Thread by @ESpacewalk

MSCI, the largest ESG rating company, doesn’t even try to measure the impact of a corporation on the world. It’s all about whether the world might mess with the bottom line. via @CamSimpsonNews @AkshatRathi

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@CamSimpsonNews @AkshatRathi "No single company is more critical to Wall Street’s new profit engine than MSCI, which dominates a foundational yet unregulated piece of the business: producing ratings on corporate “environmental, social, and governance” practices.

@CamSimpsonNews @AkshatRathi BlackRock and other investment salesmen use these ESG ratings, as they’re called, to justify a “sustainable” label on stock and bond funds. For a significant number of investors, it’s a powerful attraction.

@CamSimpsonNews @AkshatRathi Yet there’s virtually no connection between MSCI’s “better world” marketing and its methodology. That’s because the ratings don’t measure a company’s impact on the Earth and society.

@CamSimpsonNews @AkshatRathi In fact, they gauge the opposite: the potential impact of the world on the company and its shareholders. MSCI doesn’t dispute this characterization. It defends its methodology as the most financially relevant for the companies it rates.

@CamSimpsonNews @AkshatRathi This critical feature of the ESG system, which flips the very notion of sustainable investing on its head for many investors, can be seen repeatedly in thousands of pages of MSCI’s rating reports.

@CamSimpsonNews @AkshatRathi Bloomberg Businessweek analyzed every ESG rating upgrade that MSCI awarded to companies in the S&P 500 from January 2020 through June of this year, as a record amount of cash flowed into ESG funds. In all, the review included 155 S&P 500 companies and their upgrades.

@CamSimpsonNews @AkshatRathi The most striking feature of the system is how rarely a company’s record on climate change seems to get in the way of its climb up the ESG ladder—or even to factor at all.

@CamSimpsonNews @AkshatRathi McDonald’s Corp., one of the world’s largest beef purchasers, generated more greenhouse gas emissions in 2019 than Portugal or Hungary, because of the company’s supply chain. McDonald’s produced 54 million tons of emissions that year, an increase of about 7% in four years.

@CamSimpsonNews @AkshatRathi Yet on April 23, MSCI gave McDonald’s a ratings upgrade, citing the company’s environmental practices. MSCI did this after dropping carbon emissions from any consideration in the calculation of McDonald’s rating. Why?

@CamSimpsonNews @AkshatRathi Because MSCI determined that climate change neither poses a risk nor offers “opportunities” to the company’s bottom line...

@CamSimpsonNews @AkshatRathi Not everyone on Wall Street is comfortable with the profits being made by giving investors the impression that they’re contributing to the fight against climate change.

@CamSimpsonNews @AkshatRathi Tariq Fancy, BlackRock’s former chief investment officer for sustainable investing, initiated a one-man campaign this year against “green” financial products. “In essence, Wall Street is greenwashing the economic system and, in the process, creating a deadly distraction.

@CamSimpsonNews @AkshatRathi I should know; I was at the heart of it,” he declared in an essay for USA Today. Fancy and others say the emphasis on ESG has delayed and displaced urgent action needed to tackle the climate crisis and other issues, including the widening chasm between the rich and poor...

@CamSimpsonNews @AkshatRathi Fernandez has said he views ESG investing as a tool for preempting change as much as one for bringing it about.

@CamSimpsonNews @AkshatRathi When he was on a marketing blitz last year to promote what he called the urgent need for the world to more fully adopt ESG investing, Fernandez got on CNBC’s Squawk on the Street, a kind of investment sports show for who’s up and who’s down on Wall Street.

@CamSimpsonNews @AkshatRathi “By the way,” he told the hosts, “we’re doing this to protect capitalism. Otherwise, government intervention is going to come, socialist ideas are going to come.”

@CamSimpsonNews @AkshatRathi He went further in his interview at COP26, an interview MSCI solicited as it promoted ESG and a new climate-related data product.

@CamSimpsonNews @AkshatRathi “It is 100% a defense of the free-enterprise, capitalistic system and has nothing to do with, you know, socialism or zealousness or any of that,” he said."