(Drivebycuriosity) - It seems there is a curse on the economy. It is called ESG: Environmental, Social & (corporate) Governance investing. Big activist funds - including BlackRock, Vanguard and State Street (the Big Three) - force companies to invest and manage their business following woke targets like environment, racial equality and other social topics. According to Morningstar, assets committed to ESG strategies grew by 53 percent, year over year, to $2.7 trillion in 2021 (thehill ). The ESG cult include funds, consultants, rating agencies and government authorities.
ESG already changed the global energy markets. Oil companies like ExxonMobil and Chevron are facing mounting pressure from funds controlled by climate activists to reduce their investments in the exploration of fossil energies ( forbes). As a result the reduced energy investments are already slowing today´s production of oil & gas and lead to scarcity of energy and record high oil, gas and electricity prices. The increased costs of oil, gas & electricity are curbing consumer spending for other goods and contribute to the current recession.
Unfortunately ESG does not only target energy production. The ESG activists try to enforce vague issues like supporting human rights, diversity, employee compensation and more social issues. The ESG activists want to force companies to give up the profit motive and to pursue social goals instead, like social equality, race and so on. Even the almighty SEC (Security Exchange Commission), the American government authority who controls the stock market, demands that companies reveal how they deal with the environment and other woke issues, their ESG scores.
ESG is the incarnation of the old stakeholder capitalism idea. The stakeholder promoters propose that companies should ignore profits and investors. They demand that companies focus on the social good instead.
What is wrong with profits? Adam Smith declared
“it is not from the benevolence of the butcher, the brewer, or the baker
that we expect our dinner, but from their regard to their own
interest”. All the nice things we purchase are given to us because someone else makes a profit.
Profit maximizers try either to reach a certain target (for instance number of cars produced) with the least possible cost or to achieve the most with the available means. Profit maximization leads to cost control and efficiency.
Giving up targets like productivity & efficiency leads to waste. New York City, controlled by woke bureaucrats & politicians, spends $2.6 billion for constructing a mile subway, Spanish capital Madrid builds subways at $65 million per mile ( twitter). The extremely high cost of New York`s subways can partly be explained by the high unionization of the city. A study shows that Labor unions, the darlings of the ESG crowd, reduce product quality (marginalrevolution. ). Unionized firms are more likely to have recalls than non-unionized firms. If companies hire people who are not quite fit for their job and pursue political & other activities instead their assignments they invite idleness, embezzlement, spoiling, nepotism, corruption and other problems. If companies pursue ESG instead of profit maximization they throw sand into their gears.
If the whole economy would abandon efficiency & productivity it would reduce the GDP. In other words the economy would produce fewer goods & services and would reduce the living standard for the whole population. Especially low income groups, the poor, would suffer.
Stuart
Kirk, head of responsible investing at HSBC Asset Management, was
suspended by his employer after giving a presentation in which he said
that
bankers and policymakers were overstating the impact of climate change
in an attempt to “out-hyperbole the next guy.” (thehill telegraph ). Kirk declared on LinkedIn that "cancel culture destroys wealth and progress" and there is "no place for virtue signalling in finance. Kirk announced to continue to critizizes the "nonsense, hypocrisy, sloppy logic and group-think inside the mainstream bubble of sustainable finance," adding that "most of what’s out there is bonkers". that "unsubstantiated, shrill, partisan, self-serving, apocalyptic warnings are ALWAYS wrong".
Tesla, producer & developer of electric cars, solar roofs & batteries got kicked out of the S&P 500 index dedicated to companies excelling at environmental, social, and governance (ESG) issues. Tesla CEO Elon Musk commented the decision with: “ESG is a scam. It has been weaponized by phony social justice warriors" ( fortune).
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