S&P Global removed Environment, Social, and Governance (ESG) factors from its scoring of corporate debt as the financial industry has increasingly soured on the controversial investing scheme.
Since 2021, S&P Global, the debt rating industry, rated companies’ exposure to various ESG factors:
Payments company Visa, for example, had received a two for “E” and “S” and a three for “G”. FirstEnergy, an Ohio utility that has been charged with corruption, received a four score for “G”, S&P’s second-lowest grade. Late last week S&P reversed course, saying that only text, not numerical scores, would comprise analysis of a company’s ESG matters.
ESG has become the latest vector by which large financial institutions push companies to adopt leftist positions such as anti-climate change policies, policies advocating for racial justice, and diversity requirements that they would otherwise not adopt.
Breitbart News has cataloged just a few of the ways that BlackRock and other asset managers have pushed publicly listed companies to adopt these leftist positions.
Now, S&P Global will only judge companies’ commitment to ESG based on a text narrative, not score them on a number scale.
“We have determined that the dedicated analytical narrative paragraphs in our credit rating reports are most effective at providing detail and transparency on ESG credit factors material to our rating analysis,” S&P Global wrote.
The debt ratings company’s decision to shy away from ESG contrasts with Moody’s, which still scores companies based on ESG factors.
Republican state attorneys general, House Republicans, and conservative groups have increasingly scrutinized ESG.
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Tom Lyon, a professor at the University of Michigan’s business school, said ESG ratings are “not that reliable.”
Marcus Moore, a portfolio manager in San Francisco, California, said that ESG scores should not be the first thing investors consider.
Andy Brenner, head of international fixed income at Natalliance Securities, said, “[ESG] is very hard to measure. I think it’s a very overrated concept.”
David Larcker, a professor at Stanford’s business school, said that by removing ESG ratings, S&P Global might be saying that “the ratings really are not that useful. Or maybe they are responding to pressure from attorneys general and other people who are anti-ESG.”
Big investors who subscribe to Bloomberg’s terminal product said in a survey that ESG is an underperforming fad.
“ESG has morphed from risk management to political activism for the left,” one respondent said.
Another Bloomberg terminal client said, “Our job is to provide returns for investors, not change the world.”
Sean Moran is a policy reporter for Breitbart News. Follow him on Twitter @SeanMoran3.