The use of Environmental, Social and Corporate Governance loans is almost certainly guaranteed to backfire on the corporations that are taking advantage of them.
The term “ESG” was originally coined by the United Nations Environment Program Initiative in 2005, but the methodology was not fully applied to the corporate world until the past six years when ESG investment skyrocketed.
ESG is about money; loans given out by top banks and foundations to companies that meet the guidelines of “stakeholder capitalism.” Companies must show that they are actively pursuing a business environment that prioritizes woke virtues and climate change restrictions. These loans are not an all prevailing income source, but ESG loans are highly targeted, they are growing in size (for now) and they are very easy to get as long as a company is willing to preach the social justice gospel as loudly as possible.
Deloitte’s Insights studies show that ESG assets compounded at 16% p.a. between 2014 and 2018, now account for 25% of total market assets, and they believe that ESG could account for 50% of market share globally by 2024.
These loans become a form of leverage over the business world – Once they get a taste of that easy money they keep coming back. Many of the loan targets attached to ESG are rarely enforced and penalties are few and far between. Primarily, an ESG funded company must propagandize, that is all. They must propagandize their employees and they must propagandize their customers. As long as they do this, that sweet loan capital keeps flowing.
It’s enough to keep corporations addicted, but not enough to keep them satiated. Diversity hiring quotas based on skin color and sexual orientation rather than merit help make the overlords happy. Pushing critical race theory smooths the way for more cash. Carbon controls and climate change narratives really makes them happy. And, promoting trans-trenders and gender fluidity makes them ecstatic. Each participating company gets it’s own ESG rating and the more woke they go, the higher their rating climbs and the more money they can get.
However, this sort of loan for something that is guaranteed to reduce a corporation’s actual business revenue is also guaranteed to harm the corporation over time. Look at Marvel, for example. Money flowing in from ESG loans might pay for blackwashing and transgendering its heroes, but it can only replace the sales revenues being lost for a limited time.
And unlike sales revenues, loans eventually have to be repaid. Even if the converged banks write off the initial loans, eventually they will want to collect their pound of flesh, the cost of which can only increase as interest rates rise from their historic lows.
ESG is the sort of thing that requires free money to implement, and it is a particularly pernicious form of corporate cancer. It’s only a hypothesis at this point, but one might well build a successful investment strategy around the knowledge that the more ESG money a corporation takes, the more likely it is that the corporation’s sales are falling.