Skip to main content

Social, not Rational.

ESG investing embodies a distinctive, socially-infused approach to investing, positioning itself firmly within the realm of politics while rejecting the traditional pursuit of maximum returns on capital. Sociables Express believes that ESG, with its sociopolitical foundation, has effectively ushered politics into the very heart of the investment landscape. This prompts a big question that the UK’s investment sector must confront: Should social factors determine numerical-based financial decision-making?

Traditionally, the most successful investors, traders and fund managers have adhered to rationality, eliminating emotional influences in their investment choices. These investors have, as a rule, omitted social factors from their approach when making sound investment decisions. However, ESG introduces a problem to this proven investment strategy.

The law of mathematics doesn’t care about feelings and social factors.

A Contradictory Risk

Within the world of both ESG and diversity, a contradiction emerges. Companies often present themselves as torchbearers of diversity, inclusivity, and environmental responsibility, all while harbouring significant flaws in their business practices. Is it tenable for a business to tout its moral compass while conducting operations in countries with questionable human rights records? This precarious balancing act attempts to straddle the line between two contrasting worlds, and it poses an escalating risk to both corporations and their top-tier executives.

Sociables Express strongly advises against jumping onto the ESG Branding bandwagon unless a company maintains an unblemished record. Smart traders, hedge funds, and shareholder activists are poised to seize the opportunity that arises from the chasm between the ESG illusion and stark reality.

Prominent figures, and even certain mainstream media outlets, have begun to openly question ESG, with some going so far as to label it a fraud and a scam.

“ESG investing is a complete fraud”

Chamath Palihapitiya

“ESG is a scam

Elon Musk

Over the past eight years, the Western world has witnessed a growing divide that has given birth to a new concept called “Woke.” ESG investing is gradually becoming intertwined with the notion of “woke,” posing a potential problem for many publicly listed companies. A company that regularly promotes itself as a staunch advocate of ESG and social consciousness risks being branded as “woke,” a label that carries its own set of challenges and controversies.

The examples of Target (NYSE: TGT), PayPal, Natwest Group, and several other companies thrust into the political arena serve as cautionary warnings.

(Reference: NY Times – Target Sales.)

Going Against the Grain

Sociables Express has dedicated the past few months to gathering feedback from UK retail investors regarding their sentiment on ESG. Our findings have illuminated a prevailing trend: the majority of retail investors do not prioritise ESG ratings as a primary decision for investment. In fact, many retail investors do not even bother to investigate a company’s ESG ratings. A minority may be dissuaded from investing in a company if they perceive it as “woke.”

In light of this feedback, we believe that companies should explore reallocating some of their financial resources, previously earmarked for ESG, towards a diverse range of alternative avenues. Rather than fixating on ESG, it is advantageous to shift the conversation toward a company’s product, growth prospects, progress, intrinsic value, vision, opportunities, and its impact on the UK economy. This not only mitigates politically-linked risks, it also offers value and distinctiveness.

Sociables Express firmly believes that the path to opportunity and distinctiveness lies in going against the grain. Consider Tesla, a company often perceived as synonymous with its unorthodox CEO, Elon Musk, who openly calls ESG a scam. Has this deterred investors from flocking to Tesla’s stock? The answer is a resounding NO.

Tesla stands as one of the world’s most traded stocks among retail investors and claims the title of the most traded global share on IG, one of the UK’s largest investment platforms.

(Reference: IG – Most Traded Stocks UK)

Tesla has, in the eyes of many on Wall Street, evolved into a phenomenon—a “cult stock.” We firmly believe that if given the chance, 99% of UK executives would eagerly run 5,000 miles to attain the status of a “cult stock” among retail investors. What company wouldn’t want thousands of retail investors flocking to their stock?

(Reference: WSJ – Tesla Stock)

To the company executives, investor relations experts, and portfolio managers among our readers, we beg you to pose a simple but profound question to others within our industry: Is ESG evolving into a political risk? The answer is Yes!

Leave a Reply