Elon Musk is hot-blooded and always quick to bitch on his Twitter account. Last May, his anger erupted against the S&P Dow Jones, one of the market’s leading index providers. Electric car maker Tesla, of which he is CEO, had just been removed 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 linked to that in France of CSR, corporate social responsibility. Tesla’s exclusion from the S&P 500 ESG was prompted by the existence of racial discrimination complaints against the company, its opposition to the creation of unions in its factories and its handling of a government investigation after related accidents. to its self-driving vehicles.
If the S&P Dow Jones recognizes Tesla’s contribution to promoting sustainable transport, it therefore penalizes it for issues of working conditions and good governance. The situation is comical: the S & P 500 ESG, which gives the the to judge whether this or that company is virtuous, punishes the pioneer of the manufacture of electric vehicles, while the American giant ExxonMobil, one of the biggest polluters in the world, is still in the index. On Twitter, Elon Musk vituperates: “ESG is a vast scam, a scam [« a scam » en anglais, NDLR]. This has been instrumentalized by pseudo-social justice warriors. »
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too much subjectivity
The CEO of Tesla is then not the only one to find the sanction absurd. Across the Atlantic, several fund managers, these financial heavyweights who decide where to invest billions and billions of dollars and can influence the behavior of many investors, have also stepped up to the plate. Even the arms manufacturers, carefully shunned by ESG champions before the war in Ukraine, are perplexed that they are today considered by some to be “defenders of democracy”. What serious criteria should be considered in terms of CSR? Can we sanction companies on complex ethical questions in which there is a large part of subjectivity? Besides, when does objectivity end and subjectivity begin?
In an exciting issue dated July 23, The Economist looks at these questions. Without going so far as to tax the S&P Dow Jones with “crazy activism” (“wacktivism” in English) like Elon Musk, the British magazine notes how ESG investments have become a fashion – financial players are taking advantage of it. elsewhere to increase their commissions on this segment – and are increasingly influencing the behavior of companies. According to asset manager Morningstar, ESG assets in mutual funds and ETFs (Exchange Traded Funds) or “trackers” weigh more and more heavily in global finance: almost 2.8 trillion dollars (1 trillion equals trillion) at the end of March 2022, roughly the size of the cryptocurrency market.
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A relevant criterion: CO emissions2
However, the agencies supposed to evaluate the ESG of companies often reveal an inconsistent system. After studying six of them, The Economist finds that they use 709 different criteria among 64 categories. Only about ten categories are common. And yet, they do not even include an essential measuring instrument: greenhouse gas emissions. It’s often the world upside down, some ESG agencies measure the risk that climate change poses to a company, rather than the threat that this company may pose to the climate. The Economist quotes John Gilligan, of the Big Issue Invest fund, which supports social and charity-oriented businesses, summarizing the degree of subjectivity inherent in these subjects: “The idea of measuring ESG, says John Gilligan, is like trying to judge your favorite child. » Meaning: we always manage to find very accommodating and above all very subjective criteria that will make this child pass for an exemplary person.
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However, the right CSR measure is crucial for the future of the planet. However, by dint of being too interested in social and governance issues to the detriment of greenhouse gas emissions, we do not encourage political leaders to take real measures in the face of climate change, believes The Economist. Why are there still no real international carbon taxes coordinated between countries? For the British magazine, it’s time to get back to basics: measure less, but better and, first and foremost, carbon dioxide emissions. By putting pressure on companies for their carbon footprint and by rewarding good students, we would have virtuous companies that are better valued on the markets and therefore have cheaper access to capital. Enough to transform world capitalism more quickly in the face of the climate emergency.