06 Jun The Ones Who Walk Away from ESG
The following commentary/analysis is one I wrote in my capacity as a senior fellow at “the nation’s oldest consumer protection agency,” Consumers Research, where, among other things, I compile a weekly letter for public pension-fund managers. I am sharing it here today because I thought it might be useful to some of you.
Longtime readers will recognize that I have used the following analogy before, starting seven years ago with an essay for late, great Culture of Life Foundation on the cruel and inhumane treatment of Charlie Gard. It remains relevant in any circumstance in which the weak and the powerless are willingly and knowingly sacrificed to achieve the political ends of the ruling class.
On ESG as Utilitarianism
In 1973, the science-fiction legend Ursula K. LeGuin published one of her most enduring and most haunting short stories, “The Ones Who Walk Away from Omelas.” In it, she describes the city of Omelas, a utopia filled with laughter, music, love, and above all, happiness. Everyone in Omelas is joyous. They are content, absolutely, completely, and undeniably fulfilled. Well, almost everyone….
LeGuin describes a setting far away from the joy and happiness of the rest of the city, far away from the light, the happiness, and the love:
In a basement under one of the beautiful public buildings of Omelas, or perhaps in the cellar of one of its spacious private homes, there is a room. It has one locked door, and no window. A little light seeps in dustily between cracks in the boards, secondhand from a cobwebbed window somewhere across the cellar. In one corner of the little room a couple of mops, with stiff, clotted, foul-smelling heads, stand near a rusty bucket. The floor is dirt, a little damp to the touch, as cellar dirt usually is.
In this room lives a child. “It looks about six, but actually is nearly ten. It is feeble-minded. Perhaps it was born defective, or perhaps it has become imbecile through fear, malnutrition, and neglect.” The child lives in squalor, scared to death, nearly starving, and with no human contact or support. LeGuin writes, “The terms are strict and absolute; there may not even be a kind word spoken to the child.”
Why is the child there?
They all know it is there, all the people of Omelas. Some of them have come to see it, others are content merely to know it is there. They all know that it has to be there. Some of them understand why, and some do not, but they all understand that their happiness, the beauty of their city, the tenderness of their friendships, the health of their children, the wisdom of their scholars, the skill of their makers, even the abundance of their harvest and the kindly weathers of their skies, depend wholly on this child’s abominable misery . . .
There is nothing they can do. If the child were brought up into the sunlight out of that vile place, if it were cleaned and fed and comforted, that would be a good thing, indeed; but if it were done, in that day and hour all the prosperity and beauty and delight of Omelas would wither and be destroyed. Those are the terms.
The story of Omelas and its suffering child is, of course, LeGuin’s critique of consequentialist ethics or, more specifically, the morality of utilitarianism, the brainchild of the Scottish Enlightenment philosopher Jeremy Bentham. Bentham argued that “rights” are mere human constructs, the creation of governments, certainly not endowed by our creator, and designed to favor one group over another. “For every right which the law confers on one party,” Bentham wrote, “whether that party be an individual, a subordinate class of individuals, or the public, it thereby imposes on some other party a duty or obligation.” Bentham saw the very idea of “natural rights” or “natural law” as “perversions of language.”
The measure of an act’s righteousness in a consequentialist sense is its outcome. Consequentialist/utilitarian morality is not measured by an action’s consistency with natural law or with the command of a higher authority; it is not assessed by an action’s adherence to an eternal truth, a responsibility, or a duty; it is, rather, measured by its effect on society as a whole, by the “greatest happiness principle.” Acts that produce greater happiness and greater pleasure and decrease aggregate suffering are moral, while those that do the opposite are immoral.
ESG is utilitarianism applied to public policy through the mechanism of finance.
