provides equity for all, and directs profits to the marginalized and oppressed. Stakeholder theory provides the legal and administrative means for accomplishing these objectives.
