Ethical Investing is Undermining Democracy

Net Zero. Diversity at any cost. One-sided mass media. The ever-leftward left. “Woke ideology”, you say, and I don’t disagree. But we really need to talk about money.

What if someone three-hundred times richer than either Bill Gates or Elon Musk said to every big corporation “I am going to give you money if you promote diversity or buy your electricity from renewable sources”.

Unlike Bill or Elon, who only own a part of Microsoft or Tesla, such a person could own the entirety of both companies, alongside the top twenty largest companies that you could name. It’s a lot of money - about $30 trillion, which is enough to buy a quarter of the entire stock market - so what effect would this have?

Given that it is the duty of company directors to increase shareholder value, and finding favour with this rich guy would increase this without having to innovate on product or compete, it would result in the increased promotion of renewable energy and electric vehicles within those companies clamouring for a cut of the money. There would be increased adoption and promotion of diversity, equity, and inclusion initiatives. Ideas that might otherwise be evaluated on different criteria would be more readily accepted within these organisations, such as promotion based on physical characteristics as opposed to merit.

And what if this same rich-guy said “I want you to really show you believe in these things, not just some superficial adoption, so if you still advertise in places that are contrary to these policies then I’m not going to give you as much money”. All of a sudden, media companies that rely on advertisers for revenue would be wary of saying things in their newspapers or TV shows that resulted in them being black balled and losing their big-company clients. So certain policies would be amplified, and the volume would be turned down on the contrary voices.

It sounds far fetched. No-one’s that rich. And that’s absolutely true. But what if, instead of an individual being that rich, it was a massive group of people and institutions who pooled their money according to a particular set of rules? Enter, ESG. No need for any tinfoil hats.

It started innocently enough - teachers and nurses didn’t want their retirement money invested in tobacco or weapons. So finance created “ethical” investment funds that only bought shares in companies meeting certain Environmental, Social, and Governance standards.

About fifteen years ago, major financial institutions transformed this well-intentioned movement into a massive industry. Today, the world’s largest companies receive ESG scores based on compliance with these criteria. High scores for renewable energy usage, employee ethnic diversity, CO2 reduction. And there’s enormous money at stake - higher ESG scores mean more investment from ESG funds, significantly driving up share prices.

Companies don’t adopt progressive policies because their directors had environmental or social justice epiphanies. They do it because ESG scores directly impact their access to capital, their borrowing costs, and their share prices. They adopt the policies to make money.

And the incentive structure cascades down through the entire economy. A large company’s ESG score gets affected by the standards of their suppliers, so they won’t do business with smaller companies that hurt their rating. Meanwhile, smaller companies need financing, but banks’ own ESG ratings depend on who they lend to, so they’ll give cheaper loans to more compliant customers. Suddenly every business in the supply chain starts adopting green practices and diversity policies - not from conviction, but to access cheaper loans and keep their corporate customers.

This creates entirely artificial markets. Demand for renewable energy, TV shows with diversity casting, electric vehicles - all largely driven by ESG criteria rather than consumer choice or economic efficiency. And the companies that spring up to profit from this new demand want to maximise their income, so they don’t just focus on selling their services to ESG-compliant companies. They, and their investors, actively work to expand - advertising their products, lobbying for stricter diversity requirements, sponsoring sustainability conferences, funding and publishing favourable academic research - anything that increases their sales.

The most elegant aspect of all this is how it eventually taps into taxpayer money. Companies and investors don’t need to do all the lobbying themselves - that would be too transparent and outside their expertise. Instead, they fund non-government organisations with aligned interests - climate advocacy groups here, anti-racism initiatives there. These NGOs focus on their particular causes while also ensuring their own survival. When they succeed in influencing government policy, they not only enact regulations that direct public and private funding toward their causes (benefiting their original investors), but they also secure taxpayer funding for themselves. The result is that taxpayers effectively fund the lobbying of their own government. It’s a self-reinforcing cycle: advocacy for regulations and technologies that favor the original investors - usually at the expense of economic efficiency, therefore the taxpayer - all sustained by taxpayer money.

There are significant secondary effects. Since a company’s ESG score can be influenced by where its advertisements and publications appear, media companies now increasingly prioritise content that ultimately protects their advertisers’ ESG ratings over content that appeals to audiences. They shy away from publishing anything that risks these advertiser relationships, which explains why mainstream media persists in producing the same sanitised content while haemorrhaging viewers.

Even investors outside of ESG, whose goal is not to profit directly from the promotion of diversity, say, ride piggy-back upon the beast. The same apparatus that mandates diversity also suppresses dissent on migration - useful if an investment relies upon population growth, housing demand, or the availability of cheap labour. A massive emerging economy might gain geopolitical advantage by fostering dependence on their cheaply manufactured renewable energy equipment, benefiting from the environmental focus. These aligned-interest groups contribute to the same NGOs and lobby in the same direction, creating a coalition far more powerful than any single interest.

The result is universal distortion of the public narrative - not because of ideology, but because policies get favoured simply for boosting ESG scores

Now, that’s all well and good for publicly traded businesses, but what about the deeper influence on governments, or universities, where the ideology can be more manifest despite the institution not having the same profit drivers?

