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Companies with good ESG scores pollute as much as low-rated rivals

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Re: Companies with good ESG scores pollute as much as low-rated rivals

#41

Post by JamesBarney »

Dig1t wrote: post #3

A component of ESG scores is how much you discriminate against white people. So of course you can have a good ESG score yet be a polluter.

A couple of hiring managers from oil and gas companies have told me there is a strong push to try not to hire white ICs if you can help it. This makes more sense in the context of trying to get a good ESG score to improve their P/E ratio.

Re: Companies with good ESG scores pollute as much as low-rated rivals

#42

Post by lofatdairy »

legitster wrote: post #21

Matt Levine: It's Easy to Make Oil Companies ESG: https://www.bloomberg.com/opinion/articles/2023-07-12/it-s-e...

Was gonna post this. That said, this is not what Levine is writing about. Levine is writing about how you can restructure your portfolio to gain exposure to fossil fuels _without_ lowering your ESG metrics by simply investing in companies with fossil fuel holdings (since then your ESG is calculated by the carbon emissions of the holding firms and not the assets themselves). Here, the authors are essentially concluding that ESG ratings are actually poorly correlated w/ the actual emissions of the firms being rated. This is probably because the environmental metrics of ESG scores are forward-looking (thus you can offset current pollution by aggressive reduction projections), but I'm not in this field so I don't know anything more.

Re: Companies with good ESG scores pollute as much as low-rated rivals

#43

Post by Aerroon »

psychphysic wrote: post #29

ESG is a waste of time, I can't wait until this fad dies down.

When I first read about it I thought someone was playing an elaborate joke. It makes no sense why such ephemeral concepts should somehow lead to better investments. If anything, the entire ESG score thing seems like a scam to get people to make bad investments and to then bet against those investments.

Re: Companies with good ESG scores pollute as much as low-rated rivals

#44

Post by Aerroon »

lantry wrote: post #27
throwawa14223 wrote: post #6

As far as I can tell ESG is a huge 'begging the question' problem. Companies with good ESG scores do better because we invest in companies with good ESG scores.

But shouldn't the "free market" correct for this? If most people are putting their money into ESG but there isn't a real underlying performance difference, that creates an arbitrage opportunity for people willing to invest in non-ESG? Sadly, I can already hear the right-wing rebuttal: "the market isn't truly free because of the (bankers) running blackrock! we need govt intervention to ban ESG, then the market will be…

>But shouldn't the "free market" correct for this?

It probably will. It will just take many years for this bubble to pop.

Re: Companies with good ESG scores pollute as much as low-rated rivals

#45

Post by MostlyStable »

legitster wrote: post #21

Matt Levine: It's Easy to Make Oil Companies ESG: https://www.bloomberg.com/opinion/articles/2023-07-12/it-s-e...

Also, there's evidence that moving investment from polluting to non-polluting industries at best has almost no impact, and potentially makes things worse:

https://www.icpmnetwork.com/wp-content/uploads/2023/07/Count...

Re: Companies with good ESG scores pollute as much as low-rated rivals

#46

Post by lesuorac »

tfandango wrote: post #10

ESG is tricky to talk about thanks to the politization of it. I work on some projects that involve ESG data and I have some thoughts. First there's LOTS of factors. If you bunch them all up into one number, it becomes meaningless as the article describes. I would think wiser minds would use this data to make investment decisions based on some specific risk, like hedging against some environmental disaster which may a…

Making an assumption that the factors into an ESG score are significant in how they affect a company; isn't investing into a company with a bad ESG sub-component(s) a good idea?

You've identified what is going wrong with the company so as a large fund you can buy a lot of shares and push for shareholder votes to fix those aspects of the company and reap profits when the company improves?

Re: Companies with good ESG scores pollute as much as low-rated rivals

#47

Post by legitster »

CameronNemo wrote: post #39
legitster wrote: post #26

Earlier quoted context omitted.

I find it hilarious the kind of conspiracy theories people lob at BlackRock and Vanguard. BlackRock maybe I can maybe understand, but Vanguard is like the most straightforward boring investment company in the world. It's literally a shareholder co-op for passive investment funds. People have no idea what they are talking about.

How is ESG passive investment?

In most cases the are not! If you buy an S&P 500 Index you are not buying an ESG fund at all.

For a fund to be passive, all you are saying is that you are following pre-set rules for that fund. And there are any number of investment products these companies make and offer that use any sort of pre-set criteria.

You can take a look at one of Vanguards (few) ESG index funds and their criteria are very clearly presented at the bottom of the page: https://investor.vanguard.com/investment-products/mutual-fun...

Re: Companies with good ESG scores pollute as much as low-rated rivals

#48

Post by distant_hat »

Often companies with good ESG scores optimize for having good scores. Its like studying to the test and they may have particularly poor results outside of the test that they have studied for. Also, ESG is political and like all things that involve politics, many things that may be good for the score may be bad for the environment. Easiest example to see is in energy with things like nuclear power, and 'biomass' and coal.

Re: Companies with good ESG scores pollute as much as low-rated rivals

#49

Post by [deleted] »

CameronNemo wrote: post #39
legitster wrote: post #26

Earlier quoted context omitted.

I find it hilarious the kind of conspiracy theories people lob at BlackRock and Vanguard. BlackRock maybe I can maybe understand, but Vanguard is like the most straightforward boring investment company in the world. It's literally a shareholder co-op for passive investment funds. People have no idea what they are talking about.

How is ESG passive investment?

[deleted]
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