The ESG Advocate 007 - ✨Now with 98% Disinformation!✨
It started with one or two anti-ESG videos amid a sea of good ESG webinars. However, over the past few weeks, the anti-ESG movement has adopted the word 'woke' and states are backing out of ESG investments. Social media has blown up with shouts of the 'ESG scam.' As a result, I now see more conservative anti-ESG videos with higher view counts than productive, quality ESG videos on Youtube.
Disinformation, the conflation of ESG and sustainability, and general confusion about ESG have spread like wildfire. But, unfortunately, it isn't only impacting ESG. Climate disinformation is rampant, even as the Earth's weather systems wreak havoc.
Let's get to it!
Disinformation and ESG
My productivity has dropped off a cliff because I'm distracted from figuring out what's real. Let's look at two interesting examples that emerged just this week:
First, Wikipedia had to block some users from editing its 'Recession' page. ICYMI, we're not currently in a recession from a technical standpoint, but some bad actors are trying to convince the world we are. As a result, Wikipedia took steps to address the issue.
Side note: Unemployment is a key recession indicator, but as of August 5th, the economy added 528k jobs, so...
Second, on the heels of 'monkeypox is an STI' comes new confusion that monkeypox is airborne. I'm assuming it isn't (the CDC and WHO are aligned). Meanwhile, the US leads the world in monkeypox infections, so it would probably be good to understand this better.
Side note: This is an "S" issue.
Both cases show how easy it is to manipulate information at scale to suit an agenda (although simply sowing chaos seems to be the goal in both cases). Disinformation isn't simply incorrect; there's a deception behind it. As a result, we are confronted daily with deciding the reality we're living in.
So, what does this have to do with ESG?
Well, a lot because with ESG reporting, information is communicated that is ripe to be misinterpreted or manipulated by a range of stakeholders.
In June, I sat in on the Sustainability Reporting on Digital Harm workshop hosted by the Center for Long-Term Cybersecurity (CLTC). One quote stands out from the session's report:
The stakes of these forms of reporting (ESG/Sustainability) are high: they affect the array of information that people use to make choices about how to interact with a business, whether as a customer, employee, investor, regulator, or concerned private citizen.
In other words, companies' data is critical to how stakeholders interact with companies. It is critical that data is correct and communicated appropriately. I often put it this way: 'Data is the proof of your story.' If we lack quality data, we can't be sure that a company's ESG story or a firm's ESG investment strategy is achieving the results we want.
Still, transparency only gets you so far. It's the outcome people want. Alison Taylor, Executive Director of Ethical Systems, wrote this on LinkedIn:
As with #ESG reporting, we remain in thrall to the idea that more and more “transparency” will magically solve all our problems, without considering the RECEIVER of information in any depth.
I've found that practitioners can identify greenwashing and data manipulation pretty readily, but other stakeholders might not be able to get past the marketing of a good sustainability tale to find the reality.
To complicate matters, ESG reporting lacks regulations and consistent reporting, and the communication around ESG investing is wildly confusing, with different interpretations abound based on the receiver (or stakeholder).
For example, in Focus, Focus, Focus, Shivaram Rajgopal argues that we should focus on 'what the company cares about' instead of sustainability metrics. If your goal is a sustainability outcome, then that is correct. If your goal is to understand how the company manages its risks, then you need material ESG information.
Side note: I disagree with Rajgopal's opinion that CxOs aren't dealing with 10 or more material issues across their business at any time.
These are some reasons we're getting barraged with articles like ESG Investing Isn't Designed to Save the Planet. I largely agreed with the article, but it has a few similar refrains that muddy the evidence and point out the uncertainties:
It Doesn't Deliver Meaningful E or S Impact -> I disagree with this because I find passionate people with funding and executive support to make a difference every day. These issues are challenging and take time to develop like any business project. People like to say Elon Musk started the EV revolution, so surely it isn't a leap to think ESG has influenced sustainability and DEI initiatives at companies.
It has Yet to Prove that it Delivers Better Returns -> This is a never-ending argument, but I keep coming back to risk. ESG is about managing risk, and if you aren't paying attention to it, eventually, sacrificing a focus on those issues will build up and manifest in some business cost (see One Vision podcast below).
It Perpetuates the Fantasy of Market Based Voluntary Action -> The article points to an example where Coke (in 2015) overstepped its water outcome based on where it had set the sustainability boundary. In my tweet thread above, I call out that Coke has addressed this in more recent sustainability reports, correctly recognizing the issue.
Now, these points are certainly worth debating, as are the other points in the article, but this is the big problem:
It Confuses Investors (substitute 'Stakeholders' or 'Receivers' here)
ESG investors will not have access to comparable, accurate measures, making it nearly impossible to attribute results or make impact claims.
The uncertainty around the data and its interpretations towards a nebulous outcome is the window through which disinformation creeps in. Granted, it's also the mechanism by which greenwashing is called out and addressed. In other words, discourse is useful, but the issues outlined in this article (and many others) quickly become anti-ESG talking points.
As it turns out, anti-ESG pundits have a head start and don't need help.
The legacy of climate disinformation
The sad truth is that decades of climate disinformation built the foundation being used to bring ESG down.
