Out on a limb

Hurts when someone gets special treatment, doesn’t it? When they’re given dispensation to ignore the rules that everyone has to follow…

Well, many appeared to notice the rule book bending this week, when speculation emerged that the London Stock Exchange might offer special measures to Arm Holdings if the company lists in London. Reports suggest the company would be offered relaxed conditions for reporting “related party transactions”.

Some were miffed (“annoyed” if you were born after 1995.—Ed). Roger Barker, governance guru at the Institute of Directors, told CityAM: “In the long term, good corporate governance is best served by the consistent and fair application of sensible rules that protect investors and other stakeholders.”

And, more pointedly: “The UK should not endanger its hard-won reputation for high governance standards by engaging in a regulatory race to the bottom.” That’s telling them.

ESG pays its way

Economists at the universities of Essex, Stavanger and the much more sunny California, say ESG policy costs are compensated for by increased share prices.

The team drew the conclusion after looking at whether investors would back ESG policies that seemed to have a high cost, or to put it another way, policies that “benefit society” but may not benefit a firm enough to cover the costs.

After building a theoretical model that gauges investor reaction to expensive ESG policies, the team concludes: “The upshot is that, in our experiment, the prospect of policy adoption generally increases demand for the firm’s shares, and the resulting share prices largely compensate for the ESG policy cost.”

That’s one in the eye for ESG naysayers.

Wake up and smell the cup o’ Joe

Worth pointing out that there has been some questioning of the value of ESG recently. Anti-ESG groups in the US can sound a little rabid, while in the UK things are a little more sedate. However, in a recent letter to the Financial Times Amsterdam business boffin, Joe Zammit-Lucia, says assessing ESG should not be conducted on a “utilitarian” basis.

Things have changed, Joe argues, and there is acceptance now that “companies do not stand apart from the societies in which they operate”.

“Previous certainties have gone, such as our views on globalisation, the primacy of laissez-faire neoliberal ideology, the supposed effectiveness of trickle-down economics, our tolerance of the externalities generated by business activity, the acceptance of the idea that the role of business is exclusively to maximise shareholder value, the perils of financialisation and many other political issues too numerous to list.”

In other words: yes, there’s a lot of “bullshit” written and spoken about ESG, but investing in ESG should be about judging whether companies are adjusting to this new world. The writing is on the wall.

Minority report

Bad news on the climate reporting front. The Carbon Disclosure Project finds in a survey that, while 4,000 companies have climate transition plans, only 81 (0.4%) can boast practice by reporting on all 21 key indicators needed for credibility. CDP looked at the reporting of 18,600 companies in 135 countries.

Amir Sokołowski, CDP’s climate guru, says: “Companies must evidence they are forward planning in order for us to avert the worst impacts of climate change and to send the corrects signals to capital markets that they will remain profitable.”