November 26, 2022

ANALYSIS: TRUE. Jeffrey Carter: ESG Investing is a Fraud.

My last blog was about webs and how fraudsters and government use them. They wind up trapping themselves. In the case of government, they can keep the web going even though nothing works because they can issue debt.

In private industry, the fraud breaks down. See FTX.

I remember being in an MBA class at Chicago Booth talking about Enron. One student said, “They sure made a lot of money”. The professor said, “But they went to jail.” The student said, “But they made money.” The professor forcefully said, “They went to jail.”

Or, if you are Jon Corzine you managed to stay out of prison. Others weren’t so lucky.

Sometimes, the government will change policy to enable fraudsters. Democratic Congressman Barnie Frank rewriting loan policy for homes allowed the whole house of cards to be built that tanked housing values and the economy in 2008. It also caused the government to go deeper into debt and changed banking regulations so that they were more slanted against smaller individuals and a positive for big corporates. Changing the definition of the word vaccine has enabled the fraudsters to distribute a Covid vaccine that doesn’t actually work. But they made millions so what?

Wake me up when the elite credentialed suits go to jail.

Let me put it in plain English. ESG investing is a fraud. It doesn’t take into account regular financial metrics. Paraphrasing hedge fund manager and PhD economist Cliff Asness; he put it gently in his paper on ESG when he said, “investors will accept less return in return for doing good.”

Like most lefty scams, it’s about avoiding accountability when you fail to produce promised results. Profits are measurable. “Doing good” is not. Thus the latter is a preferable metric for people in charge of institutions.

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