EIon Musk is hot-tempered and always ready to quarrel on his Twitter account. Last May, his anger flared against the S&P Dow Jones, one of the leading index providers in the market. Electric vehicle maker Tesla, of which he is the CEO, has just been delisted from the S&P 500 ESG index. ESG, which has three pillars: E for “Environment”, S for “Social” and G for “Governance”, is a concept closely related to France’s CSR, corporate social responsibility. Tesla’s exclusion from the S&P 500 ESG was due to complaints of racial discrimination against the company, its opposition to unionization in its factories, and a government investigation after related crashes with its self-driving vehicles.
If S&P Dow Jones recognizes Tesla’s contribution to promoting sustainable transportation, it will therefore penalize it for problems with working conditions and proper management. The situation is comical: the S&P 500 ESG Index, which sets the tone for judging the goodness of a company, punishes an electric vehicle pioneer, and the American giant ExxonMobil, one of the world’s biggest polluters, is still included in the index. On Twitter, Elon Musk scolds: “ESG is a fraudulent scam, scam. [« a scam » en anglais, NDLR]. The fighters for pseudo-social justice serve as a tool for this. »
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too much subjectivity
Thus, the Tesla CEO is not the only one who finds the sanctions absurd. On the other side of the Atlantic, a few fund managers, those financial heavyweights who decide where to invest billions and billions of dollars and can influence the behavior of many investors, have also jumped into action. Even gunsmiths, who were carefully shunned by ESG champions before the war in Ukraine, are perplexed that today they are considered by some to be “defenders of democracy.” What serious criteria should be taken into account in terms of CSR? Can we sanction companies on complex ethical issues that involve a lot of subjectivity? Besides, when does objectivity end and subjectivity begin?
The exciting July 23 issue of The Economist explores these questions. Without going so far as to label the S&P Dow Jones with “crazy activism” (“wacktivism” in English), like Elon Musk, the British magazine notes how investing in ESG has become a fashion – financial players take advantage of it. their commissions in this segment – and increasingly influence the behavior of companies. According to wealth manager Morningstar, ESG assets in mutual funds and ETFs (Exchange Traded Funds) or “trackers” are increasingly weighing in global finance: almost $2.8 trillion (on the long scale, Ed) at the end of March 2022, which is about corresponds to the size of the cryptocurrency market.
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Related criterion: CO2 emissions
However, agencies tasked with evaluating companies’ ESG often find an inconsistent system. After reviewing six of them, The Economist found that they use 709 different criteria across 64 categories. In total, about ten categories are common. Yet they don’t even include an important measurement tool: greenhouse gas emissions. Often the world is turned upside down, some ESG agencies measure the risk that climate change poses to a company, rather than the threat that that company may pose to the climate. The Economist quotes John Gilligan of Big Issue Invest, which supports social and charitable enterprises, summarizing the degree of subjectivity inherent in these topics: “The idea of measuring ESG,” says John Gilligan, “is like trying to judge your favorite child. » Meaning: We always manage to find very comfortable and, above all, very subjective criteria that will make this child worthy of emulation.
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However, the right measure of CSR is critical to the future of the planet. However, due to the excessive interest in social issues and governance at the expense of greenhouse gas emissions, we do not encourage political leaders to take real action in the face of climate change, according to The Economist. Why are there still no real international carbon taxes agreed between countries? It’s time for the British magazine to get back to basics: measure less but better and, above all, carbon emissions. By pressuring companies for their carbon footprint and rewarding good students, we would end up with virtuous companies that are better valued in the markets and therefore have cheaper access to capital. Enough to rapidly transform global capitalism in the face of the climate emergency.