Why ESG Will Fail Us, Spectacularly

I get many inquiries on the subject of ESG, for the uninitiated referred to as investing in the Environment, Social, and Governance, from large pension funds to smaller asset management and investment outfits.

From the date we published some articles on the subject of ESG, I also noticed Google searches crawling inquisitively for “esg rate failure venture capital” on our site. Perhaps in response to the well-publicized recent collapse of venture fund Social Capital meaning to do good.

Good

The only repeatable strategy for social good is a strategy subjugated to the rules of evolution – an approach entirely different from what is described as ESG today.

Investing for social good is not for the faint at heart, for it changes the asset management investment thesis from nervous hedging on quick-and-dirty asset allocation schemes of relative (fund vintage) short, I have referred to in the past as the musical-chair game of asset management, into the deliberate pursuit of the ever-expanding fractal of human discovery of evolutionary long. An overhaul of the core competence of the investment staff, who now need to learn some of the basics of evolution and anthropology to understand why, how, and when the human fractal expands. I developed a masterclass to assist.

Such an overhaul, however, fits more organically with the risk-return profiles of institutional asset managers, and specifically pension funds, who must have a vested interest in the renewable strength of its members. For prolonged membership contributions with fewer withdrawals of benefits are how pension funds walk the knife-edge towards increased solvency.

Bad

I already stated why ESG in its current form is an evolutionary placebo, but let me reiterate my stance more unequivocally:

ESG is, and will be a complete failure, in due time disproven by evolution.

Georges van Hoegaerden

I do not want you to construe that opinion with my lack of interest to save our planet from ourselves. Au contraire, I have spent the last eight years getting rid of manmade nonsense that percolates our lives. The best way for us to save our planet is to stop making fools out of ourselves.

I report to our best understanding of the evolutionary truth, not to the frivolous vestiges of false positivity or manmade make-believe. And more manmade conjecture of what prolongs our existence on earth will, despite hollow karma, does nothing to persuade the rule of nature. Indeed, the rule of man must subjugate to the laws of nature.

Be honest

Our intellectual honesty, as Nobel Prize winner Richard Feynman emphasized how little we know about nature, should prevent us from making shit up. Excusez les mots.

The job of a scientist is to listen to nature, not to tell nature how to behave.

Richard Feynman

The same applies to asset managers if they want their asset allocations to trace and support the expanding fractal of humanity accurately. Here is why ESG is manmade buffoonery:

  • ESG is associated with sustainability, an evolutionary oxymoron, and thus unable to keep the promises it makes, and unable to deliver the repeatability it presumes.
  • ESG is detached from evolutionary relevance and is in conflict with the rules nature bestows on everything on our planet. ESG will therefore not produce the predictability it presumes.
  • ESG tailors to what humanity wants, not to what humanity needs. Hence, ESG is normalized to the improper truth. Man does not define the rules of nature responsible for the prolonging of humanity. More sugar-water is not what humanity needs if you catch my drift.
  • ESG rates the best-practices of how products are made, less on what is made and why. So, proverbially, any company could make and sell evolutionary poison not shipped in plastic bottles. We have enough of those companies already.
  • ESG is a manmade manacle, formulated by a weak set of etiquettes conjured up by peers, allowing its investable companies to easily dress up in compliance while violating the most rudimentary rules of nature. I am waiting for the self-aggrandizing award shows.
  • ESG compliance is driven by a rating-system fabricated by social experts who know nothing about evolution, their rising-tide stature colluded on by investment peers. What better way to write your own report-card of yet another false pretense for the world?

Placebo

But Georges, is not any kind of attention to nature a good thing for nature, I can already hear a reputable chairman say?

No, is my resolute answer, in the same way, a placebo given to a cancer patient is a very cruel and deadly experiment especially to those expecting to be cured. And we will all be affected by that kind of medicine of false investment allocation hope. We do not have time to fool around.

Expect the companies involved in rating ESG to do some heavy dancing to avoid responsibility in the meantime, not unlike rating companies like Moody’s, S&P, and Fitch performed quite a dance after the subprime mortgage crisis not to be blamed for the ratings that appeared meaningless.

Unchanged, the history of greater-fools and that of their hangers-on is bound to repeat itself, reverberated happily by obedient disciples afraid to turn over the rocks of financial religions deposited by predecessors.

Au Naturelle

We know a lot more about evolution than most people realize. All you need to do is observe and connect the dots. Nature has laid its guiding principles out for us, the ones we best follow for the sake of humanity.

The opportunity to truly improve humanity lies at the congruence of the current silos of policy, capital, and innovation. With a new role for government to preemptively establish the preeminent rules of our humanitarian gameplay – in tune with nature – and the private sector executing and competing in said gameplay.

We cannot wait to tell you what a new system of human excellence, the upstream evolution of “ESG”, should really look like to inherit the consistency, repeatability, and predictability of nature.

To discuss this article, book a free 30-minute video-conference with Georges.

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