SEC Commissioner Hester Peirce lambasted ESG ratings, raters, and activists of all types (shareholders and non-shareholders alike) in her remarks last week before the American Enterprise Institute - analogizing the trend toward branding companies as "good" or "bad" based on the often amorphous, subjective, and morality-based ESG standards to the shunning and shaming so memorably played out in Nathaniel Hawthorne's well-known classic, The Scarlet Letter.
Here is an excerpt from her read-worthy remarks:
We are seeing a similar scarlet letter phenomenon in today’s modern, but no less flawed world. In these remarks, I will focus specifically on the way in which corporations are being assessed according to Environmental, Social, and Governance (ESG) factors. Here too we see labeling based on incomplete information, public shaming, and shunning wrapped in moral rhetoric preached with cold-hearted, self-righteous oblivion to the consequences, which ultimately fall on real people. In our purportedly enlightened era, we pin scarlet letters on allegedly offending corporations without bothering much about facts and circumstances and seemingly without caring about the unwarranted harm such labeling can engender. After all, naming and shaming corporate villains is fun, trendy, and profitable.
See also Bloomberg' s "Firms’ ESG Ratings Are Like ‘Scarlet Letters,’ SEC Official Says," and ESG ratings and other information & resources on our Sustainability page. This post first appeared in the weekly Society Alert!