THE ESG MIRAGE - FAKING ESG IS SHORT TERM GAIN FOR LONG TERM PAIN - Bloomberg's report is a huge gutshot for the overall ESG movement and a call to action for an independent standard reporting structure that is not controlled by money to produce more money. This is consistent with an article I wrote last year after the US SEC issued a general circular notice warning about the veracity and validity of ESG reporting. As Bloomberg outlines, funds and investment houses have manipulated ESG to be another tool to manipulate market valuations and influence investors in ways that wouldn't pass any "governance" standard represented in ESG. The problem is these practices may deliver short-term gains, but when they are exposed, and in today's information world everything gets exposed eventually, the market corrections could be catastrophic. When the public becomes aware of the misrepresentation and manipulation it creates huge public pressure for new regulations, a loss of social support or social licence resulting in boycotts or stock sell-offs and often a massive loss of market capital value. Look at Enron, VW and Patagonia when they got caught for failing in their ESG responsibilities and ask yourself if that is what you want in the long run for your organization. Publicly traded companies have unique short-term pressures, which are different for private companies, regardless all companies need to actually live the sustainability principles which ESG was developed to measure if they want to truly create long-term success and value for all of their stakeholders. Because when you get caught faking it, there will be a terrible price to pay.
I’d like to hear your thoughts on this, please share in the comments and pass it on. I'm excited to hear everyone's perspectives on the practicalities of living ESG in a way we can pool our learnings and take back new ideas to make ESG real in our organizations.
If ESG isn’t a part of your strategic growth planning and execution, then this is your call to action to embrace and live ESG, or you may find it hard to attract investors, customers, talent, partners and ultimately ensure your continued success in the new normal.
Regardless, you can download this article or listen to the audio version of it through the link below. https://www.bloomberg.com/graphics/2021-what-is-esg-investing-msci-ratings-focus-on-corporate-bottom-line/