HomeTop StoriesThe ESG movement is exposed as a dangerous scammer

The ESG movement is exposed as a dangerous scammer

Even now, 18 months after Moscow’s tanks crossed the Ukrainian border, the ESG mavens continue to search for their moral compass – Hollie Adams/Shutterstock

Hardly a day goes by without another sobering reminder of the brutality of Vladimir Putin’s illegal invasion of Ukraine.

On Saturday night, the Kremlin launched dozens of cruise missiles and Iranian Shahed drones in eastern Kharkiv province. Six people were killed and a blood transfusion center was destroyed. President Volodymyr Zelenskiy described the “guided aerial bomb” attack on the medical facility as a war crime. It was day 530 of the war.

Still, some good can come out of Russia’s war in Ukraine by taking a more critical look at the West’s decadent, complacent “ethical” investment movement.

Environmental, social and governance (ESG) investors have tied the knot over Russia, maintaining their support for companies that have not left the country while refusing to support defense firms that have armed Ukraine in its fight against Putin.

With fund managers falling down a rabbit hole because of Russia and NatWest in trouble because of the Nigel Farage affair, questions are legitimately raised about whether Britain’s financial institutions are completely in the grip of hypocritical benefactors.

The green finance craze is part of the same hollow crusade. Last weekend it emerged that Barclays used the ‘sustainable finance’ badge to provide large amounts to Shell. Laughably, the bank has classified a $10bn (£7.8bn) revolving credit facility it provided to Shell as “social and environmental finance”.

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Barclays counted its share of the loan against its goal of providing $150 billion in social and environmental financing, according to an analysis of the bank’s loan classification framework by this paper. It will do little to counter growing concerns among regulators and ministers about corporate ‘greenwashing’. Our energy needs need to be financed, but such mislabelling can only erode confidence in the financial system.

It’s time to ask ourselves if the ESG movement is just a scam, and a potentially dangerous one.

Even now, 18 months after Moscow’s tanks rolled over the Ukrainian border, and with an estimated 40,000 Ukrainian civilians and about 20,000 Ukrainian military dead, ESG experts continue to search for their moral compass.

When war broke out, it was widely accepted that the West had a duty to help defend a European neighbor against an unjust and unprovoked act of aggression by a more powerful and menacing neighbor.

European states and the US rushed to provide vital military aid. Berlin quickly sent 1,000 anti-tank grenade launchers and 500 Stinger missiles to Kiev, in a major reversal of a longstanding policy of refusing to export weapons to conflict zones.

Similarly, for the first time in its history, the European Union agreed to provide military aid to a country under attack. Russia’s actions prompted some hasty self-examination among Western leaders.

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The UK has provided almost £5bn in military aid in the form of 10,000 anti-tank missiles, 100,000 artillery rounds, over a hundred anti-aircraft guns and a squadron of Challenger 2 tanks, making it the second largest donor in the world behind the US.

Zelenskiy says Western defense systems have produced “significant results” on the battlefield, deflecting a “significant number” of Russian attacks in the past week alone.

It is a shame that the people of Ukraine cannot count on the same display of unity and support from the city. On the contrary, the self-proclaimed morality guardians of the ESG brigade continue to do their best to undermine the West’s efforts by effectively definancing the defense industry.

According to the government, two-thirds of institutional investors have withdrawn from companies involved in security and defense, or are considering doing so, on the basis of completely misguided and short-sighted “ethical” concerns.

Gun contractors are lumped in with tobacco, oil, alcohol, and other so-called “sin stocks” that are perceived as a threat to society. Yet Ukraine’s predicament has shown that the greatest threat to Western freedom is Putin himself, and without the West’s support for Kiev, Russia could have continued its imperial advance beyond Ukrainian territory, further into Europe.

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City Secretary Andrew Griffith and Defense Procurement Secretary James Cartlidge have gone a step further, warning perfectly reasonably that the UK’s long-term security is being jeopardized by the Square Mile’s growing distaste for defense supplies.

There is a certain squeamishness about nuclear technology, but without such a deterrent, the wider West would be more vulnerable to a Putin nuclear strike. Should city financiers also be reminded that without freedom they wouldn’t be free to support such causes in the first place?

In an effort to quell mounting criticism, the fund management industry has tried to downplay the role of ESG, pointing to persistently low valuations in the London stock market as a bigger factor in investors’ lack of appetite.

But as Griffith points out, the reasons may not matter all that much. “Whether intentional or the misguided application of ‘ESG’ policies… defunding defense is the opposite of social responsibility when peace and democracy are threatened,” he tweeted.

The city is in no position to be complacent when it comes to Russia anyway. For decades it was unconditional in welcoming Russian money, while British shareholders were delighted to see BP, Shell and Unilever forging close ties with the Kremlin. Even now, the moneymen of the West continue to support the same organizations despite their failure to leave Russia.

The entire ESG building is now facing a well-deserved reckoning.

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