Recently there has been an enormous growth in companies who have made the effort to go through ESG accreditation. Many have their own sustainability and ESG officers or use external consultants .
Accountants and legal advisors are compiling massive reports so that their clients are more attractive to socially conscious investors.
But does it do any good?
The ESG accreditation has three aspects . On the environmental side it looks at how the company’s actions might harm the environment. On the social front the company might organise or adopt projects to help the communities locally and occasionally internationally. The governance accreditation looks at how employees and vulnerable minorities are treated, and whether the company indulges in dubious business practices. Yes, it is all very vague.
Allow me to leave aside the social and governance issues – I am interested in the environment climate change side of things. During the last weeks I have collected some examples
Here are some corporate examples.
- Additionality . That is an important concept. Some corporations like @Shell have sold their fossil fuel operations to companies like @Glencore. The coal mines have not suddenly disappeared , they just have a new owner and world’s greenhouse gas levels are unaffected. So should we buy Shell shares because of this?
- Unilever , the consumer goods giant, appointed an CEO called Paul Polman, who cared deeply about sustainability and climate change issues . Unilver’s shares have been out -performed by their competitors @Proctor and Gamble, and @Nestle. Unfortunately share performance is more important than ESG and Polman resigned.
- @Exxon and @Tesla. There is no one standard for ESG measurement. In one recent table Exxon came out above Tesla. Historically Exxon may have caused directly and indirectly more greenhouse gas emissions than any other company in history . Tesla has pioneered replacement to gas/petrol driven automobiles. Go figure. This saga has severely discredited the whole ESG story.
- @Schneider Electric. At a recent investment meeting, I and my fellow investors were presented with details of Schneider Electric as a good ESG investment. I happen to know the company. It supplies lots of electrical kit for renewable power. So what! I think that an investment in Schneider will not help the environment in any way. Schneider is just satisfying market demand - it is not a ‘good’ company.
ESG accreditation helps little and do not expect you can solve climate change by investing in the ‘right’ company. If you do you will end up being disappointed.
David Waimann is VP Energy at OurCrowd Investments and executive director at five water and renewable energy tech companies. drw@ourcrowd.com
This article is part of a series of more than 20 posts discussing climate policy and technology.
