Having seen the methodology of the supposed leaders in ESG rankings like Sustainalytics and MSCI there’s many flaws in the rankings - it is almost impossible to get your head around and doubt most advisers could explain the neat number. Fund managers tie themselves in knots as almost every company has an ESG case for it against that doesn’t just reflect in the scoring and there’s always an investor that’s annoyed. I’ve seen some whacky reasoning to substantiate for and against a company. It is not always just because a company is in coal mining it has a good score etc though that does have an impact of course.

Most people only care about the E in ESG and take for example gas pipelines they score well on co2 emissions but then again they transport co2 (gas is a transition fuel but is still a fossil fuel).

Arguable ethical fund managers should sometimes own big polluters like the utilities to force the change they’re fighting for especially if the company doesn’t need access to capital in the future. If it needs capital makes sense to not own to increase that companies cost of equity. Most companies in that space are usually mature and spew cash flow though.

I was wondering last night about the same thing mentioned by yourself @Mujo

Would be nice If we knew the methodology used to rate different stocks and even better if there was more transparency about it so public companies have a yardstick on what they need to do to get more favourable ratings.

Having said that, none of it really makes sense as you see in the examples above.

Take Elders which tanked 22% today. I think Elders doesn't rate highly because of it's association with the bad press about the livestock trade with animal cruelty and disease etc.. even if it is a small percentage of the business. So people see that as a risk and don't buy.

But it is also a double-edged sword. If we don't go invest in these companies that for instance, help put food on the table, then we make it harder for them to do business with the community and that in my opinion would have a more negative impact - costs will go up and more shortcuts would be made. I'm not quite sure what most of these businesses need to do to be looked on more favourably for investors. Like you said ESG seems to be used as a tool exclude some stocks altogether and in some cases they get it wrong rather than encouraging organizational change for a listed company.