By simply muddying the evidence and pointing out the uncertainty around climate science (sound familiar?), fossil fuel companies were able to plant the seeds of doubt in people's minds to push their agenda.
“The tragedy of this is that all over social media, you can see tens of millions of Americans who think scientists are lying, even about things that have been proven for decades,” said Naomi Oreskes, a historian of science at Harvard University who has written about the history of climate change disinformation. “They’ve been persuaded by decades of disinformation. The denial is really, really deep.”
If you need a specific example, check out how Matrix, a political consulting firm, helped fight off political opponents who favored renewable energy.
Efforts like these have left a generational-length legacy of doubt in the minds of millions. The way ESG and sustainability get conflated by companies and investors makes this a short jump to sow ESG doubt.
The ridiculously undeniable unprecedented weather worldwide might be the turning point to dispel these long-standing myths.
For example, this week saw three 1-in-1,000 rain events in the US, not including this bizarre flooding scene in California near the devastating McKinney fire.
Seeing isn't always believing, however. The connection between climate change and extreme weather isn't being made consistently everywhere.
This week, I came across an article called Why has it been so hot in Tampa?, which just begged to be checked out. The article mentions a real phenomenon, urban heat islands, as one reason. There is no mention of climate change as another reason.
Yet, this read from the Tampa Bay Times calls out climate change and seasonal weather patterns as the key culprit. There is no mention of urban heat islands.
Even with extreme weather smacking us in the face, we can't agree on a single story.
Heroes emerge on several fronts
Even with all of the anti-ESG disinformation and disagreements, there are pockets of hope. Journalists, politicians, academia, legal movements, and practitioners are stepping up to help clear the air of disinformation.
Let's start with climate disinformation. This week, Merlyn Thomas took to BBC News after trolls beat down meteorologists on social media. The dispute was largely centered around the link between climate change and the UK's record-setting heatwave. Notice that she calls people out to get in touch when they see climate disinformation. 👏
Side note: One of the points of contention in the UK was the heat wave from 1976 against the current one. If you need a chart to showcase the difference, be prepared to be depressed (posted originally here).
Regarding disinformation from the backlash around ESG investing, we've seen at least Florida, West Virginia, and Texas retreat away from ESG funds. On the other side, Maine has legislated divestment from fossil fuels in its pension system. This isn't quite ESG but is aligned with sustainability goals.
Suddenly, a new voice emerged this week: New York City comptroller Brad Lander.👏
In an interview in the Responsible Investor, he said that anti-ESG voices are louder and potentially swaying the big investment firms from their public ESG commitments. He will ask questions about whether or not to pull back from those investment firms, expressing surprise at how quickly the anti-ESG movement is gaining ground.
Another voice brought some clarity to the anti-ESG backlash this week. Robert Eccles published a thoughtful piece called Some Reflections On An RSC Memo, ExxonMobil, And Tesla. He nails the three things that anti-ESG pundits get wrong:
It isn't only about the environment
Materiality, materiality, materiality
"ESG is about a company’s operations and activities. Impact is about the positive and negative externalities of a company’s products and services."
I believe it's on that third point that the most confusion exists. When you combine that with this earlier quote in the article, you can see why some investment firms might want to keep the confusion in place.
Most retail investors believe investing is a way to make positive change in the world.
This brings us to greenwashing, which is its own kind of disinformation. We're seeing more activity around the markets attempting to address greenwashing. Australia's Financial Services Council is warning fund managers about how they market sustainability funds. This was the premise behind the SFDR regulation in the EU and appears to be behind the SEC's latest draft proposal. Accurate labeling and disclosure of financial products is critical to ensure investors drive toward the outcomes they want.
There also have been a couple of interesting litigations emerging. The latest action is against Washington Gas, where plaintiffs assert that natural gas marketing is overshadowing the harm that methane can cause.
This attention to greenwashing could get investment firms and companies to recognize that people are paying attention, but it can also be a double edge sword if companies don't want to share progress because they don't feel they've gone far enough and might get called out. Brian O'Kelly, CEO of Scope 3, noted that we might need a new term "Greenworking" for companies to express that they are making positive progress. I agree because stakeholders don't understand how complex this transition is.
Lastly, if you're looking for some inspiration, don't miss One Vision's interview with Nima Farshchi, Director of the Center for Social Value Creation at the University of Maryland. I need to credit him with my earlier insight above:
🗝️Sacrificing ESG integration accumulates into business risk over time!
Based on this interview, Theodora Lau made a plea that we should just slow down. In a world of never-ending economic growth and failing fast, we should refocus our efforts on the ESG and sustainability challenges we face before the world forces us to slow down. Unfortunately, none of this debate or disinformation will matter if that happens.
Tweet of the Week
This TOTW was sent to me by Barb MacLean. One of the ways to fight disinformation is to get involved by pivoting into an ESG or sustainability career.
While Erika Reinhardt lays out great advice below for sustainability and software engineering, she has a very useful insight in this thread.
Try to explore where you applying your skillset will make the biggest difference
As a Liberal Arts graduate working in technology, ESG, and sustainability, I'm a HUGE fan of that!
