U.S. House Financial Services Committee Debates Building A Sustainable And Competitive Economy With ESG

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It was interesting to watch the debate about the legislation of disclosure of ESG on July 10th and to hear the arguments of those for and against.

Albeit, only one of the four invited people, Mr. Atkins, a former SEC employee with a somewhat questionable past in banking protections unable to prevent their collapse, was against ESG disclosure. He reasoned that ESG constructs were “squishy,” and thus, reporting would lead to more questions than answers.

You can feel the slide coming, the meaning of interesting – I began with – quickly becoming the pejorative word for the opposite.

 

Manacle

I respond by shaking my head about how our government supports the grandstanding of ESG, supposedly building a sustainable and competitive economy, as the title of the video published by The House indicates.

ESG will do neither, for sustainability does not exist anywhere in our universe, and competition is harmed by a methodology of ESG steeped in collusion amongst peers.

But for the sake of further review, let’s skip the evolutionary incompatibility of ESG and play along with the manufactured consent conjured up by finance, and evaluate how The House, as the lower part of our federal government, dissects the need for disclosure of ESG compliance.

 

Define Good

The most crucial question came near the middle of a two-hour session from Congressman David Scott (Georgia) who, in a deceptively slow and unassuming pace, shook the very existence of ESG to its core and left the invitees stumbling for answers. 

The question was: “who decides what is good for humanity,” and then adding: “but empirical data is consequential.” The conclusion reached after examples such as Nike using underage children to sow shoes together were put forth, disclosing how the public is deemed the final decision-maker and the arbiter of ESG enforcement.

Mindy Lubber, President of a non-profit sustainability advocacy organization, just falling short of declaring the public votes on the validity of ESG with their pocketbook. My mouth fell open upon hearing such stupidity, we have seen many times in the past how leaving the detection of malpractice covered up by opaque financial systems by the public pans out; disastrous.

What struck me was how Mr. Scott appeared blissfully unaware of the gravitas of his own question, as his compliments at the end of his allotted time did not meet the logic of the answer given. I figured the question might have been fed to him by one of his aids, reminding me, as I was once told on The Hill, DC is run by twenty-year-olds spoonfeeding congressmen. Well-meaning, yet woefully uninformed.

 

Revolving Mediocrity

So, here we have it.

  • ESG is an evolutionary fallacy, as sustainability does not exist anywhere in the universe
  • Described as squishy by former SEC employee
  • Dubious in intent as evidenced by the SEC scarlet letter
  • Using rating systems of self, by self, colluded upon by peers
  • Disclosure defined by companies, using elective material risk assessments 
  • Infractions only discovered in worst-case scenarios by the public

At what point in time are we going to stop letting finance direct the evolution of human ingenuity in all the wrong ways and directions, and instead use the experts of evolution to determine what the evolution of its arbitrage, the system, must look like?

 

Faulty Correlation

Many members were concerned about the decreasing number of IPOs, with China responsible for one-third of worldwide IPOs, going as far as to correlate that decline to the requirement of disclosures on ESG. The same self-serving rationale we saw around Sarbanes-Oxley proving to be false. Frankly, members who cannot separate cause from consequence in finance do not belong on the Finance Committee in any branch of government or need to come for a refresher on finance.

We have fewer IPOs because the financial system, as the theory that determines what can be discovered, has turned subprime. An undesirable outcome that can only be resolved by addressing root-cause.

 

New Thesis

We must develop a better thesis that determines what can be discovered (Einstein). A thesis not conjured up by financiers with no understanding of the evolutionary nature of the investible assets, but with a thesis compatible with how nature and thus all its assets evolve.

A thesis of finance incompatible with nature will be responsible for an anthropogenic cascade twice the size and speed of the lost opportunity cost. A vote in favor of ESG and disclosures, in its current form, is a vote – not for – but against the expanding fractal of human expansion in equilibrium with nature, quite the opposite of how the promoters of ESG characterize their influence.

 

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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