Rating agencies should rate the financial risk of stuff (mostly bonds they should try and do it well given that whole mess they created in 08)
They should not be involved in politics. When a rating agency goes beyond number crunching and they start looking at other stuff they are already out of their role. When they start looking at the number of women on the board that is preposterous.
Same is true for Fitch, Moodys, Bloomberg etc.
Everybody wants to be a politician and a virtue signaler these days...too bad that in a country full of politicians and virtue signalers nobody does any actual work.
"Should we bail out the banks" was politics. BP has a massive oil spill, how much will they be fined, are they going to be fined more because they are a British and not American company? How much will fcrashes of Boeing Max cost Boeing? Imagine these crashing planes were from a Chinese company, what would the consequences for the company be ?
The big economic projections are inseperable from politics. Only a naive person will believe otherwise
Different ESG scores mean different things depending on what scoring you’re looking at. So, for example, an environmentally focused organization may rate a company high in ESG because they have low emissions and/or push for green legislation.
However, the more well known ESG scores that we see in the news are often from the financial press and are intended for investors, and often reflect the ESG risk exposure for the companies in question.
This tends to have the ironic effect of making environmentally friendly companies have low ESG scores, and less environmentally friendly companies high scores.
So, for example, Elon Musk complained about getting a low ESG risk score from S&P, but that made complete sense because Tesla was heavily exposed to governmental green policies. Remove CA’s CARB credits, or various green credits and tax benefits, etc and Tesla’s business would suffer.
Exxon, OTOH, was unlikely to see any such impact leading to a lower ESG risk score.
The key thing to understand is that there is no single ESG score. Every company creates different scores based on different factors and intended for different purposes, and their customers decide which ones are effective for their intended purposes and those scores tend to last and do well.
The political backlash against ESG scores is so misplaced.
It’s the equivalent of a personal wealth guru who believes that credit cards are not good for most poor people because they perpetuate their poverty deciding that therefore credit ratings for companies are bad, because both have something to do with the borrowing and lending of money.