Terence Corcoran: Does China meet Mark Carney’s ESG standards? |
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Terence Corcoran: Does China meet Mark Carney’s ESG standards?
And other doubts about corporate do-good policies
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In the new economic world order being created under the guidance of Prime Minister Mark Carney and other global masters of central planning, the focus of corporate management allegedly needs to be expanded away from the crass business of making profits. In his 2021 book Value(s), a 500-page guide to the new world order, Carney said every corporate board in the world should monitor and measure ESG.
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For readers who have their eyes on the moon instead of the deep, dark inner planet of corporate management, ESG stands for environment, social and governance. “Once it is recognized that maximizing (short-term) shareholder returns is no longer the sole role of a corporation,” wrote Carney, corporate directors must turn their attention “to how ESG issues affect the company’s risk management.”
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The ESG movement has been around for more than a decade after emerging as part of United Nations’ effort to re-engineer corporate governance away from profit making and toward do-gooding social responsibilities, such as reducing carbon emissions and promoting social equity and internal diversity.
So how is Carney’s ESG model working out? It’s a question that seems relevant in the context of the current Liberal fixation on developing deeper economic ties with China and other nations that may not quite fit the new world order ESG criteria.
For example, China’s BYD electric vehicle giant has just been singled out by Brazilian officials for its labour policies and standards, a move that casts doubt on whether BYD is adhering to ESG imperatives, although a Brazilian court has since halted the ruling pending final assessment.
Being a model corporate citizen, BYD publishes reports and issues statements that describe its intense sustainability and ESG programs. How extensive and thorough these reports are is unknown. For example, to make its vehicles in China, BYD draws electricity from the nation’s power system, which is more than 50 per cent supplied by burning carbon-emitting coal. In 2024 the Trudeau Liberals imposed a 100 per cent tariff on Chinese EVs in part because of their “distinctly higher emissions intensity.” Will the company exporting 49,000 EVs to Canada from China, as planned by Carney, meet ESG standards?
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The China ESG issue looms even larger over the Canadian banking and financial services industry. More than a dozen financial executives last week joined Finance Minister François-Philippe Champagne in Beijing, where they met with Chinese officials to build up trade and investment relations. Can that buildup between the two countries take place within an ESG framework that reaches beyond profits and trade flows?
Bank of Montreal Vice-Chair Scott Brison seemed to endorse ESG metrics in a newspaper commentary. “If this new era is to endure, it must place greater emphasis on equality of opportunity, ensuring that the gains from growth are broadly distributed, not concentrated. Economic openness must be paired with social resilience.”
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In recent years the ESG theme has faded somewhat from corporate agendas, particularly in the United States. In pre-Trump 2024, only 25 per cent of large companies used the term ESG in their annual sustainability documents. For 2026, the ESG pullback is said to be growing among U.S. corporations, according to The Conference Board.
Activists insist that ESG is still alive in Canada. The Logic reports that the big banks will face numerous shareholder motions in coming annual meetings. The idea that the ESG movement is dead is false, said Milla Craig, head of the Millani shareholder organization. Nothing could be “further from the truth,” she told The Logic.
A glance at the Bank of Montreal’s 2025 Sustainability and Climate Report — 117 pages of corporate minutia and bureaucratic language — suggests a major system is in place, including the bank’s “Environmental & Social (E&S) Risk Committee,” which provides “oversight of the integration of E&S risk considerations within the Enterprise Risk Management Framework and subsidiary risk frameworks.”
Whatever the scale of ESG activities within banks and thousands of other enterprises, determining whether they have a meaningful impact on a corporation’s market value and shareholders is doubtful.
The theory behind ESG is that companies with higher ESG scores will outperform non-conforming corporations as investors around the world seek out companies with a greater sense of social responsibility and reduced environmental risk.
A new research paper suggests that over the long term, ESG-rated firms do not outperform. The European economists concluded that their study “challenges the belief that high ESG scores lead to superior financial performance. Through a comparative analysis of the performance of top- and bottom-ranked ESG portfolios in U.S. equities over 20 years, we find that although low ESG-rated firms delivered higher raw returns, this performance gap becomes statistically insignificant after adjusting for risk.”
Another paper surveying global ESG market activity said its research pointed to “a weak relationship between the ESG ratings and expected returns, with some evidence of modest underperformance of high ESG stocks compared to lower rated ones in specific periods.” It is evidence, said the authors, that in efficient markets ESG investing “may not provide excess returns.”
So what is the point of the United Nations/Mark Carney corporate model? In the end, the ESG process involves massive regulatory and bureaucratic processes and assessments, employing thousands of high-end consultants, all to little or no avail aside from allowing companies to claim to be good guys.
• Email: tcorcoran@postmedia.com
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