ESG Is the Opium of the Investors

ESG has created a luxury good out of symbolic pro-social investing. In practice, it mainly replicates consensus ideology. Those who want to go beyond it must act directly on the world.

Yiran Ding/Among the clouds

Last week, Palladium Correspondent Nicolas Villarreal published a new analysis of the Environmental, Social and Governance (ESG) framework now common among corporate boards and investment portfolios across America. ESG has sparked fears that it can be used for the soft implementation of political goals into how investments are evaluated, instead of strict measures set by fiduciary duty. Its advocates, meanwhile, believe that it can solve the problem of harmful externalities or public goods not being priced into investing choices. 

Nico’s article debunks the idea that ESG has the capacity to rewrite the economy in this way at all. The devil is in the details, and in practice ESG funds have been unable to change investor choices or even forward their nominal goals. Instead, ESG serves as a kind of luxury good for investors, neatly fulfilling their desire to feel like they are changing the world while actually changing almost nothing. Its real work is ideological: it replicates consensus beliefs and entrenches political updates, such as with reversals on how ESG rates Russian oil companies or armaments in general since the Ukraine war began. 

These trends are linked to the structural role of finance in providing the goods which reproduce the capitalist class. If ordinary financial assets are what reproduce the position of the capitalist class in the modern economy, then ESG finance is effectively a luxury consumption good. It comes about after the necessities of reproducing the class have already been met.

But the luxury good getting sold is the appearance of action. Regardless of whether the goals of the ESG framework are desirable, what’s important is that the actual planning needed to realize those goals—be it through philanthropy, institution-building, or industrial planning—are outsourced to the market. But in reality this has little bearing on the environmental practices of companies like Exxon. ESG, then, is the “ultimate symbol of their degradation from historical agents into passive consumers.”

You can check out Nico’s article here.

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Here’s what’s been on the front page lately:

ESG Is the Opium of the Investors by Nicolas Villarreal. ESG has created a luxury good out of symbolic pro-social investing. In practice, it mainly replicates consensus ideology. Those who want to go beyond it must act directly on the world.

Britain Is Dead by Samuel McIlhagga. Despite its early industrial dominance, Britain’s elites never managed to adapt to the new landscape of power. After more than a century of structural breakdown, its very future as a unified state is in doubt.

Entrepreneurial Statecraft Gets the Goods by Wolf Tivy. You don’t reshape society by starting a cultural movement. Instead, you need to implement direct action materialism.

Who Is the Art World For? By David Gelland. Art today often aims to shock rather than inspire. How did that change happen?

The Smallest Living Things, A Short Film. The health of the smallest living things is necessary for the survival of all life on Earth. This short film, directed by Charles Abelmann, tells the story of one self-made farmer’s quest to care for microbiomes—and call out the abuse of antibiotic overuse in livestock and people.

That’s all for now.