Proponents have described it as the most ambitious yet, and if that weren’t absurd enough, the provisions in the regulations apply to non-EU businesses that collaborate with EU businesses, as well as consumers.
In this article, we explain the EU’s ESG directive, identify the provisions that worry people the most, and explain why the elites are so fixated on ESG.
Why ESG is an ideology and not an investment methodology
First, a brief review of Environmental, Social, and Governance, or ESG, refers to an investment trend that has been promoted by Financial Elites since the beginning of the 21st century.
In short, ESG states that environmental, social and governance issues are more important than production output or profits. Logically, this imperative is incompatible with basic economics.
Purposely pursuing more expensive energy sources, hiring people based on their personal identity rather than their abilities, and letting governmental and non-governmental organisations make business decisions are a recipe for disaster.
ESG’s incompatibility with basic economics is why it’s more accurate to refer to ESG as an ideology rather than an investment methodology.
Any company that complied with ESG criteria would quickly find itself out of business. This is why the ESG ideology was mostly ignored for the first 15 years of its existence. The term was coined in a 2005 report written by the United Nations, the World Bank and the Swiss government.
ESG criteria were inconsistent and unclear, contributing to their lack of adoption among businesses. This all changed in mid-January 2020 when BlackRock CEO Larry Fink wrote an open letter to all the shareholders. The asset manager ordered them to comply with ESG.
For context, BlackRock is the largest asset manager in the world with 8.6 trillion dollars in assets under management. In late January 2020, the world’s Elite gathered in Davos Switzerland for The World Economic Forum or WEF’s annual conference. There, the big four accounting firms standardised ESG criteria with the help of an organisation headed by Bank of America CEO Brian Moynihan. Moynihan is another key ESG player.
ESG criteria have since become synonymous with the UN’s Sustainable Development Goals or SDGs. For reference, the SDGs are a set of 17 goals that all 193 UN countries should meet by 2030.
The overlap between the ESG and the SDGS comes from the strategic partnership the WEF signed with the UN in the summer of 2019. The announcement states that the WEF will help “accelerate the development of the SDGS”. In other words, they will provide the private sector with funding for compliance.
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Besides the development of digital IDs, SDGS mandate the development of things like “smart cities”, Central Bank Digital Currencies or CBDCs, and carbon credit scores to track and reduce your consumption.
All these technologies are being developed by companies closely affiliated with the WEF but as mentioned, ESG is incompatible with basic economics. This begs the question of why the private sector is on board. The short answer is artificial profits.
Companies which comply with ESG get lots of investment from asset managers, like Blackrock and better loan terms from Mega Banks. Companies which refuse to comply with ESG see investments pulled and risk losing access to financial services altogether.
On the public sector side, they risk unreasonable regulations and bad press from governmental and non-governmental institutions working with these asset managers and mega banks. This terrifying situation comes from the unnatural accumulation of wealth caused by a financial system where limitless amounts of money can be created.
Asset managers and mega banks borrow large sums of money at low-interest rates and then use this money to buy assets and influence. They can now use this influence to push their ideologies.
Under normal circumstances, the ESG ideology could not exist in a sound monetary system. The ESG push has come primarily from the private sector entities that are affiliated with the WEF, there are a few public sector exceptions. The biggest one seems to be the European Union or EU.
Why is EU’s ESG regulation part of the green deal?
Lo and behold, the EU’s ESG initiatives have their roots in the Next Generation EU pandemic recovery plan. Not surprisingly, the implicit and explicit purpose of Next Generation EU is to help all European countries meet the UN’s SDGS by 2030. The recovery plan is expected to cost over 1.8 trillion Euros, in other words, it provides the public sector with funding and compliance complementary to the WEF’s initiatives.
One-third of all this printed money will fund the EU’s green deal which was likewise announced at the start of the pandemic. Now, to give you an idea of just how ideological the green deal is, one of the three goals noted on its website is to ensure that “economic growth is decoupled from resource use”.
This impossible goal is, why is it appropriate that the EU’s ESG regulation is part of the green deal? The ESG regulation in question is called the Corporate Sustainability Reporting Directive or CSRD.
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It was first introduced in April 2021 and was passed in November 2022. Then, it went into force this January 2023. There are just two caveats, the first is that the CSRD is technically a directive, not a regulation. An EU regulation requires all EU countries to comply with the EU law as it’s written, an EU directive allows EU countries to adjust the EU law and take their time rolling it out.
The second caveat is, going into force and being enforced are two different things. While the CSRD went into force this January, it won’t actually be enforced until 2025. In fact, the ESG reporting standards themselves would not even be published until June this year. EU companies will start collecting data using these standards in 2025.
This data will be reported, a spokesperson for the agency tasked with setting these standards recently specified that over 1000 ESG data points will need to be reported in a December 2021 interview. One of the architects of the CSRD revealed that the purpose of the directive is to “bring sustainability reporting to the same level as financial reporting”. He also revealed that all of the reported data will have to be digitised and this won’t be easy or cheap.
Companies required to comply with ESG regulations
Naturally, failure to comply with the EU’s ESG disclosures will result in sanctions which should be “effective, proportionate and persuasive”. The CSRD will require governments to publicly shame the companies that didn’t comply, order them to stop violating ESG criteria and of course fine them.
