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ESG Investing: How Right Becomes So Wrong

James Emanuel profile picture
James Emanuel


  • I've seen some horror stories working in the ESG space and can't help but wonder how right can become so wrong.
  • Unilever has mistaken political correctness with ESG and upset its major shareholders.
  • Lloyds Banking Group sought to become a champion of diversity and inadvertently introduced discrimination into the workplace where none existed before.
  • Here is a collection of true stories that will make you cringe.
  • It will also make you ask difficult questions that perhaps you have never considered.

Middle Eastern businessman riding horse backwards

How Did You Get It So Wrong?

John M Lund Photography Inc/DigitalVision via Getty Images

ESG: Conceptually Simple, But Simply Complex

“ESG” has become an esoteric buzzword, but what does it really mean and how should we think about in the context

This article was written by

James Emanuel profile picture
Author of top selling investment book "Success in the Stock Market", James is the CIO of the investment partnership Rock and Turner, website:http://theinvestment.company. James has enjoyed a 25 year career in the finance and banking industry. He has worked at tier one banks including Citigroup Inc and Deutsche Bank Wealth and Asset Management. The book, Success in the Stock Market is available on Amazon: https://www.amazon.com/Success-Stock-Market-professional-investor/dp/B088BHGSGL

Analyst’s Disclosure: I/we have a beneficial long position in the shares of UL either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (33)

James Emanuel profile picture
James Emanuel
Article Update 06 May 2022
This article sparked a debate on LinkedIn around gender equality and female representation on the board of directors in corporate entities. I wanted to summarize the discussion and outcome for the benefit of Seeking Alpha readers.

The percentage of females in C-suite roles, an arbitrary measure pursued blindly by some, is a red herring.

In my article I used the example that 88% or nurses in UK hospitals are women. I could have also said that over 96% of UK primary school teachers (for kids aged 4 - 11) are women.

This simply demonstrates that some professions attract more females than others (the reasons for this are beyond the scope of this article but it is important to stress that it appears not to be caused by discrimination against men in those roles).

So, if certain professions are naturally female dominated, does it not stand to reason that other professions must have a lower number of women? It is mathematically impossible for it to be otherwise.

That being the case, how can it be correct to blindly pursue equal numbers of men and women on the boards of corporate entities?

Think about this another way. Hypothetically, if every time a company advertises to fill a directorship role only 5% of the applicants are women, is it not logical that (all else being equal) only 5% of the directors will be women?

I don't have the exact numbers to hand and it will differ from country to country and from industry to industry, but without this kind of context how can it be right to pursue equal gender representation at C-Suite level as many do ostensibly on ESG grounds?

The point being made is that having a universal percentage of female directors as a target for corporate entities is patently the wrong approach.

What matters is that there is no discriminatory behaviour within the company that prevents women from being employed. Now that would matter. Women need to be given equal opportunities. This is what needs to be monitored within the auspices of ESG.

The same approach ought to be taken with ethnicity.

I welcome the views of Seeking Alpha readers.
Its not about equality its about jealousy. For all intents and purposes the cervically-endowed have won the war of the sexes in the western world. So thouroughly that a large % of the cervically-challenged choose idleness. Then we hear banshee wailings from the former that they can't find suitable metrosexual mates as they age beyond 30 years. That they can't even find _unsuitable_ mates. In the meanwhile crack fem scientists are working like the devil towards the ultimate goal of repro sans men.
Hi James - very well written and in-depth article. I would like to add some context around the “S” of ESG. I worked in the insurance industry for 18 years, was never asked to sign a ideological litmus statement for either of my 2 employers, but over the last several years witnessed how political DE&I issues received endorsement under the guise of ESG, and that this is played out in both personal and overtly political ways.
Transgender ideology is an extreme example that I personally witnessed being proselytized by my company with such zeal, that I would put it on par with any actual religious organization. When ideologies are fully embraced and pushed by an employer who controls your paycheck, it is a form of oppression. In this particular area, the Human Rights Campaign has become a de facto dictator over thousands of American companies from Apple to Target to large insurance companies. I attempted to engage my employer over multiple months as I had personal experience in this area where they signed the HRC’s public statement/letter describing political opposition as promoting discrimination and mistreatment. After multiple attempts to engage the company leadership on the issue, I resigned as it became clear they were not going to deal with me in good-faith and it felt like a “sit-down and shut up or leave” situation. The perception of being diverse and inclusive on superficial progressive social-political issues trumps the reality of bringing diversity of thought.
I left my company with an internal blog post imploring that unless ESG is implemented with a true diversity of thought, it will not be a force for good. In my opinion it will continue metastasizing into a dark and insidious form of oppression.
James Emanuel profile picture
@upsidedowninoil thank you for your comments.

