There has been a lot of rhetoric around the value of ESG and that creating an ESG programme is somehow bad for business. In some circles, this goes even further, suggesting that developing and investing in ESG should be banned. These viewpoints are based on misleading headlines. While they may point to the suggestion that ESG is bad, that is not what is really happening. What lawmakers in some US states are saying is that a ratings agency or bank calling a company that might happen to be involved in a carbon-producing industry as ‘bad for ESG’ is grossly unfair.
Indeed, at a basic level, that does sound to be unfair – especially if only one element (e.g. carbon usage or production) is being used as the basis on which a poor ESG rating is being made. That company might be great at many of the factors that come together to form ESG, but just happens to be in a business that generates carbon. While the lawmakers are not quite articulate enough to really understand the nuances of the words they use and how they are interpreted by the media and mainstream consumers, it is important that everyone understands exactly what ‘ESG’ represents.
The attached graphic shows ESG and the Speeki ESG model. It then shows what each of the elements means when describing a company. Just because a company might be poor in one area, this weighting should not destroy its ESG credentials. To do so would be short-term thinking, as well as misleading and grossly unfair.
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