‘Why ESG Is the Devil’: How ‘Inclusive’ Companies Crush ESG Ratings

‘Why ESG Is the Devil’: How ‘Inclusive’ Companies Crush ESG Ratings
Cigarette packs on a shelf in a store in Los Angeles, Calif., on April 28, 2022. (Mario Tama/Getty Images)
Naveen Athrappully

Propagating skewed criteria, environmental, social, and governance (ESG) standards end up promoting companies with “inclusive” values and a progressive agenda rather than actual environmental or positive social impact.

Recently S&P Global gave Tesla an ESG score of 37, with the electric vehicle manufacturer garnering 60 points on the “environmental” front, 34 for “governance and economic,” and 20 “social” score. In contrast, cigarette companies like Philip Morris International Inc., Altria Group, and Imperial Brands had higher ESG scores. “Why ESG is the devil,” Musk said while responding to a June 13 tweet by journalist Aaron Sibarium explaining how ESG ratings discriminate between companies.

“From S&P Global to the London Stock Exchange, tobacco companies are crushing Tesla in the ESG ratings. How could cigarettes, which kill over 8 million a year, be deemed a more ethical investment than electric cars? One answer: Tobacco’s gone woke,” Sibarium, a reporter at The Washington Free Beacon, stated in a tweet on June 13.

S&P Global has given Philip Morris International Inc., which makes the popular Marlboro brand of cigarettes, an ESG score of 84, with the brand scoring 85 points in the “social” aspect and 83 points in the “governance and economic” category.

Cigarette manufacturer Altria Group has an ESG score of 42, edging out Tesla in both “social” and “governance and economic” scores. Imperial Brands received an ESG score of 42 as well, beating Tesla.

ESG standards judge brands on how they deal with issues like diversity, adherence to transgenderism, and devotion to climate change hysteria rather than focusing on shareholder interest or company profits.

S&P Global is one of several ESG ratings providers, which include MSCI, Sustainalytics, Moody’s, and Fitch among the biggest names. According to S&P Global, it collects data from over 13,000 companies with 99 percent global market capitalization.

Scoring ESG Points

Unlike Tesla, cigarette brands have openly pushed “progressive” causes like diversity and inclusion that tends to get them more ESG points. For instance, Altria’s website clearly states: “Our Corporate Governance Guidelines require that women and people of color be included in any search for potential new directors.”

Back in June 2020, Altria announced $5 million to “address systemic racism faced by black Americans and advance social and economic equity.”

In February 2021, the company announced that it had received a score of 100 on the Human Rights Campaign Foundation’s 2021 Corporate Equality Index, the nation’s foremost benchmarking survey and report measuring corporate policies and practices related to LGBT workplace equality.

The company also filed an amicus brief against Idaho’s law to ban transgenders from participating in female sports.

A 2022 report (pdf) from Philip Morris International made it clear that the company followed a policy of discriminatory hiring and promotion practices under the guise of “advancing gender equality.”

“Our ambition is to maintain a gender balanced representation in management positions. To do so, we aim to maintain a minimum of 40 percent women in managerial roles globally.”

In its 2022 ESG Review (pdf), Imperial Brands stated that they “promote diversity within the business through awareness campaigns, career talks, unconscious bias training, and diversity celebrations. We have provided bespoke e-learning courses in 11 languages to help our people leaders understand the issues of unconscious bias and microaggressions.”
Tesla largely avoids focusing on diversity appeasement. In June last year, the company laid off the president of its LGBT community as well as a lead who was involved in diversity and inclusivity initiatives at the firm.

A Polluting Industry

The three cigarette companies—Philip Morris, Altria, and Imperial Brands—were given good scores by S&P Global in the “environmental” category. While Philip Morris got 87 points and comfortably bested Tesla’s 60, Altria and Imperial Brands both came close, with 51 points each.

The scores were given despite the fact that the cigarette industry is known to be highly polluting.

In May 2022, the World Health Organization (WHO) raised “alarm” over the environmental impact of the tobacco industry.

Every year, the sector results in the loss of over 8 million human lives, 600 million trees, 22 billion tons of water, 84 million tons of CO2, and 20,000 hectares of land, the organization said in a May 31 post last year.

“Tobacco products are the most littered item on the planet, containing over 7,000 toxic chemicals, which leech into our environment when discarded. Roughly 4.5 trillion cigarette filters pollute our oceans, rivers, city sidewalks, parks, soil, and beaches every year,” said Dr Ruediger Krech, director of health promotion at WHO.

Popular commentators criticized S&P Global’s ESG valuation standards online. “So, cigarettes do more good for the climate than a Tesla? The hypocrisy of ESG scores. Tesla got just a 37 out of 100, while Philip Morris got an 84. Who’s supposed to believe this nonsense?” author Patrick Bet-David stated in a tweet on June 15.

The truth remains that electric vehicles do not perform well when taking into account real-world environmental factors. However, based on the scoring methodology, Tesla would garner better ESG rates if the company complied with progressive ideologies.

ESG standards are mainly adopted by companies to appease large investors like BlackRock that use these metrics to evaluate whether to invest or not.

The criteria mechanism has been facing heat lately with major retail brands like Bud Light and Target losing significant market share and capitalizations following marketing practices that have irked their core customer base.

These brands followed ESG guidelines to promote values which did not resonate with a large portion of their clients.

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