Tuesday, February 18, 2020

Wall Street is Getting Infected by Wacko Environmental, Social, and Governance Demands

Sadly, Environmental, Social, and Governance (ESG) will play an important role on Wall Street in the near future. Top Wall Street law firms are taking notice.

A new memo, from the Wall Street powerhouse legal firm Wachtell, Lipton, Rosen & Katz that was provided to EPJ, reads in part:
Recent months have seen institutional investors and other stakeholders, notably BlackRock and State Street, stressing the importance of comparable and decision-useful ESG disclosures by their portfolio companies. Such calls follow in the wake of growing interest among investors and other stakeholders in understanding and assessing the performance of companies based on ESG metrics. While the exact system by which companies will report on ESG issues remains to be determined by the market, it is clear that beginning in 2020, and in the years to follow, companies will be disclosing significant amounts of quantifiable information on a basis that will permit comparisons within and across industries. This information will be used by companies, investors, asset managers and other stakeholders in making real-world business decisions, including decisions relating to M&A. 
This despite the fact that environmental concerns are simply a private property question that can be easily resolved by correct private property law (SEE: Economics and the Environment: A Reconciliation).

Social justice, relating to corporations or otherwise, is an empty concept.

The great Nobel prize winner F.A. Hayek  wrote in Law, Legislation and Liberty, Volume 2: The Mirage of Social Justice:
It is not only by encouraging malevolent and harmful prejudices that the cult of 'social justice' tends to destroy genuine moral feelings. It also comes, particularly in its more egalitarian forms, into constant conflict with some of the basic moral principles on which any community of free men must rest. This becomes evident when we reflect that the demand that we should equally esteem all our fellow men is irreconcilable with the fact that our whole moral code rests on the approval or disapproval of the conduct of others; and that's similarly the traditional postulate that each capable adult is primarily responsible for his own and his dependents' welfare, meaning that he must not through his own fault become a charge to his friends or fellows, is incompatible with the idea that 'society' or government owes each person an appropriate income.

This could very well mean that extremely profitable firms that ignore wacko ESG demands will be better off staying private.


(ht Felix Bronstein)

1 comment:

  1. It's not that much better in parts of the private-company world. Institutional investors are starting to require private-fund managers to demonstrate their ESG wokeness and policies.