Milton Friedman was right
I've come to a long way to agree with the "Jedi of valuations" on this: "My views on ESG are not a secret. I believe that ESG is, at its core, a feel-good scam that is enriching consultants, measurement services and fund managers, while doing close to nothing for the businesses and investors it claims to help, and even less for society." - Aswath Damodaran, ESG's Russia Test: Trial by Fire or Crash and Burn?
Why? It sounds lovely. "Do well by doing good". Compete, but do your bit for the environment, social issues and governance. The trouble is in evolutionary psychology.
We can't deny what Richard Dawkins calls the "selfish gene". We are built such that our genes want to pass themselves on. We are motivated according to our genetic code. Attempting to change that merely distorts the system. In business, it opens us up to destruction of value and, worse, exploitation.
Nobody ever walks into a meeting with the driving goal to do the best for the overall ESG of all parties. If you do that, you're going to get beaten up. Consistently. You're the bum in the room. Why? Because you can bet your bottom dollar - which you'll lose - that other people in the room are really looking out for number one.
My best explanation is here. In this piece, I use the lens of ubuntu. Another splendid notion. And one that will ruin you if you were to really apply it. (I don’t believe anyone does.)
The best proxy for our chief motivator is status. Ponder everything you do. How much of it is to boost or justify your status in the tribe? Embarrassingly, it's just about everything. [See Will Storr on this.]
"It is the ape and the tiger in us, granted. But like the man in jail, it is in us, isn’t it? We can’t get away from it." - Jack London. Competing within the law gets to the best solutions. Not utopian ones. Not even excellent ones for everyone. But the least bad, certainly. Work for your shareholders. Not some vague notion of stakeholders. That's what I do.
Try this piece out of Harvard for another interesting take. Their pithy assertion, “In short, is ESG really good? The answer is no.”