I fear that for too many companies this has become a tick box exercise at the expense of common sense and good commercial acumen.
ESG=liberal BS, this type thinking will wreck the economy. Look at the current energy situation in Europe!!
Extracing higher fees from ... says it all. Exploiting Silly Greens.
James Emanuel profile picture
There are many comments to my article in this thread that concern me. People have described ESG as a scam, a leftist cult or more crudely, as BS.

As explained in my article, (ESG) integration is “the practice of incorporating ESG information into investment decisions to help enhance risk-adjusted returns, regardless of whether a strategy has a sustainable mandate.”

Since we are all looking for enhanced risk-adjusted returns, we are all on the same page here.

So, if you invest in a company with poor corporate governance (the G in ESG) you may find that the business makes poor decisions which impact returns. A good example is Twitter which, since its IPO in 2013 (a decade ago) it has provided its shareholders with a total return of zero. Meanwhile the stock based compensation decisions of senior management has made its senior people very rich. Had investors focused on corporate governance from the outset they could have avoided this disaster of an investment.

Similarly, if you invest in a company that pays no regard to the environment and dumps toxic waste wherever it can then not only does it lack any moral compass, but it exposes its shareholders to a huge risk (this is your E in ESG). Trafigura Group Pte. Ltd. is a Singapore-based multinational commodity trading company and is a case in point. It dumped its toxic waste on the Ivory Coast of Africa and was subsequently compelled to pay hundreds of millions in clean up costs in addition to legal damages to all of the locals who had been adversely affected. That was a huge hit to its earnings.

So, ESG is about identifying risks which will help you to avoid investing in the wrong companies. Coming back to where we started, it is not a scam, a cult or BS.

I hope that this helps to clear up the confusion.
@James Emanuel I think the rub comes particularly in 2 areas:
1. the E part, where many are not at all aligned with the global warming, aka climate change, narrative. No investor supports irresponsible actions such as the one you cited, that is not the resistance point.
2. the S component, where similarly, investors resent resources being used and energy being diverted from profitability, to dubious social engineering initiatives, such as supporting BLM (Buying Leadership Mansions) and other race-based and gender identity politics programs.
These 2 are distortions of the ESG movement (are they a feature, or a bug?) and give pause to investors who wish to see profitability prioritized over PCness.
James Emanuel profile picture
@pg guy I agree with you 100%. Resources and energy are not supposed to be diverted away from the business.

Again, ESG is “the practice of incorporating ESG information into investment decisions to help enhance risk-adjusted returns, regardless of whether a strategy has a sustainable mandate.”

ESG is for investors to evaluate risk against reward taking all key considerations into account.

It is NOT a box ticking exercise for companies, which is what you correctly describe. In fact, one might argue that if a company uses it as a box ticking exercise and diverts resource to ticking those boxes, then the management of the company demonstrates ineptitude and this ought to be a red flag for the investor.

Either way, ESG has served the investor well.