Politicians – like all rational actors – are benefit-maximizers, which is to say that will do only those things that enhance their popularity and thus enable their ongoing “public service.” This is a large part of the reason democratic political systems have so readily embraced overweening and heavy-handed administrative states. It is far less damaging to one’s personal reputation (and electoral prospects) if the hard work of implementing policies and, thereby, deciding winners and losers is done by someone else, someone from whom politicians can reasonably distance themselves.
Nevertheless, in functional democratic political systems, administrators are limited in the scope of their abilities by law, putting the execution of some policies beyond even their abilities. They could and would – in many cases, happily – implement unpopular policies, if their theoretical political masters had the resolve to enable them to do so. But they don’t.
Additionally, in functional democratic political systems, both politicians and administrators are limited by the rights of the people, which the courts jealously protect.
What all of this means, then, is that in rights-based societies in which the people are sovereign, utilitarianism is largely a non-starter. No one with political power is willing or able to enact policies that are, by their very nature, designed to “hurt” people, even if those people are few and powerless. In theory, the “greatest happiness principle,” sounds as if it would be readily embraced by democratic majorities, but in practice, it is nearly always rejected.
That’s where ESG comes in.
The reason ESG exists in the first place is that conventional political and administrative models failed to achieve policy goals deemed essential by various political, social, and economic elites. Traditional, voluntary Socially Responsible Investing was transformed into the involuntary system of ESG-based engagement and coercion specifically because politicians lack the will and administrators lack the ability to do the things required to advance unpopular and harsh, but purportedly necessary public policies.
The most obvious illustration of ESG’s utilitarian underpinnings is found in its predisposition toward the achievement of “sustainability” through the electrification of everything. As is well known by now, electrification requires the use of batteries, and batteries, require the harvesting of rare minerals, namely cobalt. Cobalt mining, in turn, is a brutal business carried out in harsh conditions by truly evil people:
Child and forced labor taint the supply chain of cobalt, a mineral that is a critical component in the lithium-ion batteries and other products important for modern technologies, including electric vehicles. Fully four-fifths of the world’s cobalt is buried under the ground in the Democratic Republic of the Congo (“DRC”) and the mining and refining of the mineral is dominated by Chinese companies. 80% of the DRC’s cobalt output is owned by Chinese companies, refined in China, and then sold to battery makers around the world.
Mining of cobalt is linked to grave human rights abuses, including the exposure of miners to unsafe worksites and reliance on child and forced Congolese labor, as well as environmental degradation. The U.S. Department of Labor estimates that at least 25,000 children are working in cobalt mines in the DRC.
These child slaves are, quite literally, the real-world parallels to LeGuin’s slave-child of Omelas. The conditions under which they labor are not much different from hers, and nor, for that matter are the rest of their lives.
Unfortunately, this is hardly the only manifestation of utilitarian “morality” in the ESG approach to policy. A recently published paper by researchers at Columbia University, Columbia Law School, and Tel Aviv University demonstrates that “if ESG-driven climate stewardship achieves the scale necessary to have a real impact on global warming, it will hurt the poor and exacerbate inequality.” While ESG promises a pain-free solution to climate change for the political class and its allies in finance and business, in truth, it delivers pain and suffering for those who lack political power and political recourse. Like all climate policies, ESG is “nearly always regressive, with the costs of such policies impacting those with the least, the most.”
To be clear, the authors of this study are neither climate skeptics nor fossil-fuel advocates. Their proposed solution is one that most closely resembles the proposals made by Tariq Fancy, the former head of sustainable investments for BlackRock, that is, for finance and business professionals to get out of the public policy realm and for government officials to make the tough decisions they have thus far avoided. Their research indicates specifically that only a rights-based governmental approach to policy can be even remotely fair and equitable, while private-sector-directed ESG serves only pitiless utilitarian ends.
In conclusion, ESG is simply incompatible with virtue or deontology-based ethics. In theory, it is a clever means by which to circumvent the problematic subtleties of self-governance. In practice, however, it becomes clear that those subtleties exist for a reason and that circumventing them serves cruel and human-rights-denying utilitarian ends.
Walk away.
