Displaying items by tag: esg

On Twitter, Tesla CEO Elon Musk made critical comments as he shared an article which showed that tobacco companies like Philip Morris had higher ESG scores than the electric vehicle pioneer. Tesla was given an ESG score of 37 out of 100, while Philip Morris was scored an 84.

This isn’t the first time that Musk has spoken out against ESG. In addition to tobacco companies, Tesla also scored lower than fossil fuel companies like Shell and Exxon. Given the growth in ESG funds and influence of asset managers like Blackrock, stocks with higher ESG scores are the recipient of increased inflows.

However, this has also led to opposition as many see ESG rating as faulty and politically motivated. Additionally, companies are accused of ‘greenwashing’ or other behavior to game the ratings system to artificially boost ESG scores. 

For many, this is an indication that ESG investing is misguided as tobacco causes millions of deaths around the globe every year, and companies with a record of contributing to climate change are given better scores than Tesla which is leading the charge in making EVs more popular and cheaper.   

ESG proponents counter that Tesla scores well on environmental factors but falls short in terms of social and governance factors, leading to a poor overall score. 

Finsum: Elon Musk made critical comments about ESG investing following reports of tobacco companies and oil companies with higher ESG scores than Tesla.

ESG is increasingly becoming another front in the political battle between Democrats and Republicans. Over the last decade, ESG has been embraced by many asset managers and has been used to encourage corporations to evaluate decisions beyond just finances and consider environmental, social justice, and governance implications. This has led to a pushback among conservatives who are opposed to corporate activism and want a return to when investors and companies focused on financials.

It culminated with legislation passing in many red states that bars asset managers from considering ESG factors when making investment decisions with state funds. The same battle has raged at the federal level. In a Reuters article, Daniel Wiessner covers the Biden Administration’s filing to toss a lawsuit from a consortium of 25 Republican-led states which is looking to uphold the Trump Administration's ban on socially conscious investing by employee retirement plans. 

The ruling would impact retirement plans of nearly 150 million Americans, representing $12 trillion in assets. According to the Department of Justice and the Biden Administration, retirement plans should consider ESG factors in addition to financial information due to their impact on a company’s long-term health.   

Finsum: Republicans are looking to fight back against ESG investing. In turn, the Biden Administration is looking to toss a lawsuit from Republican states which would ban ESG investing for employee retirement plans.

In an article for Bloomberg, Anchalee Worrachate covered a recent note from Goldman Sachs’ Della Vigna who was critical of the ESG movement and said that it is leading to underinvestment in energy production. In turn, this would lead to higher prices down the road and hurt the energy security of developed countries as was briefly experienced in the months following Russia’s invasion of Ukraine.

He believes ESG has focused too much on divesting from fossil fuels rather than investing in renewable energy. Over the last 10 years, capital expenditures on energy production have fallen short of what’s necessary. Vigna notes that spending on renewables is rising, but it’s not close to enough to make up the gap.

Another criticism of ESG is the focus on absolute emissions rather than the carbon footprint of emissions. Vigna says this is misguided, because it simply means less energy production rather than boosting zero emission energy production.

Vigna is worried that the US and Europe have lost the urgency that they felt in the spring of 2021 to expedite the energy transition process given its numerous secondary effects. He warns that the equilibrium remains very tight, and there is the risk of another surge in prices. Despite this threat, the momentum to transition has slowed, and ESG proponents have gone back to a focus on emissions rather than new sources of energy. 

Finsum: Goldman Sachs’ Della Vigna believes that the energy transition to renewable sources needs to be expedited, in part, due to ESG’s focus on reducing emissions.

In an article for Forbes, Jon McGowan discusses how five out of the eight insurance companies, who were among the early signers of the agreement, are leaving the United Nations’ Net-Zero Insurance Alliance due to antitrust concerns and a backlash regarding ESG. 

The alliance was formed in 2021 to encourage the insurance industry to proactively work on solutions towards climate change. The goal was to get to net-zero emissions by 2050 by promoting change of internal practices and to use investment decisions to encourage other stakeholders to reduce their emissions as well. It also mandates disclosures of decisions related to climate change and is modeled on financial disclosures that are required by the SEC. 

This has raised antitrust concerns given the coordination of companies within an industry. It also has led to opposition due to the recent, heated pushback against ESG investing which has intensified with Republicans taking over Congress. At the statehouse level, Republicans have also mobilized to ban use of state funds from using ESG factors in investment decisions. 

Finsum: Insurers are leaving the UN Net-Zero Insurance Alliance due to antitrust concerns and the backlash over ESG investing. 

Going….going…..gone.

Nope; no precious four baggers here. Instead, ESG recently took something of a hit as the United Nations convened a climate alliance for insurers, according to reuters.com. A minimum of three additional departures – including the chair of the group – took place. What had them heading for the exits? Opposition from U.S. Republicans pols.

As of the time of this report, on May 25, that meant at least seven members of the Net-Zero Insurance Alliance had bid the group adieu, with five of the eight founding signatories included. NZIA was founded in 2021.

Over the past year, in terms of reaching decisions evolving around investments, negativity stemming from the contemplation of EGS factors has dominated the landscape, according to weforum.org.

The invasion of Ukraine, inflation and, in some parts of the world, a spike in populism, have aroused criticism surrounding ESG.

The caveat: integral to abetting the swing to a greener, more sustainable future hinges on investing that’s truly sustainable and, consequently, shouldn’t be shucked aside.

Even so, the period of negative scrutiny in so much as arriving at investment decisions generated by ESG factors, has been unprecedented.