The issue, as I have written in my article, is that ESG is so poorly understood that most are getting it horribly wrong (hence the title "How right becomes so wrong?")
StandSuave profile picture
@James Emanuel >ESG has served the investor well

Yeah, tell that to Sri Lanka who banned fertilizer at the behest of IMF and World Bank loan grantors. See how that (among other things) turned out. Sugar coat it, talk out of both sides of your mouth, and try to be lukewarm all you want ESG is a scam that harms investors and poor people. The Western world imposing these mandates on Frontier countries in particular should be deeply ashamed.
ESG = BS, How do you keep politically neutral?
dieuwer profile picture
ESG is just another woke cultist ideology that has nothing to do with reality.
StandSuave profile picture
ESG is a scam to collect fees.
Ishi Kenjo profile picture
ESG is evil & a bad investment.
SA-NJ52 profile picture
@James Emanuel

Thank you for your kind words.

Hopefully the ESG/greenie stupidity will pass just like my Pet Rock did.

SA-NJ52 profile picture
It is refreshing to read an article that helps to explain the stupidity of ESG.

Like Pet Rocks, ESG will eventually fall away as investors look at what investments make sound financial sense, not what will pander to the ESG/greenie crowd.

As soon as I hear this crap I look for other investments.

Now before I get flamed for these views, I happen to believe the climate change is important.

But such policies will only work in a globalized, peaceful world. Putin and Xi have put a stop to this.

Germany got caught out because it listened to these crazies and shut down its nukes and supported NordStream 2. Now energy costs are going up dramatically for Europe and Germany has gone back to burning coal at an alarming rate.

So we need to be smart, not politically correct about energy and climate change.

Oil generates revenue to the treasury. Flakey sources like wind and solar do not. Now if my RUSW SPAC takes off, my plan is to liquify and bottle wind and sunshine and ship it to Asia and Europe in converted LNG tankers. All I need is a billion dollars to implement my ESG/greenie plan.

Oil companies know that they need to change. Despite what Uncle Joe and his band of raving loonies want oil companies to start drilling again, this is not happening. Instead they are taking their windfalls to pay down debt, pay dividends, buy back shares and invest in carbon capture and hydrogen.

So SRI needs to be rebranded as Smart Responsible Investing....you heard it first here.

ESG needs to be rebranded as Economic and Smart Growth...you heard it first here.

Big Game James profile picture
I couldn't agree with you more. In theory, ESG sounds like a reasonable concept. In practice, it's a crock of activist leftist political correctness BS. The quote about ESG being a "feel-good scam" is a nice summary of how it is actually applied in the real world by left-leaning companies, even if you disagree with the quote. Anyway, thanks for the well-written and very thorough article.
ESG = exploiting stupid green$. I'm on the lookout for an ESG-agnostic fund -- and recently put some money into FTHNX as a way to play it. The biggest flaw of ESG seems to me to be that it tends to make companies and governing entities inflexible, which is toxic in a very fluid world. That ESG is a thing that popular companies do due to hubris thinking the stock market will over-value them.
Moats and Income profile picture
One should also question BLK’s involvement with CCP in China.

BLK is heavily invested in China and was the finance company that championed increasing MSCI global investment indexes to send more western money to the CCP.

What part of that relationship supports ESG? CCP beliefs are bipolar to western beliefs on every topic.
auto44 profile picture
@Moats and Income Yep, Larry The FINK trying to curry favor with Xi.
Moats and Income profile picture
When any guiding investment principle becomes financially reckless - it can only be “sustained” if treated like dogma.

The green dream - and big finances participation that was solidified in 2021 is case and point.

All major tech changes are both piloted and phased in over time. Changing man’s energy source is w/o question the biggest tech change ever attempted.

Rushing in green energy by flash cutting capital to O&G created needless broad financial pain in the form of historical inflation and lack of energy security.

Somehow the sustainability part of ESG financing doesn’t include damaging inflation or creating an environment for military conflict.

And, of course, the green dream requires one to believe in man-made climate change - which is based on biased research funded by those using it for political gain. Politics wins when you can create a common enemy. Don’t bother reading IPCC research findings that is overflowing with uncertainty. Don’t worry about climate researchers questioning climate change as their opinions are heresy and they will be shunned and fired/unfunded.

