ESG

Doing well while doing good was a phase from Ben Franklin that businesses adopted many years ago. It is something that grew slowly. After the war Japanese products were cheaply made and American consumers were not happy. In the 60's that began to change and by the 70's Japanese autos were top of the line quality. Some US car manufactures sent representative to Japan to find out how they were doing. They came home and to make a long story short they found out that when you treat your employees with dignity and respect they respond favorably. The plant employees wanted to have top quality cars because they were treated well. You might say they were doing well while doing good. Many other examples can used to demonstrate the effectiveness of this idea. In the past few years this concept has been expanded to Environmental, Social and Governance (ESG). While this is a path to success for companies it is being used to punish companies for their real or perceived political views. Certain groups suggest pension funds use ESG scores to determine their investment strategy. An oil company whose products increase CO2 would be down graded but a company making solar panels would be upgraded. This is using the philosophy of doing good to determine what manufactures should be making. This would encourage investment advisers to move funds away from oil to solar. The fact that the demand for oil may be greater than the demand or solar is left out of the equation. The basic concept of supply and demand is being replaced with what some see as the moral high ground. This idea is promoted by the same people who want to determine what is true from what is disinformation. The question then arises who are these people, how many are they and what are their business qualifications.