Categories: NewsOpinion

What ESG?

The world was made to believe that ESG investments would save the environment and bring a more just and equitable world

WHERE history is concerned, it can be said that the environmental, social and governance (ESG) investing principles became fashionable in mid-2010’s as the global market was awash with surplus money coming out from the US’ quantitative easing (QE) measures.

Financial failures resulted from the over-extended and over-creative profiteering US banks gave a perfect excuse for the Federal Reserve (Fed) to bail-out their cronies using (American) public money by introducing QE, first from November 2008 to March 2010, and the second from November 2010 to June 2011.

During these two periods, the Fed has purchased toxic banking assets totalling approximately US$2.15 trillion (RM11.62 trillion), consequently putting trillions of dollars into the hands of avaricious investment funds (also known as shadow banks) to turn their focus on global markets and opportunities.

When the United Nations (UN) General Assembly adopted the 17-points Sustainable Development Goals (SDGs) in 2015, these investment funds had a perfect template served on a silver platter. Here, it has a universal framework for investments with lofty, out-of-this-world ambitions to address poverty, inequality, climate change and environmental degradation.

Aligning these SDGs with ESG was easy.

These funds collaborated with UN to come out with a six-point Principles for Responsible Investment (PRI), incorporating ESG factors into investment decision-making and ownership practices.

With impossibly grandiose objectives, and no precedence or any form of benchmarking to refer to, it took a breeze for these funds, scheming with global consultancy firms, to dupe the world into thinking that their advocated ESG investments will save the environment and bring about a more just and equitable world.

They said that carbon capture technologies and electric vehicles (EVs) would avert global environmental disasters, conveniently leaving out key details of how carbon capture initiatives are merely a drop in the sea of global pollution. Or of how EV-making technologies are in fact wrecking a much-much worse havoc onto the atmosphere and environment.

In the meantime, these investment funds enriched themselves with ridiculous amount of wealth.

Last year, the biggest of them all, BlackRock Inc, boasted of managing assets (asset-under-management or AUM) worth more than US$9.42 trillion, making it effectively bigger than the individual annual economic output of almost all 189 economies in the world.

Only US (US$25 trillion) and China (US$17 trillion) have bigger annual GDP than BlackRock’s AUM.

While enriching themselves, BlackRock had actually never stop mocking the very standards that they used to justify their ESG investments. Its holdings in weapon manufacturers such as Lockheed Martin Corp, Northrop Grumman Corp, Boeing Co, General Dynamics Corp etc — the biggest betrayers of ESG essence of humanity and sustainable life — were maintained, if not increased.

These arm manufacturers were directly responsible in weaponising the US and its allies, notably the UK and Israel, who murdered and responsible for deaths of millions of people in the invaded nations of Afghanistan, Iraq and Palestine, as well as in most armed conflicts worldwide.

Energ y companies were derided for shambolic returns in improving carbon release to the atmosphere and yet, BlackRock continues to re-invest into oil and gas companies such as Occidental Petroleum Corp, greenwashing environmental damages with mediocre, unproven projects with fancy names.

And this mind-numbing hypocrisy, unfortunately, is becoming a global trend.

Even in Malaysia. Go check out the recent ESG research notes issued by one prominent investment bank on Main Market-listed Leong Hup International Bhd.

The poultry company, one of the biggest poultry producers in the region, scored very poorly on its ESG metrics, both quantitatively and qualitatively. In fact, if the passing rate is the universal 40%, Leong Hup International has failed miserably, scoring a meagre 18% as it violates almost every ESG metrics stated.

And yet, this prominent investment bank is continuing to recom mend to its customers to ‘Buy’ Leong Hup International shares. This was despite revelations that it has not developed any concise sustainability policy with traceable date or long-term commitment to track progress.

The notes had also disclosed that Leong Hup International does not has any ESG policy, neither an ESG committee nor long-term ESG targets to be fulfilled. “As per our ESG assessment, Leong Hup International lacks transparency in key ESG metrics and long-term emission targets.”

Not only that, it was acknowledged that it is one of five feed producers recently fined by the Malaysian Competition Commission (MyCC) under suspicions of manipulating feed prices, with RM157.5 million to be paid out of the cumulative RM415.5 million fine.

Leong Hup International is no stranger to run-ins with the law either. In 2018, Leong Hup International, along with 12 other fresh chicken suppliers, were fined SG$27 million (RM94.39 million) for anti-competitive practices by the Competition and Consumer Commission of Singapore. Nearly half of the cumulative fine, SG$11.4 million, was Leong Hup International’s portion.

The research notes admitted that as Leong Hup International seeks to challenge MyCC’s findings, it has not imputed the impact of the penalty into its recommendation.

Yet, it’s a ‘Buy’; as advised to its customers.

Now, if their customers could not see the mockery, or if the market authorities could not be bothered to find the ludicrousness of this advice, it could go down as a new low in the Malaysian stock exchange history.

  • Asuki Abas is the editor of The Malaysian Reserve.

  • This article first appeared in The Malaysian Reserve weekly print edition
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