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LETTER TO SCMP
I refer to the letter by HKPU professors “How the city can help companies raise their standards in ESG”, July 27.
I am against promoting ESG in Hong Kong (as I said in “For business owners ESG is just red tape”, 12 June). I speak from a thirty-year career in Hong Kong in the Australian Trade Commission (Austrade) and as founder of an SME company in Hong Kong (Wall Street English). [1]
The last thing SMEs need is yet more paperwork to apply for an ESG score. Especially since the ESG score itself is bogus:
1. Companies game the system. The ESG is not a certification (like Hong Kong’s “Excellent Service Certification"). It is instead a score, like that of Business Schools. Companies have worked out how to game the system for the best score.
2. The score is political. Tesla had its ESG ranking removed two days after Elon Musk announced his bid for Twitter, and replaced by Exxon/Mobil. The world’s largest electric car company was replaced by a monster fossil fuel company, because the ESG overlords didn’t like Musk buying Twitter. A purely political decision -- no wonder Musk called ESG “a scam”.
3. Better ESG score doesn’t mean better performance. That’s one of its selling points, but it’s not true, as companies with high ESG score are at best average in terms of returns, and in some cases worse. ESG is a “weapon of mass distraction”. Correlation between ESG score and returns, average = 0.5. Which means ESG fund as likely to do worse than average funds as it is do do better. Terence Keeley.
4. Larger companies get better ESG scores than smaller companies. Larger companies have more resources to fill out ESG paperwork, while smaller companies are too busy running the business [2]
Should larger companies benefit even more than they already do?
5. Early adopters are giving up on ESG. Example: Larry Fink of Blackrock. An early proponent of ESG, he has now stepped back from touting it, having realised how problematic it is.
The world has reached “Peak ESG”. And now is the time our good professors choose to start pushing ESG?
ESG is an American invention, via the United Nations of Kofi Annan. Yet another bit of woke nonsense. What on earth are we doing promoting it?
I urge the government to ignore the advice from these good professors.
Let’s instead celebrate: “RIP to ESG”.
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[1] I mention my career only because the letter writers include all their titles (presumably) as part of their authority. My running an SME company is part of my authority. And more than academics, I’d say. What do they know about business? Answer: nothing. Pretty much. I’ve never met an academic that does. Apart from Aswath Damodaran, below vid.
[2] "Using environmental, social, and governance (ESG) scores as a proxy for CSP [Corporate Social Performance], our research supports past studies showing a large cap bias in measures of CSP.” Portfolio Management Research. [My emphasis].
ADDED:
- The difficult truth about ESG investing, with professor Aswath Damodaran
- The problem with ESG, Zach De Gregorio
- We are not going to waste time on ESG reporting, Warren Buffet and Charlie Munger
- Poor returns on ESG funds, Terence Keeley
- The false promise of ESG. Finance professor Damodaran
