I am anti ESG, and you should, too, if you genuinely care about the Environment, Social Issues, and effective Governance.
ESG is the ultimate in manufactured consent, an investment allocation thesis of evolutionary deceit worse than no plan at all. For ESG creates mere false-positives, and the no-plan option has at least the opportunistic propensity to produce many false-negatives.
You see, the fundamental precept of ESG, or Impact Investing, or Responsible Investing is sustainability, a concept that does not exist anywhere in the universe. Hence the rules and processes to quantify an investment as ESG are incompatible with how nature would appraise the value, for nature works based on renewal, not sustainability.
The difference between renewal and sustainability is as stark as the difference between life and death. Let me explain by using the evolution of a species, say a human resource, which could easily apply to other resources.
The evolution of any species is predicated on a process of renewal that ensures the species adapts to an ever-changing equilibrium with nature, with the species dependent on nature’s resources. Conversely, portraying the process of evolution is based on sustainability, expecting an instance of a species and its resources to existing forever, which is a false supposition hampering and delaying the species’ adaptability. The same applies to companies as the assets serving the human species.
So, indeed, ESG hinging on sustainability is a false promise that despite much rhetoric and trade-show pageantries of greenwashing, positivity in actuality slows down the process by which humanity adapts to nature.
I have had three in-depth conversations about ESG this week, where the devotion to reason initially appeared as hopeless as administering medicine to the dead, were it not for nature’s truth – I dutifully explain – to be irrefutable and undeniable.
Short of admitting ESG is an outright evolutionary placebo the brave asset managers, realizing a repeatable investment thesis is only as good as the systemic eradication of false-positives, defiantly utter: I get it, but is not any investment in nature a good thing? Can we not move from ESG to your plan? Can’t we just rely on the marketplace to determine whether ESG has validity?
Let me respond to each sputter in detail for the public good.
Isn’t any investment in nature a good thing?
No, nature works by establishing a dynamic equilibrium. A disturbance of that equilibrium with lopsided static infusions of investments creates an unnatural imbalance and cascades on other natural resources and thus the species that depend on it. So, a drastic change applied to nature without recognizing the dependencies will do more harm than good. The higher-order issue here is that the human species is not the curator of nature. Our sole job is to curate ourselves by ensuring the footprint we leave behind is as tiny as possible, or better yet, nonexistent. Hence investments should be directed not at nature but the excellence of human renewal in equilibrium with nature.
Can we not move from ESG to your plan?
Yes, we can easily use PR techniques to transform ESG into my thesis derived from nature’s principles. That would undoubtedly help save face for asset managers without any knowledge of evolutionary biology, already on the bandwagon of ESG, to change course. However, the rules of renewal are fundamentally different from the practices deployed by the false supposition of sustainability in ESG. Hence, ESG’s compliance with nature would require a complete overhaul of its thesis and processes.
Can’t we just rely on the marketplace determining whether ESG has validity?
No, a marketplace is a construct where buyers and sellers congregate to exchange services. The existence of the marketplace and the participation of people in it is no indication of its evolutionary integrity. Las Vegas exists not because the odds of winning make any sense – if you catch my drift. So, letting the convulsions of a marketplace, its participants engaged in a self-aggrandizing fanfare knowing nothing about evolution, decide on the strategy for humanity’s expansion is a dangerous and foolish proposition.
I agree wholeheartedly that we must stop trashing our planet and finally respect it. For an asset manager deploying asset allocation strategies of long (10, 25, 50 years+), that means acquiring the knowledge of how evolution applies to asset management is paramount, the reason why I began teaching masterclasses on the subject. Do not fret: my bite in real life is more gentle than my bark in the blogosphere. Every day is a bright new day to change course.
An ESG index conjured up by financiers, modulated by peer-review, in complete ignorance to, and incompatible with evolutionary principles is not what directs funds to where humanity needs them most. For that reason, ESG is evolutionary poison and belongs in the dustbin of history.
The commitment of the human species attempting to create a better world and live as long and healthy as possible must begin by realizing we are merely at the mercy of nature’s rule.
All of us, not just asset managers, must begin to comprehend and adhere to nature’s principles and processes, I have described before, that continually expand the fractal of human ingenuity to improve human adaptability to nature’s entropy.