Understanding the Impact of ESGs
If you believe that humanity has a special and sacred duty to care for the environment, then you probably also appreciate our planet for both the life-giving food it provides and its inherent beauty. Few people can remain unmoved after seeing the Grand Canyon’s splendor, the Alps’ cold beauty, or the rushing Niagara Falls.
But what happens when the conversation shifts from personal responsibility for environmental stewardship to ideological agendas that require global, top-down decisions?
Too often, it seems that governments are willing to sacrifice the livelihoods of productive citizens—or whole industries—to meet ideological agendas. Environmental, social, and governance (ESG) criteria have proven to be particularly useful in this regard. But do these standards take the best metrics into account? Can ESGs produce the change they set out to accomplish, or do they damage communities?
ESGs certainly don’t produce food when supermarket shelves are empty. Below, we’ll explore the usefulness and shortcomings of ESGs.
Have you come across thoughtful articles or podcasts about the role of ESGs in current events across the world today? Drop links in the comments, or tag us on Instagram!
What are ESGs anyways? Environmental, social, and governance criteria are a set of standards intended to inform investors about a company or nation’s long-term stability, opportunities, and risks. How are they safeguarding the environment? Addressing climate change? Managing relationships and communities? Structuring leadership and internal controls?
If we look at historic data, are top-down mandates responsible for increasing life expectancy or decreasing poverty rates? According to Liberty C.E.O. Chris Wright, it’s actually bottom-up social organizations and access to energy (hydrocarbons) that have transformed society over the past few centuries. If the current ESG movement introduces mandates and wages war against hydrocarbons, how will that practically affect lives? Hear what Wright had to say at Common Sense Society’s 2021 conference:
You may also want to dive into the data in Liberty’s Bettering Human Lives report.
Even if ESGs attempt to encourage moral action on the part of businesses, are they making the most important moral distinctions? Do they account for the moral distinction between freedom and tyranny? Have they instead fostered a culture that undermines from within the free market system that drives opportunity and growth? Common Sense Society President and C.E.O. Marion Smith dives into these questions in this article.
In April of 2021, Sri Lanka’s government decided to become the world’s first all-organic country, banning the use and importation of chemical fertilizers. They now have a near-perfect ESG score of 98, but was it worth the cost?
Despite having been self-sufficient just six months earlier, Sri Lanka had to import $450 million worth of rice because 20% of their crops failed. Tea exports plummeted, costing the economy $450 million. Over 85% of farmers experienced crop losses. A top-down effort to promote an ideological agenda forced the nation into bankruptcy.
Is there cause for concern that Western “liberal democracies” will resort to top-down, ideological mandates? That’s exactly what we’re witnessing in The Netherlands. Over 40,000 farmers have taken to the streets in recent weeks to protest harsh emissions regulations that the Dutch ruling coalition itself concedes would force upwards of 30% of farmers out of business. The farmers are rallying around the slogan “No Farmers. No Food.” Sure enough, supermarket shelves are already bare. Are these top-down mandates helping individuals and communities?
Dr. Melvin Schut, director of CSS–The Netherlands, released this statement on the issue:
The Dutch government’s misguided environmentalism is hurting farmers and fueling an understandable rise in the people’s mistrust of their leaders. Farmers in The Netherlands are worried this government diktat will hurt their production, or even lead to seizures of their farms. There is no good reason for this pointless, unjust attack on our hardworking farmers that could fundamentally change the character of our country.
Meanwhile, who is holding China accountable? Are Sri Lankan and Dutch farmers supposed to suffer while China builds more than half of the world’s new coal power plants and stockpiles the world’s corn, rice, and wheat? How do environmental and economic stewardship come into play here?
The late Sir Roger Scruton was dedicated to conservation and the promotion of liberty, prosperity, and beauty. He posed some challenging questions for us today:
Why do those old-fashioned words like trust, settlement, beauty and home so seldom pass the lips of those who are now, nominally at least, in charge? And why is the agenda still set by those for whom climate change, renewable energy and global warming define the problem, and for whom the favoured solution involves the total destruction of the things we love?
We have a long way to go to address the shortcomings of ESGs, and an even more complex road ahead to address responsible stewardship of the natural world. A good place to start is by asking ourselves, do we love our communities? Are we taking personal responsibility for the world we call home?