Corporate ESG Scores - What it is and Why It Could Be Dangerous

Corporations are becoming acutely aware of their ESG (Environmental, Social and Governance) scores and are adjusting strategy because of it. But some critics believe it is entangled in politics. Here's what you need to know.

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Worldwide: Corporations, both big and small, have been becoming more and more acutely aware of their ESG ratings and have been modifying their strategy to rank higher among their competitors. The logic behind ranking high on this scale is that the better a corporation performs along the ESG continuum, the more favorable it appears to investors who are a critical part of the financial landscape of the corporation.

On the surface, it appears reasonable for a business to want to perform better for the sake of financial prosperity. But critics of the ESG rating system believe it inadvertently (and possibly overtly) encourages corporations to lean towards political agendas - particularly woke ideology.

ESG stands for Environmental, Societal, and Governance. It's the term used to represent how well an organization aligns with current environmental and social issues and how they manage and sustain it. For example, if a corporation uses more energy efficient resources compared to a similar corporation, it would rank better in the ESG score. This can also be applied to social issues such as those affecting the LGBTQ community.

However, there is growing concern that ESG scores are connected to political agendas and how an organization's decisions could impact society.


Adam Curry

One of the influential people who criticize the ESG system is Adam Curry. Curry is an announcer, entrepreneur and media personality who's been on a variety of television shows. He made an appearance on the Joe Rogan podcast and voiced his opinion of the ESG system and its impact on corporations.

In the recent Rogan interview, Curry said, "You have to move this [ESG score] along continuously. It's very simple to see why doing a woke ad as Nike or as any other company [is preferred], Pride month is easy... throw up some flags, show the right people... trans, whatever, and you get a high ESG score. But this control mechanism is being used by all corporations worldwide, and I don't even think it's stoppable."

Curry continued, "It kind of started with DEI (Diversity, Equity and Inclusion), that has now moved over to SAS-B [Board of Standards and Statistics for Corporations], and they have this formula for how you measure this ESG score and if they're really investable. Nike has a 75% score, Tesla, which you would think is really good, has a 38 because it's 'not woke enough' or Elon 'says the wrong things'. So it's harder for an institution to invest in Tesla because of their low ESG score."


Mark T. Uyeda

Another high-profile individual who has recently voiced concerns of the ESG system is Mark T. Uyeda, the U.S. Securities Exchange Commissioner. Uyeda has similar concerns and shared his opinions in a speech made to the SEC.

"Because ESG ratings may be divorced from matters of financial materiality, they can reflect a particular political or social agenda. The result - and perhaps the point - is that companies will be forced to further the agenda of the ESG rating firm in order to obtain capital," Uyeda said.

The potential issues ESG represents are tied to what 'hot topics' are in mainstream media - which often sway political candidates' opinions.

It is also a fundamental reason why we have created the Align Us App. Our app gives users an additional resource to find out more about businesses and organizations. Just as ESG scores rate organizations, we rate organizations based on a "woke meter" so you can make comfortable decisions for you and your family.


-Align Us App

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