ESG ratings creates a lose lose situation

Anheuser-Busch, Target, Disney, and other woke companies have to choose between investment backing and customers

Americans are asking why some of the world’s largest companies are committing acts of seeming self-sabotage in order to align with radical left-wing social politics. While there are undoubtedly a multitude of factors driving this phenomenon, one major reason for corporate America’s descent into wokeism – like Bud Light’s Mulvaney partnership – is the “Corporate Equality Index” (CEI), a sort of “woke report card” published by the far-left Human Rights Campaign that goes hand-in-hand with so-called “environmental, social, and governance,” or ESG investing and can earn companies lucrative financial commitments from woke investment banks.

Let's not forget that pretty much all the banks that collapsed were heavily into the ESG investment model. Silicone Valley bank was almost exclusively modeled after ESG investments and working with woke companies that followed the model. So if you are a woke California company, a bank like SVB is your savior. Depending on your business model, it might be your only option.

So that is why many of these companies choose to lean in that direction. Assuming that they do not believe that the spreadsheets and underlying P&L reports will garner them funding under traditional banking standards, they simply check all of the ESG boxes and like magic an investment comes their way.

Now one would believe that companies like A-B, Target, and Disney could survive without woke investment money. They have all had long term traditional business success with traditional business models. So wading into the ESG waters is a choice rather than a necessity. Perhaps they all believed the future of banking was moving away from traditional P&L and common sense business decisions and into the concept of ESG. Before collapsing, the Silicone Valley bank and other banks who abide by ESG had been some of the highest rated banks according to several rating services that probably should be out of business.

Even the Federal Government has been attempting to shove ESG into the equations used for Federal Funding. Much of this has been challenged in court and the Federal government has lost more often than not when they attempt to distribute money based on anything other than objective need. But the push is there and perhaps some of these woke CEOs believe strongly that their beliefs will rule the day in the long term. After all, with several banks, the Federal (and some state Governments) pushing heavy into the ESG ratings, why would they not want to jump on the bandwagon (especially if they believe it themselves). After all bias confirmation is a strong emotional driver.

But here is the problem. ESG is all good and fine if it is your thing. But like it or not, it is not a popular concept with a majority of Americans. Most Americans buy a product based on quality and price. To the degree that the average American might decide on a product based on an advertisement campaign, the overwhelming evidence suggests that going woke is not a wise business decision. If you are a large brand like Nike and you have a history of Michael Jordan's to fall back on, you might still be successful "in spite" of going woke. But there are very few examples of companies improving their bottom line by moving towards ESG and overall wokeism. But if they are able to secure more investment money... well that has to be considered.

The financial world has been turned upside down over the past few years, with more and more politics coming into the play than ever before. Gone are the days when the idea of no politics and no religion was the tried and true manner to keep things civil and friendly. Now everyone wants to push their politics or even their religion down everyone else's throats. Even as it pertains to business. But unless you want to lop off half the country as potential customers, going political is never a good thing for a business. But it has become so common that only the most egregious of situations see any backlash.

I go back to one thing that many here in America seem to forget. That is that we currently live in a global economy and much of the developing world is looking to compete. Not just in business, but in jobs as well. Certain kinds of businesses need certain kinds of employees with certain skills. Have the right woke qualifications is not going to help you get a programming job if you do not understand code. You can jump up and down till you are blue in the face, and it wouldn't matter at the end of the day.

If US companies (and many US politicians) believe they can get around this for some reason, then those entire companies will soon be replaced by other companies who are making better products and services at better price. We (as Americans) have to understand that China, India, and other places in the world do not give a bigger rip about our ESG ratings, whether there are enough LGBTQ+ workers on staff, or any of that nonsense. They are simply going to run businesses the way the world has always run businesses and they will eventually crush the "woke companies" that they will be competing with.