July 26, 2023
ESG Inconsistency
Diane Kimura
When ESG scoring and mandates began, I began to do deeper dives into how ESG companies were rated and their performance impact on portfolios. One of the biggest limitations is the lack of standards for the defining and scoring of ESG factors. ESG ratings agencies can use different criteria to assess companies, which can lead to inconsistencies
One ESG rating agency might give a company a high rating for its environmental performance, while another rating agency might give the same company a low rating. Many highly rated "green" companies source materials using destructive mining practices and questionable fair labor practices.
Another limitation of ESG investing is the
challenge of measuring the impact of ESG factors on a company's
financial performance. This is because ESG factors are often
qualitative in nature, and it can be difficult to quantify their impact.
It is possible for a company to be rated highly for its ESG performance, but still have poor financial performance. This can lead to investors making poor investment decisions.
Like the genocide watchlist, inconsistencies
Nestlé: The Swiss multinational food and drink company that has been criticized for its environmental record. Nestlé has been accused of contributing to deforestation in the Amazon rainforest yet is still considered to be an ESG-friendly company by some ratings agencies.
Apple: Has been criticized for its labor practices. For example, Apple has been accused of using forced labor in its supply chain, yet is still considered to be an ESG-friendly company.
Walmart: Has been accused of contributing to climate change given the planes, ships, and trucks needed to move inventory to the stores and its customers. Most of its products are sourced from other countries, but it is still considered to be an ESG-friendly company.
Other concerns about ESG investing are the focus on environmental factors while ignoring social and governance factors. Others argue that ESG investing is too subjective and that it is difficult to measure the impact of ESG factors on a company's financial performance.
The imposition of "woke activism” on, and by companies, to meet nebulous or artificial standards has led to various bad outcomes. Feel-good policies need to be better scrutinized before they are imposed upon us.
When ESG scoring and mandates began, I began to do deeper dives into how ESG companies were rated and their performance impact on portfolios. One of the biggest limitations is the lack of standards for the defining and scoring of ESG factors. ESG ratings agencies can use different criteria to assess companies, which can lead to inconsistencies
One ESG rating agency might give a company a high rating for its environmental performance, while another rating agency might give the same company a low rating. Many highly rated "green" companies source materials using destructive mining practices and questionable fair labor practices.
It is possible for a company to be rated highly for its ESG performance, but still have poor financial performance. This can lead to investors making poor investment decisions.
Like the genocide watchlist, inconsistencies
Nestlé: The Swiss multinational food and drink company that has been criticized for its environmental record. Nestlé has been accused of contributing to deforestation in the Amazon rainforest yet is still considered to be an ESG-friendly company by some ratings agencies.
Apple: Has been criticized for its labor practices. For example, Apple has been accused of using forced labor in its supply chain, yet is still considered to be an ESG-friendly company.
Walmart: Has been accused of contributing to climate change given the planes, ships, and trucks needed to move inventory to the stores and its customers. Most of its products are sourced from other countries, but it is still considered to be an ESG-friendly company.
Other concerns about ESG investing are the focus on environmental factors while ignoring social and governance factors. Others argue that ESG investing is too subjective and that it is difficult to measure the impact of ESG factors on a company's financial performance.
The imposition of "woke activism” on, and by companies, to meet nebulous or artificial standards has led to various bad outcomes. Feel-good policies need to be better scrutinized before they are imposed upon us.
Posted by: Timothy Birdnow at
09:57 AM
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