The CSRD is expected to apply to around 50,000 companies operating in the EU but the real figure will probably be much higher, this is in large part because of the low bar for what counts as a large company.
An EU company counts as a large company if it meets two of the following three criteria:
- It takes in more than 40 million euros per year
- Has more than 20 million Euros worth of assets
- Has more than 250 employees
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Publicly listed EU companies will also be required to comply with the CSRD regardless of their size. Moreover, the CSRD will also apply to non-EU companies which meet the following criteria,
- Takes in more than 150 million euros each year for a two-year period
- Has a subsidiary in the EU or has a branch that takes in more than 40 million euros each year
Another big reason why the CSRD will apply to more than 50,000 companies is because of extremely concerning provisions. The introduction could apply to small and medium-sized businesses inside and outside of the EU and possibly even to consumers.
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Small and medium-sized businesses will eventually have to comply with ESG
The most problematic provision is called “double materiality”. As per big four accounting firm KPMG double materiality requires “companies to identify both their impacts on people and environment impact materiality as well as the sustainability matters that financially impact the undertaking”.
Double materiality requires companies directly affected by the CSRD to collect ESG-related data from individuals and institutions that lie upstream and downstream from their business operations.
The CSRD has the potential to impact individuals and institutions around the world. Large companies in the EU will bear the brunt of the burden, time and money.
What it will take for them to report ESG criteria will be a massive expense. Any small or medium-sized businesses which lie upstream or downstream from these large companies will likewise be required to report. The expenses for them will be even greater.
Small and medium-sized businesses will eventually have to comply with ESG if they want to get investments and loans from financial institutions. They will have to pay employees a “fair wage”.
This would mean paying employees as much as a big business can, which small and medium-sized businesses often cannot do. With the CSRD applying pressure from the public sector side and ESG investors applying pressure from the private sector side, it’s more than likely that many small and medium-sized businesses affected will go bankrupt.
Why are there people so obsessed with ESG?
Some economists and tycoons have the viewpoint that big business taking over everything was always inevitable. In this scenario, the only things that will protect small and medium-sized businesses from going under will be investments from asset managers, loans from mega banks and grants from governmental authorities.
This will give them the power to pick winners and losers based on their compliance with the ESG, not on output. Assuming ESG continues to grow, we could see a scenario where businesses are occasionally prevented from providing goods and services to consumers on ESG grounds.
Excuses could include things like climate change, social inequality and the inability to track what has been purchased. Basic economics says this would not be sustainable, but printed and borrowed money would make it so. The EU could achieve its goal of having an economic output with zero input. It would just be numbers on a screen going up with inflation kept in check by capital controls on digital currencies.
Quality of life would quickly crater as no actual inputs mean no actual outputs, there would be frequent and chronic shortages of critical goods and services. The blame will be sifted to the same crises that ESG claims to solve. Real inflation will be off the charts if it is allowed to be discussed at all. By now you may be wondering, why are there people so obsessed with ESG?
The answer is obvious when you realise that the primary byproduct of ESG policies is inflation. ESG policies create inflation, and that’s why there is an obsession with ESG. The wealthiest individuals and institutions have trillions of dollars of debt that they cannot ever hope to pay back.
Control is the true purpose of the SDGS and ESG
Most of this debt was used to buy assets and influence all to push dystopian ideologies which go against the natural laws of economics. In theory, most of the issues that ESG seeks to fix could be more easily fixed with sound monetary policies, and where saving is incentivised. This would then mean that the accumulation of wealth would be harder and harmful ideologies would be harder to finance.
In practice, this would mean the people championing ESG would default on their debts and lose all their assets and influence. That is why there’s only one solution, to centralise control so that it becomes impossible for them to default. This requires controlling where consumers go, what consumers say and how consumers spend money. It seems like control is the true purpose of the SDGS and ESG.
What happens when energy prices soar
The silver lining is that the elites are unlikely to succeed in implementing ESG policies. Proof of this was seen last summer and autumn when energy prices went through the roof. Anti-ESG rhetoric also went viral. ESG only saw a positive comeback after energy prices fell but this is not going to last long. This is because the fundamentals of the energy market still have not been addressed.
There is a huge lack of supply relative to demand and energy companies are reluctant to expand in the face of ESG opposition. When energy-driven inflation comes back and it will, ESG will become Public Enemy Number once again.
When energy prices soar you will see governments declare oil, natural gas and nuclear energy as green and spend half a trillion dollars to burn dirty coal to keep the lights on like Europe did last winter and that is just what will happen in the developed world.
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In the developing world entire countries will go under, there will be revolutions, coups, civil unrest and mass migrations. All those angry people will know that ESG is ultimately to blame, this will lead to Global instability which will thwart the UN and the WEF’s plans.
Their members are hyper-aware of this, which is why they’re trying to move quickly to take control of everything before the purchasing power of Fiat currencies go completely to zero.
They will fail because people will opt out of the current system when they start to see it closing in on them. They are locked out by adopting alternative technologies like cryptocurrency which have been in development for years in preparation for this exact transition. As Fiat currencies implode the current system will collapse and an alternative system will emerge.
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