ESG (Environment, Social, Governance) is a scoring system some folks have come up with to score which stocks you can “ethically” invest in vs those you shouldn’t. The problem I have is that it seems like a bunch of woo.

The idea is that companies shouldn’t just try to make the most money, they should also protect the environment, advance social justice, and govern themselves responsibly. Yet I’m reminded again of how FTX (you know, the folks who stole investor’s money) got really high scores on ESG despite being a complete criminal enterprise. Other dicey factors seem totally ignored in ESG rankings as well, TotalEnergies SE ($TTE) is a French company directly funding the Russian Genocide of Ukrainians by continuing to ship LNG out of Russia and yet it’s considered a “leader” in the Social category. An otherwise identical company like Exxon-Mobile ($XOM) is considered just “average” in the Social category despite no longer operating in Russia since the war began, so it seems like a little genocide between friends doesn’t affect TotalEnergies’ ESG scores all that much. One wonders just what does affect ESG in that case.

This may seem unfair, after all TotalEnergies is just trying to make money, right? And their LNG is in heavy demand by customers, right? Yet that is exactly what ESG scores are supposed to act against, the tyranny of capitalism to externalize all costs onto the rest of society. Tesla for instance is merely a 9/10 in the Environmental category because despite moving the largest number of cars in history off of fossil fuels, their cars use lithium and the mining of lithium hurts the environment. This is a cost that Tesla externalizes to the rest of us, yet it’s a necessary cost to run their business so they get an ESG ding. But it seems ESG scores are applied randomly and say more about the scorer’s personal biases than anything to do with the companies themselves.

So here’s my advice: forget ESG entirely. If you want to invest ethically, then look at the companies you’re investing in and weigh the costs and benefits yourself. Does Apple adding new privacy features make up for the horrific conditions at the Foxxcon factories? Then go ahead and invest. But that’s a very personal ethics question that no one else can answer for you. If you instead export that question to some ESG-ified ETF, then you’re just letting someone else’s biases run your investment account. And those people might not know the first damn thing about Environmentalism, Social Justice, or Corporate Governance.