ESG opponent highlights ESG ratings confusion (2021)
| Environmental, social, and corporate governance |
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Independent Wall Street analyst, ESG opponent, and author Stephen Soukup appeared on both Fox News’s “Tucker Carlson Tonight,” and Fox Nation’s “Tucker Carlson Today” to discuss his book The Dictatorship of Woke Capital. Among other things, Soukup discussed ESG and what he considers one of its greatest perils, the confusion over ESG ratings, an assessment shared among some of ESG’s most outspoken proponents. He argued that the ratings are inconsistent, are often contradictory, and can be manipulated for purposes other than promoting shareholder-focused goals. In the end, he argued, “ESG can mean anything you want it to mean,” or, conversely, can be selectively applied for personal, political, or cultural reasons.
Soukup raised the issue of Elon Musk and Tesla, which, he said, would appear to most outsiders to be an ESG no-brainer investment, a company that is on the cutting edge of trying to eradicate the need for the internal combustion engine. He argued, however, that Tesla’s ESG’s ratings are inconsistent and are often negative, not because of its business practices but because of its reporting practices, which many ratings services consider insufficient.
Meanwhile, over at Morningstar, Michael Jantzi, the founder of Sustainalytics, a division of Morningstar and one of the best known and most prominent ESG ratings services, insists that there is no reason for anyone to be worried that the perceived diversity in ESG ratings signals a chaotic and exploitable business environment. Indeed, he insists that this diversity is proof that the opposite is true, that the ESG movement is, in his view, maturing and robust:
| “ | “This [criticisms] is an indication of a maturing and increasingly robust industry. There’s a lot of nuance, particularly on the institutional side of the business, looking at the challenges of integration across asset classes.
Constructive criticism in anything makes you better…. [T]he diversity of ratings is a sign of a healthy market. It reflects that there are a variety of approaches--some, like Sustainalytics’ ESG Risk Ratings, measure risk, other focus on impact, while others look only at reputation or market sentiment, for example. Different starting points lead to different outcomes, so the market has choice. That’s a good thing from my perspective. I often wonder if the critics of ESG ratings are also the ones complaining loudly about the fact that credit ratings and sell side ratings are too aligned? As for emojis--they instantly convey a direction or how someone is feeling about something, so in a sense there is some similarity to ESG ratings. But the criticism reflects a fundamental misunderstanding of what an ESG Risk Rating is. It’s not meant to be a single indicator or a single tool to make a decision. It’s meant to be used alongside other tools and inputs to inform the user about whether or not this is a company you might want to consider investing in or engaging with. It’s a starting point to what lies beneath.”[1] |
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See also
- Environmental, social, and corporate governance (ESG)
- Economy and Society: Ballotpedia's ESG newsletter
External links
Footnotes
- ↑ Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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