Dilbert is Still a Thing and He Hates ESG.

Two things, then, were surprising to me this morning. The first, that Dilbert still exists. The second, that ESG as a concept has pervaded the zeitgeist of a typical American-morning-coffee-and-reading-the-paper ritual (to the extent that the “paper” part of that still exists).

To me, the value of ESG is pretty simple. On the E side – from wildfires to once a century rain events that happen twice a year, to heat waves and more powerful hurricanes – there’s little rational doubt that the impacts of climate change are going to be the major physical barrier to economic success. 

Encouraging firms and investors to take significant actions to try to mitigate the intensity of that headwind and then rewarding those that contribute more to the solution seems not only rational but evidence that we are looking down the field. 

Right now, we’re asking for a little and often the wrong thing, but those that take it seriously are more likely to effectively respond to the climate-based disruptions that are coming for any business. Taking your climate responsibility seriously means you recognize that climate change is a force to be lessened because the worse it gets the more likely your business will be vulnerable to massive disruptions.

To be honest, I don’t know exactly what Scott Adams’s problem with ESG is. It seems from his series of comic strips it’s more about the fact that success or failure on an ESG scorecard is easily manipulated. He may be right there. It is true that we are judging the wrong thing, offering easy outs, and not taking seriously what should and shouldn’t be counted (at least for the E part), but that’s not terribly surprising. We are at the early stages of incorporating this thinking in how we evaluate activities from firms and funds. But all the political attacks that ESG champions are getting are really just more of those cynical baby with the bathwater things that happen in politics so frequently: let’s use a poor implementation as a reason to get rid of a good idea that we don’t like for wholly unrelated reasons. It seems we should focus on how to do it right, not if we should do it at all.

While I focus on issues related to the E of ESG, I think a similar analysis applies to the S and G pieces as well. Judging a firm’s performance based on if it is creating an environment that is comfortable for a work force that is more diverse or that reflects the social progress that the country and the world is making seems to, again, be a reflection of good management. Especially in an economic environment where competition for a strong workforce is fierce, the idea that you have a workplace environment that is respectful and empowering of your employees to do their best work (the S) and is transparent in how it operates and acts with integrity when it makes decisions (the G) seems to me the way we move from the Dilbert workplace to one that is less easy to lampoon. So I guess that may be Scott Adams’s biggest problem with ESG: it’s promise is that there will be so few Dilbert like work environments to eliminate the common language that allows his cartoons to resonate.