Then tie in big finance to make this political climate platform a reality in the investing world and you create a crusade the produces historical inflation and lack of energy security - to slow man’s progress and invite wars.
James Emanuel profile picture
@Moats and Income
The IPCC research is actually second to none on the climate issue and politically neutral. There is no biased research. The evidence is overwhelming.

The past 150 years have been reckless on the part of mankind, growth at any cost (including destruction of the very environment upon which we depend for survival).

For the first 100 years post industrial revolution mankind had the excuse of ignorance. But for the past 50 years it is pure wilful blindness.

You speak about rushing in green energy, but that is symptomatic of the western world having buried its head in the sand for the past 50 years ignoring the obvious. The truth is that the earlier we start to address these existential issues the less impactful it becomes because change may be gradually phased in. The problem is leaving it until the 11th hour which has created the problem that you describe.

Al Gore released the movie An Inconvenient Truth nearly 20 years ago. It was so inconvenient that people chose to ignore it.

In the words of Steve Jobs, "Be Smart, Think Different". We need to do things differently in future. With a population globally of 7.5bn our current course is unsustainable.

I would urge you to Be Smart and to Think Different. Try reading the IPCC research report (or at least the executive summary). You'll be impressed.

The issue is not that ESG is wrong, but the way that it is being executed is often wrong.
Moats and Income profile picture
@James Emanuel I’ve read the IPCC research (more than the summaries).

I’ve watched those that attempt to present other finding get cancelled/fired.

Sadly with this comment you’ve discredited yourself.
fhbecker profile picture
@James Emanuel Quoting from M. Oppenheimer's 1990 book "Dead Heat: The Race against the Greenhouse Effect"

(by) 1995 the greenhouse effect would be desolating the heartlands of North America and Eurasia with horrific drought, causing crop failures and food riots.....(by 1996) the Platte River of Nebraska would be dry, while a continent-wide black blizzard of prairie topsoil will stop traffic on interstates, strip paint from houses and shut down computers.......The Mexican police will round up illegal American migrants surging into Mexico seeking work as field hands.

Sadly, his book was not intended to be fiction......

Yes the earth is warming, the real question is how much are humans causing it, a little or a lot? That is where the debate is. Climate alarmists say humans are responsible for almost all the change and exaggerate the change, and the "deniers" say humans are not responsible for anything.

If the answer is truly is a lot, NONE of the legitimate climate proposals (Paris etc.) do much at all in terms of results for the huge spend (trillions) to help current human deaths or suffering. Its all out decades from now, when and if the alarmist are correct.

Simple, cheap stuff like deaths from vaccine preventable diseases and bad drinking water can be fixed today for a fraction of what the climate alarmists want society to spend on reducing CO2 decades from now.

Those things (clean water & vaccine preventable diseases) currently kill more people in less than a decade than died in all of WWII. Where are the climate alarmists on those issues? Silent. Which tells me climate alarmists really do not care as much about humans as they purport to.
Not addressed BlackRock and other firms that create market ETF’s should in No way be able to vote The proxies of 100’s of thousands of individual investors.
They are using the bully pulpit of these accumulated votes to push forward a far left agenda….hopefully the center the silent majority holds.
@gs3 I agree and think the government should weigh in. If you are holding assets on behalf of someone, you should not be able to vote on their behalf unless they direct you to. This is a government interest because it concentrates market power far to much.
@gs3 BLK is one of Wall Street's squid companies. Out for biggest profit extractions from where the easy money is to be found -- and ESG is all about mulcting the 2nd/3rd gen inheritors of big old money feeling guilty about how it was originally made.
Edward J. Roche profile picture
The so called principles of sustainability and diversity are fundamentally flawed.
Life has always been about transformational change not sustaining the old. People differ in millions/billions of different ways but the diversity programs only count one or two superficial things.

Needs a total rethink.
PA1975 profile picture
Very detailed article
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