The Antidote To ESG’s Environmental Snake-Oil Is Here

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Whenever you are not supposed to question what a growing number of people are doing and what precisely they applaud themselves for is when you must question their motives vigorously, as I do.

 

Innovation 

Humanity is remarkably solipsistic, and the defensive claws come out when you dare challenge the carefully constructed walled-gardens of pre-established influence and control. The tell-tale sign of an anti-meritocracy.

A pageantry of positivity deployed by the masses is by definition suspicious, as meaningful positivity can only be derived from an assessment of harsh realities bestowed upon us by nature in terms of an expanding universe constrained by depleting resources.

The stale and foregone conclusions of the herd leads non-conformists like me to challenge and discover new and better normalizations of truth to develop a new and more optimal path towards a brighter future.

Because of the rejection of reason by large groups: 

“I would never belong to a club that has me as a member” — Groucho Marx

 

Truther

I have faced the protectionism of mediocrity from the age of seven when I began to see through my father’s unreasonable dogmas (he unintentionally trained my stance), to building startups where analysts first refused to cover us (only to have us lead a whole new quadrant later), to now how conference organizers, realizing where their bread is buttered, are afraid to put me on stage (I will do my own if I have to). 

“No one is more hated than he who speaks the truth.” — Plato

And yet, the hutzpah to question humanmade suppositions is precisely the much-needed practice we rely on to reinvent ourselves. We ought not to accept the fate of seven billion people subjugated to mediocre manmade systems believing none of those seven billion people have the power to change the systems. 

We cannot all remain in the cave of Plato’s caveman allegory for humanity to change.

 

The Science of Finance

Science uses a painstaking process consisting of proof and peer-review that challenges any supposition and quickly flushes out the unquestionable ones. 

A process that caused Einstein’s theory of relativity to be adopted not until some ten years after he devised it, at the next solar eclipse. Einstein’s wife had given up on him by then, which he reluctantly accepted as the sacrifice to his steadfast determination. A hundred years later and we have yet to realize the theory of relativity actually applies to all flora and fauna on our planet, more on that below. 

So, it is even more astounding how financiers can launch a set of suppositions, like ESG, Impact Investing, Corporate Social Responsibility using capital allocations completely incompatible with the nature of its assets, guiding the expansion of human ingenuity down an ever-narrowing and finite path incompatible with evolution, all without proof and unaccepting of counter-arguments. 

Nervously afraid of my arguments are the purveyors of these programs now, for I bring 4.5 billion years of undeniable proof to the table. I do not need to delve into the specifics of sustainability programs, for sustainability is flawed at the top. Sustainability, used as the lynchpin of these investment allocation programs, is fundamentally incompatible with the precepts of nature, as nothing in our universe is sustainable and everything in nature revolves around renewal instead. 

Unlike and partly because of Einstein, we do not need to wait for the next solar eclipse to prove sustainability is an evolutionary oxymoron, it can be observed all around us every minute of the day.

 

Futile Resistance

The purveyors of sustainability programs have a few nasty tricks up their sleeves in their defense. As they implement these programs from the underbelly of collusion with peers, the thesis of what constitutes an ESG compliant company is extremely weak. There are too many versions of programs aiming to do the same thing, reporting is elective, and evolutionary relevance is a farce majeure. 

Realizing how feeble the sustainability proposition truly is, the purveyors of these programs now jostle for position and feign proof by creating an index of self, the ESG index, to which companies exposing their preferred material risk can then elect to measure themselves on. Mind you, with no external arbitrage other than public outrage (in the case of Nike and others) warning a company, not the investors, to shore up its act. Self-selection makes this index the poster-child of financial buffoonery.

“Finance has gone bonkers” — Charlie Munger

You really start laughing when a very large European institutional investor proclaims to have deployed ESG for the last thirty years, a hastily applied PR retrofit to an investment thesis that expands vicariously along the boundaries of expanding hallucinations. 

 

The Danger

Now, some people argue sustainability programs are not that bad because they focus on investing in the environment, so what could possibly go wrong? 

What could possibly go wrong when you administer snake-oil of sustainability to cure evolutionary incompatibility? What could possibly go wrong when you apply sustainability to an environment that revolves around renewal? What could possibly go wrong when you do not realize nature evolves by virtue of a dynamically expanding equilibrium. What could possibly go wrong when a thesis of long in finance does not recognize any principles of evolutionary biology in the foundation of its thesis? What could possibly go wrong when a thesis of absolutism is applied to nature’s relativity?

But let me pick a more straightforward example, as in human evolution. 

What do you think will happen when you sell a person snake-oil with the promise to live forever, the infinite supposition of sustainability, given any sane person knows birth followed by death promotes the cycle of human renewal. 

The person who drank the snake-oil may now think he will remain young and chipper, his body will not. Just like an asset manager buying into sustainability will believe the investment thesis is infinite when the assets are not. As that person ages, the incompatibility with a changing equilibrium with nature increases exponentially, with the state of the body ultimtely determining when the end is near.

Indeed, asset managers must organize and follow the nature of the asset. The assets being renewable, requiring the investment thesis to adapt to the nature of the assets continually.

 

Sustainability Is Dead

I applaud the want of many financiers to make money while doing good for the world, but doing good cannot come from a naive thesis of finance incompatible with the evolving nature of assets.

Sustainability is a fool’s errand, a false positive, an oxymoron, and an evolutionary placebo responsible for the misguided prospects of longevity, health, and wherewithal of anything in our universe. Climate change, our environment, the evolution of humanity, and finance “bleed” precisely because of the false manmade supposition of sustainability.

We, humans, tend to drown in self-induced complexity, invariably to make ourselves indispensable. But life becomes extremely simple when we pay close attention to nature. Our discoveries of nature, from the latest studies of biology, cosmology, physics, genealogy, and anthropology have given us new insights into how nature evolves. Nature, not humanity, decides the relevance and longevity of investible assets.

 

Reprise

This diatribe completes my barrage of warnings about the fallacies of sustainability that unchanged will lead to disappointing returns (save for index mangling) and will cause a significantly accelerated anthropogenic cascade to boot. 

To save the world from another manmade idiocracy, I now offer a masterclass specific to asset owners and asset managers to help them produce the consistency of repeatable alpha only the expanding fractal of nature can guarantee.

Sign up or forever hold your peace.

 

Discuss

Online discussions are so old-school and ineffective. Schedule a one-on-one online conference with Georges instead.

Georges van Hoegaerden
Georges van Hoegaerdenhttps://www.method41.com/georges
Georges is the Founder and Managing Director of method41. From analyzing the workings of policy, capital, and innovation, Georges noticed how these siloed constructs are woefully incompatible with the principles nature deploys to produce regenerative performance. With humanity stuck in a fabric of its own making, Georges set out to reinvent the operating-systems of humanity to fix the theory that determines what humanity can discover, aiming to fundamentally improve human adaptability to nature's entropy.
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