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In one way, or another, ESG affects nearly every one of us. Therefore, it is important that we understand what it is. As the title suggests, ESG is an acronym for Environment, Social, Governance. The environmental criteria measures a company’s energy use, waste generation, pollution, natural resource conservation, and the treatment of animals. The social criteria measures a company’s hiring practices, it’s racial makeup, how it treats its employees, suppliers, customers, and communities. The governance criteria cover leadership, executive pay, audits, and shareholder rights. After all of that blathering, it is most easily understood if you think of it like a corporate credit rating. The elites promoting ESG are using it to further their agendas concerning climate change, racism, and social justice. The lack of courage exhibited by today’s corporate CEOs allows the ESG elites to force their views, not just on CEOs, but on their employees, and customers.

The Chinese Communist Party has perfected a similar plan for its citizens. It is a social credit score that is used to measure the citizen’s loyalty to the government. If they get caught saying, or doing, the wrong things, the government makes it impossible for the offenders to purchase goods and services, or to remove money from government banks. Those who dare interact with the offenders can find themselves in the same situation. They effectively get erased from society. Literally.

That is basically how ESG is planned to operate here in the U.S., but for corporations. Those corporations with weak kneed CEOs are being driven to extremes by ideological money managers, banks, and the government. The compilation of ESG “points” is so complicated as to require large corporations to employ entire departments just to keep track. That is expensive and can cost companies millions of dollars a year. A whole cottage industry of ESG consultants are filling the needs of smaller companies. At considerable cost.

So what do these con men/women measure in the ‘E’ component? Companies are required to measure and report the amount, and kind, of energy they consume. They are required to report their carbon output, and the amount of pollution they produce. They are also required to understand all of the aforementioned information about their vendors. If their overall score falls below some arbitrary predetermined number, that company can find it hard get bank financing, or they might find their supply chain disrupted by a supplier that can’t allow their ESG to drop because of that affiliation. The Securities and Exchange Commission is drafting rules to force companies to comply with ESG requirements for every company listed on a stock exchange.

The largest banks and money managers are threatening companies that don’t measure up. Mutual Fund managers like Black Rock, Vanguard, Fidelity, and State Street etc. with assets around $18 trillion dollars are holding companies hostage to these ESG rating systems. They are also harming the future of investors and retirees. Mutual fund costs to monitor company’s ESG are borne by those who own the funds. You and me. Additional costs lead to poorer investment results for people with pensions and 401(k)s. Again, you and me. As more people recognize the insidious nature of ESGs, they are pushing back. Many states have begun removing assets from those managers. Others are taking their banking business away from banks who refuse to lend to companies who don’t meet their ESG demands. Hundreds of billions of dollars have been removed so far. It is just the beginning.

The ‘S’ component is even more diabolical and frightening. The social component is where companies gain, or lose, ESG points depending on their racial or sexual demographics, and how they treat their employees and people they do business with. The ESG police can downgrade a company if, for instance, they feel it’s board of directors doesn’t have enough women members. They might stop investing in airlines that don’t hire enough minority pilots. Perhaps that is why many airlines are dropping their requirements that pilot trainees have degrees. Forget poor performing mutual funds. How do you feel about unqualified airline pilots?

The ‘G’ component allows the government, and self appointed elites, to virtually control companies from the outside. They do so by directing how their employees are compensated, stipulating the transparency companies must achieve, and the kinds of audits they must run. Once upon a time CEOs ran their companies like Generals. Their goal was to be the best company in their sector. To win the war. Today, too many CEOs are more interested in being included in the elite people’s club than in running their companies for the benefit of their stakeholders. CEOs who jump aboard the ‘woke’ bandwagon, believing that will benefit humankind, have lost their way. Running a successful company does way more to elevate the human condition than participating in corporate wokeness. Most Americans understand that, even if a growing number of CEOs don’t. Thank you for reading my latest blog. If you found it interesting or informative please tell your friends. Bob