Time to break up the ESG gang, for the good of investors

By Trey Thoelcke Updated Mar 2, 10:17AM EST · Published Mar 2, 4:15AM EST

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Time to break up the ESG gang, for the good of investors — © Scacciamosche / E+ via Getty Images

(Mark Hulbert, an author and longtime investment columnist, is the founder of the Hulbert Financial Digest; his Hulbert Ratings audits investment newsletter returns.)

CHAPEL HILL, N.C. (Callaway Climate Insights) — It’s time for the E to go its own way, apart from S and G.

That’s not because the Social and Governance criteria that make up ESG ratings aren’t important. But they focus on distinctly different virtues than Environmental sustainability. Melding all three categories together has led to the dilution of each, with the result that the total has become much less than the sum of the parts.

Consider the widely diverse criteria that go into ESG rating schemes. The Social category includes factors as varied as employment practices, safety standards, talent development and product liability. The Governance category includes criteria such as the composition of the board of directors, CEO pay practices, tax shielding, accounting quality, and corruption. A company can be a major offender when it comes to greenhouse gas emissions but still have a high rating in the Social and Governance categories. Such a company’s overall ESG rating might very well be no worse than average — and maybe even above.

What would such a rating tell us? It would be reminiscent of the man whose head is in the oven and feet in the freezer but who, on average, feels just fine…

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About the Author Trey Thoelcke →

Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.

Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community. He previously oversaw the 24/7 Climate Insights site, managing editorial operations and content strategy, and currently oversees and creates content for My Investing News.

Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.

Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, overseeing a long-running critique group and moderating workshop sessions at regional conventions. He lives with his family in an old house in the Midwest.