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The call to abandon ESG is a plea for Indigenous prosperity

Joseph QuesnelIf the activists behind ESG cared, they would not stand in the way of First Nation and Metis communities that wish to move from poverty to prosperity through energy projects.

Initially, the three criteria to measure or value investments – Environment, Social, and Governance – were uncontroversial.

“Environment” once referred to a company’s potential for pollution or future legal liabilities. It has since morphed to focus primarily on a company’s carbon dioxide emissions, irrespective of their actual effect on climate change. “Social” used to denote a company’s relationships with people but has now come to represent the company’s stance on issues, often determined by far-left activists. “Governance” originally described a company’s internal management practices; it now emphasizes the racial and gender diversity of the company’s board of directors.

In other words, ESG originated from the concept of corporate social responsibility and has evolved into ‘stakeholder capitalism,’ a framework where businesses shift their focus from profitability and shareholder value to politically divisive and ambiguous criteria.

esg indigenous Environment, Social, and Governance
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Despite increasing resistance, indications show that ESG investing is not going away.

ESG investing is increasingly popular among larger Canadian companies. In March 2023, the Business Development Bank of Canada (BDC) surveyed 121 large companies and public-sector buyers, finding that 82 percent require their suppliers to disclose some ESG information. This number is anticipated to rise to 92 percent within the year.

Most of the money in ESG investments comes from huge investments like pension funds, insurance companies, and endowment funds from prominent universities and foundations. In other words, big institutional investors.

Unfortunately for ESG advocates, a study from April 2023 reveals that there is no conclusive proof that investments based on ESG criteria outperform non-ESG investments. Critics contend that the ESG scoring system lacks consistency and is subjective. They also point out that focusing on social and environmental factors may cause investors to neglect essential financial metrics, negatively impacting overall performance.

While Indigenous groups and communities have become increasingly engaged in ESG investing, particularly drawn by the potential profits from renewable energy projects, a significant issue has emerged. Indigenous organizations that have thoroughly examined ESG investing have discovered that most ESG metrics and assessments have significant flaws in their implementation.

A fundamental flaw is that the environmental component of ESG often conflicts directly with the economic self-determination of Indigenous energy-producing communities.

The primary rationale behind ESG investing and energy divestment campaigns is that fossil fuels are the primary enemy. To these climate change alarmists, First Nations are seen as ‘fair-weather friends.’ When Indigenous communities choose to pursue energy projects that promise economic prosperity, the non-Indigenous activists who champion ESG and energy divestment often withdraw their support.

A notable example involved a campaign against investing in the Royal Bank of Canada because it funded the Coastal GasLink pipeline project. Divestment activists overlooked the fact that 16 of the 20 First Nations along the pipeline route held a 10 percent equity ownership stake in the project upon completion. Also, activists did not consider that all of these communities had voted in favour of the project and the associated benefit agreements.

The activists’ campaign to demonize and divest from the energy sector frequently overlooks the interests of Indigenous communities. To these activists, it is irrelevant that the oil and gas industry provides some of the highest-paying private sector jobs available to these communities.

Just ask Crystal Smith, the elected chief councillor of the Haisla Nation in British Columbia, who has experienced significant opposition from activists during the establishment of the Cedar LNG project in her community. She has labelled these activists “eco-colonialists,” accusing them of trying to control Indigenous communities in ways similar to historical colonialism by the Crown. Smith once said: “If left to climate activists, Indigenous people would be the last to benefit, the last to participate, and the last to be connected to new infrastructure.”

Or ask Jessica Shadian, the president of Arctic360, a group that works with Indigenous development corporations, Northern governments and the private sector to bring development to the Far North. She has observed that ESG activists have convinced investment firms to shun funding capital investments for ventures in the Arctic. According to Shadian, ESG principles have deterred critically needed infrastructure and economic development. She points out that ESG activists do not reside in the Far North, which may explain their lack of concern for the local impacts of their advocacy.

ESG investing and divestment are not merely symbolic gestures like an empty land acknowledgment; they actively harm Indigenous communities by depriving them of crucial opportunities.

Private companies and Indigenous communities need to abandon ESG altogether as it warehouses First Nation into perpetual poverty. Indigenous communities need more energy projects, not less.

Joseph Quesnel is a senior research fellow with the Frontier Centre for Public Policy. He is the author of ESG and the New Eco-Colonialism.

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