In these cases, the profit motive is not as obvious - universities or governments don’t have shareholders demanding higher returns. But the financial mechanisms do still operate, just through different channels.

For universities, there are various reasons to implement ESG style policies. Corporate research partnerships flow towards universities showing alignment with ESG principles (again, because the sponsoring company’s rating will be affected by the ESG make-up of its research partners). They also depend heavily on endowments and donations, with many of the major donors increasingly tying their contributions to ESG commitments. Government funding now factors sustainability and diversity metrics into grant awards. And an internal pressure group of student activists helps too, propped up by their eager radicalism and support from those well-funded external NGOs. Whether or not individual university administrators actually believe in these causes, the financial incentives and institutional pressures ensure widespread adoption. And these continuous internal pressures in one direction result in a particular academic make-up.

Governments face similar financial pressures, though the mechanisms are less direct and often operate through institutional capture rather than explicit market forces.

The financial incentives are real. Sovereign debt ratings increasingly incorporate ESG factors, affecting national borrowing costs - a country’s credit rating can influence whether it pays 3% or 5% on billions in bonds. The green bond market offers cheaper capital to governments meeting environmental criteria. Even municipal governments find that ESG scores influence their ability to attract investment and businesses.

Supranational bodies are a major factor in governmental adoption. In the EU, disclosure requirements for large companies on environmental and social impacts have been steadily expanded so that every large company must report detailed metrics on carbon emissions, board diversity, gender pay gaps, and human rights practices throughout their supply chains. Central banks have increasingly incorporated climate risk into their regulatory frameworks, meaning more favorable loan rates for greener industries. The United Nations shapes countries’ policies worldwide through its Sustainable Development Goals, which countries publicly commit to but implement to varying degrees. Other institutions tie trade access, development funding, and favorable loan terms to ESG compliance.

There are a great number of regulations closer to the consumer. The EU is increasingly penalising car manufacturers according to the emissions of the cars they sell. And UK oil companies are being prohibited from producing oil because of the CO2 that is emitted when the consumer uses it, thus necessitating import of oil from abroad to meet demand. These myriad regulations reinforce and amplify the narrative for products and services that score well on ESG metrics, regardless of their actual effectiveness or consumer desirability.

Perhaps the most insidious consequence of these massive pressures on government is institutional capture. The experts governments consult have been selected through the same ESG-driven funding pressures that shape their universities. The think tanks and non-government organisations producing policy papers are funded by ESG-aligned foundations, and the funding of research and studies is overwhelmingly driven by the same mechanism. The same financial players administering a majority of ESG funds - firms like BlackRock, Vanguard, State Street - happen to play significant advisory roles in government economic policy.

International bodies like the EU or WHO are subject to the same information, with the added vulnerability of being less accountable and more a target of activism.

So regardless of an individual politician’s stance on Net Zero or diversity policy, they become nearly powerless to implement contrary policies when every expert, every advisor, every credible institution, every international body tells them the same thing. The only academics who received funding and tenure are those whose research supported ESG priorities.

The ideology can appear more pronounced in government not because politicians are true believers, but because they do not have an understanding of the underlying mechanisms and can only parrot the justifications presented to them. While a corporate CEO can point to shareholder value and ESG scores when explaining policy changes, a politician must claim to be “following the science” or “doing what’s right” - making the rhetoric sound more ideological even when the underlying driver remains structural and economic.

Even in countries where political rhetoric might suggest resistance to these ideas, the regulatory trajectory remains remarkably consistent over time. Politicians may frame these actions in terms of moral imperatives or scientific necessity, but the underlying drivers remain the financial incentives, institutional pressures, and the massive web of regulation that even the most capable and driven government would struggle to untangle. Governments change, the rhetoric changes, but the structural factors tend to remain, ensuring compliance remains constant.

Ultimately, regardless of whether it’s the private or public sector, the result is the same - artificial amplification of certain policies, or a particular narrative, ultimately for self-serving interest rather than True Belief. And if people are constantly subjected to a singular emotionally evocative narrative from just about every possible source, and have zero exposure to counterarguments, is it any wonder that they become angry when these issues are met with objection? And is it any wonder that those whose voices are effectively silenced by the one-sidedness start to embrace politics that pull in the exact opposite direction?

But the worst part about these culture wars is not the ideologies, or even the overwhelming all-pervasive sense of general decay and societal rupture which accompanies them. It’s that critics waste endless energy debating the ideologies themselves and overlook the systemic reasons through which they are sustained and provoked. Yes, shutting down Western industry to replace it with Chinese coal powered manufacturing makes no sense environmentally. And yes, racism-to-fight-racism is completely daft. It takes very little thought to conclude that the logic of pro- Net Zero or DEI agendas is almost entirely flawed - almost entirely devoid of anything other than the most superficial reasoning - or to be aware that the proponents almost universally avoid calm and coherent debate. But that perfectly illustrates the point - these movements don’t persist because they’re logical. They persist because they’re profitable.