Last month, credit rating company, Moody’s, announced that they are developing a tool to give “predicted, environmental, social and governance (ESG) scores for millions of public and private small and medium sized enterprises worldwide. Companies that have never even filed an ESG report because they want nothing to do with this new scoring system that is coming to America and the entire world very soon, are soon going to get a ESG score anyways.
“”SMEs (Small- Medium Enterprises) are the backbone of every economy; they drive innovation and power global supply chains,” said Andrea Blackman, Global Head of Moody’s ESG Solutions. “Alongside portfolio analysis and analyst-driven SME assessments, the ESG Score Predictor adds a unique, integral component to our comprehensive suite of cutting-edge solutions to help investors and companies leave no stone unturned when identifying and analyzing ESG risks and opportunities.”
This new first of its kind tool uses location, sector and the size of the company to predict what the companies ESG score would be. The predictor “provides an analytical solution for generating a wide range comparable and standardized metrics for assessing ESG and climate risk portfolios where a full assessment for each underlying company is not possible. Using only company, size, location, and industry as inputs, our models generate predicted metrics for each firm to ensure full portfolio coverage.”
So Moody’s, a credit rating company, has developed a system that will give your company a credit score, whether you want to participate in the ESG score system or not, and that will be used to determine how much financial risk your company has. So if your a business owner and go into a bank to take out a loan, but your ESG score is too low, you are going to have a very difficult time trying to get a loan.
Moody’s own website states that these scores will be used for “portfolio monitoring and alerts” and for “entity-level ESG scoring for loan origination”. This score will be used to determine who will and who won’t be able to get a loan.
This new score has nothing to do with whether or not the bank thinks that you can repay your loan. It’s about how “woke” you actually are. They are going to look at things like how environmentally friendly you are. What types of companies you invest in. How “diverse” your board is. What kinds of companies do you do business with. If you do business with what they deem to be the wrong kind of business (like meat producers, gun manufacturers, etc) that will negatively effect your score. If you don’t have enough “diversity” on your board, forget qualifications or who actually applies for a job with your company, that will negatively effect your score.
This isn’t something that is coming far into the future but it’s already here. Countries around the world are already starting to implement parts of this new system. Banks in the United States are already starting to provide customers with their ESG scores, which we are told is just so that you can be a more informed investor. Right.
Even if the United States government doesn’t voluntarily go along with this new scoring system, and it looks like they are all aboard, a majority of American companies will be forced to go along with it anyways if this new law passes in the European Union.
According to Sherman and Sterling who reported on this earlier this year, if this new bill were to be adopted, ” all EU member states will be required to implement the directive into their national laws. This will result in substantive due diligence requirements being imposed on companies, whether based in the EU or selling their products and services into the EU, across their entire value chain, with potential sanctions for non-compliance,” In other words, any company that does business in the EU will be held to this standard, regardless of if the company is based out of the EU or not. The company doesn’t even have to do business directly in the US to fall under this same standard. If a company like Boeing or McDonalds buys toilet paper from a company who doesn’t have a higher enough ESG score, that would negatively effect Boeings and McDonald’s ESG rating.
A final vote on implementing this system is expected before the end of this year, and it is looking like it very likely will pass. The European Parliament has already overwhelmingly voted to approve it and now it’s just trying to figure out how to implement this in all of the EU.
In June of this year, the US House of Representatives passed a very similar law called the “ESG Disclosure Simplification Act of 2021”. If this law were to pass, it would require all publicly traded companies to provide all of their information related to ESG scores and talk to their shareholders about how they are planning on imposing and using ESG scores. If this law were to pass the US Senate, companies that refuse to participate could face removal from the US stock market. This is just one step behind what is currently happening in the EU and the US usually isn’t that far behind what happens in the EU.
Sadly, without a massive public outcry in the very near future, it doesn’t look like there’s anyway to stop the system that the elites around the world are already implementing and it’s going to be nearly impossible to get rid of it once it’s implemented.
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