McGowan: ESG Investing, Virtue and Policy

October 14, 2022

by Richard McGowan, Ph.D.

My wife and I often disagree on political issues. She tends toward Aristotelian thought and toward Platonic thought. Aristotle’s book, “Politics,” analyzes structures of government and argues for a democracy, more or less. Plato’s dialogue, “The Republic,” stresses the character of those who would rule. The dialogue concludes by opposing “the philosopher-ruler,” the person of wisdom and beneficence, to that of a tyrant, in whose character power and self-interest are intertwined.

Aristotle’s government invites all voices to be heard. To paraphrase his “Politics,” “a dinner with many people at the table will have a diversity of ideas.”

In an ideal world, the best political arrangement is to have a good structure with rulers or leaders who are wise and attentive to the many voices of the governed.

Alas, we do not live in that world, an observation fairly apparent in the popular Environmental, Social and Governance (ESG) investing movement, the one that has been in the news lately.

The Sept. 4 USA Today had a half-page article focusing on ESG matters; the Indiana Business Journal had articles on ESG investing on Jan. 8, 2021, May 19 and July 29 of this year. Not to be outdone, the Wall Street Journal of Sept. 1, 2022, had a piece on the “ESG Investing Giants,” namely, Blackrock, State Street and Vanguard funds.

Those companies pressure publicly traded companies and their boards to incorporate ESG goals in their policies and practices. Unlike Aristotle’s notions, Blackrock, State Street and Vanguard Funds do not seem to listen to all the voices of the people who would be affected by ESG policies. As well, the companies are not, in structure, democratic inasmuch as the CEO and a limited number of other people direct the company’s actions and set its goals. Aristotle would frown.

It is likely, though, Plato also would frown, especially with regard to the CEOs of those companies. Do they live their lives in a manner consistent with the energy preservation that environmental considerations would direct them to lead? Do they conserve energy so others may have and use resources or are they self-indulgent and profligate in the consumption of energy?

According to the New York Post, one CEO has an 8,500-square-foot house in Aspen, Colorado. The house has eleven marble fireplaces and a garden. However, the CEO does not live there. He has a house in North Salem, New York, because he works in New York City.

The house in New Salem sits on 250 acres. The property also has a barn, a two-bedroom guesthouse, a pool and a cabana. How much energy does it take to build a house with 11 marble fireplaces? How much energy do two houses consume? These are rhetorical questions whose answers are “a lot” and “a lot,” respectively. That CEO’s environmental footprint is enormous.

This is not to criticize people who own a lot of property and houses for personal use. If the CEO produces a large environmental footprint, his right to property allows him to do so.

It is also worth noting that North Salem is 76.3 percent white, with 7.6 percent Hispanic making up the second largest group. That is more “diverse” than Aspen, where whites constitute 85.5 percent of the population and Asians, the second largest group, constitute 4.7 percent of the population. The CEO does not live shoulder-to-shoulder with people in the trenches and who are “diverse.” He has chosen the homogeneity of living with people like himself, similar in appearance and in economic strata. Again, that is his right.

Given the data, though, an Aristotelian is likely to conclude that the CEO expects to create policy for voiceless people to follow. And a Platonist is likely to conclude that the CEO is self-indulgent and inconsistent, tending more toward tyranny.It is an inconvenient truth that a leading ESG leader on Wall Street is energy profligate and prefers white homogeneity. A leader is more likely to succeed if the individual’s conduct and stated goals align.

Richard McGowan, Ph.D., an adjunct scholar of the Indiana Policy Review Foundation, has taught philosophy and ethics cores for more than 40 years, most recently at Butler University. 

North Salem data,Two%20or%20More%20(5.8%25).

Aspen data,(Hispanic)%20(1.59%25).

Larry Fink’s houses

 articles in IBJ

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