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Business

ESG: The Use of Non-Financial Metrics by the Investment Industry is a Lawsuit Waiting to Happen

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From the Fraser Institute

By Bryce Tingle

Relying on deeply flawed ESG (environment, social and governance) ratings is incompatible with investment fiduciaries’ legal obligations

ESG ratings discourage companies from growing

The ESG ratings industry is an expensive distraction for public companies. It provides, in the form of low scores, a cudgel for activists, outsiders, and shareholders to use against companies who refuse to invest in improving their scores, although these investments are a waste of resources because the scores measure nothing useful. This makes Canada’s public markets much less appealing for companies considering listing their shares. In turn, for a private company that seeking an exit to investors, this makes selling the company to a larger competitor more attractive. As
many of these buyers are foreign (especially in advanced industries like technology and pharma) innovative Canadian businesses do not scale up in this country (Tingle and Pandes, 2021: 10). The choice of innovative businesses to sell themselves, rather than go public, is very bad for Canada.

ESG ratings obscure the contributions companies make to society

The ESG ratings agencies perpetuate a harmful lie about the ways in which companies contribute to the growth and success of Canadian society. Companies create the wealth we enjoy (and use for various public purposes), they employ us, and they provide us with the goods and services
we need. Companies should be celebrated for these contributions to our society and not asked to solve social problems unrelated to their competitive activities in various markets. Their failure to deliver on these social expectations will generate greater levels of distrust in Canadian institutions.

ESG ratings are a false alternative to legislation

In practice ESG has come to be seen as a valid alternative to government regulation for solving certain kinds of social and environmental problems. As we have seen, it is incapable of doing so and is not even really intended to do so. The public is taking investment managers’ marketing copy and applying it to really serious problems.

Again, the inevitable failure of ESG to solve these problems will breed cynicism, but it also distracts us from the kinds of regulation that will
actually accomplish the social and environmental goals we have for our society.

If a fund claims to invest based on ESG considerations, the fund managers should have to show their own work and demonstrate it is rationally related to the ESG outcomes promised to beneficiaries. Merely following deeply flawed ESG ratings is, as we have seen, not acceptable. We do not tolerate fraud elsewhere in our capital markets; there is no reason to tolerate it in the claims investment funds make in order to raise money from retail investors.

A Lawsuit Waiting to Happen: The Use of Non-Financial Metrics by the Investment Industry

  • Environmental, Social and Governance (ESG) scores are sold to investment fund managers to assist them in making investment decisions. The scores are generated by a large industry of third-party firms and embedded in ratings, rankings, and indices.
  • The various elements in ESG scores stand in contrast to the traditional financial metrics relied upon by previous generations of investors.
  • Can investment fund professionals, who manage the wealth of other people, legally rely on ESG data in making their investment decisions? Over 88% of fund managers overseeing US$3.16 trillion of investment funds purport to use these ESG scores, a problem if the scores are inaccurate.
  • A decade of careful investigation in dozens of empirical studies has found:
    • ESG funds market themselves as advancing environmental and social objectives, but the ESG ratings those funds depend on are explicitly not about protecting the earth and society from the impact of corporate behaviour, but protecting the corporation from society.
    • Turning the welter of complex criteria into the simplistic ratings sold to investment funds requires judgement calls about what is material for a company or industry, and how to weigh various factors in coming up with a final score.
    • ESG ratings of the same company vary widely from one rating agency to another, demonstrating low validity and suggesting the ratings are not measuring anything real.
    • ESG ratings fail to predict future environmental and social performance, such as the exposure of a company to government fines, labour actions, or pollution violations.
    • ESG ratings of companies do not predict future operating performance or the trajectory of stock prices.
    • ESG ratings do not correlate with reduced investment risk.
    • Corporate disclosure of ESG-favoured information seems, ironically, to be connected to less ethical and more self-interested managerial behaviour.

Click here to read the report (20 pages)

Bryce Tingle

N. Murray Edwards Chair in Business Law, University of Calgary

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Business

$15B and No Guarantees? Stellantis Deal explained by former Conservative Shadow Minister of Innovation, Science and Technology

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The Opposition with Dan Knight

Dan Knight's avatar Dan Knight

Rick Perkins reveals what billions in subsidies didn’t buy: job protections, clawbacks, or Canadian hiring guarantees.

For weeks, Canadians were told, confidently, smugly, that the $15 billion handed to Stellantis and Volkswagen was protected by “job clauses” and “performance-based contracts.” That’s the line Industry Minister Mélanie Joly repeated in interviews, press releases, and on social media. It’s a lie.

Yesterday, we sat down with former Member of Parliament Rick Perkins one of the few people who actually read the unredacted contracts in question and he laid it out plainly: those job guarantees don’t exist. Not in the way you were told. Not even close.

“There is no cancellation clause,” Perkins said.
“The ‘job commitments’ are maximums, not minimums. And the contracts don’t require those jobs to be Canadian or even union.”

Let that sink in.

We were sold a vision of a green industrial renaissance, Canadian workers building Canadian batteries in Canadian factories, funded with Canadian taxpayer money. Instead, we’ve bankrolled foreign-owned companies to build batteries with no guarantee they’ll hire local workers, or that the batteries will even be sold in Canadian vehicles.

And here’s the kicker: the federal government is already writing monthly subsidy cheques, covering 100% of the cost per battery, based on production volume, not sales. That’s right. You and I are footing the bill whether those batteries go into a Dodge Ram, a Chinese-market minivan, or sit on a warehouse shelf until 2032.

No wonder the production subsidy contract is only 26 pages long. There wasn’t much in it.

Minister Joly claimed there are “performance conditions” and “job guarantees.” But as Perkins told us, those words are political wallpaper not legal obligations. There’s no enforcement mechanism. There’s no clawback clause. There’s no language saying, “You must hire X Canadians or repay the money.” It’s not there.

And that’s what this government doesn’t want you to understand. It’s not just that they wasted your money, it’s that they did it knowingly.

They gambled billions on the assumption that Joe Biden would remain in power, that EV mandates would keep growing, and that Trump wouldn’t come back. Now that he has, with tariffs, deregulation, and a clear “America First” energy agenda, these companies are doing what any rational business would do: they’re leaving.

And there’s nothing in the contract stopping them.

If you’re wondering why the mainstream media isn’t shouting this from the rooftops ask yourself who cashes the cheques. Ask yourself why no journalist has demanded to see the full, unredacted documents. Ask why Minister Champagne hasn’t been hauled before a committee and asked under oath whether he even read the damn contract before signing.

We did what they wouldn’t. We got the receipts. We sat down with someone who saw the deal with his own eyes. And here’s what he told us: it’s worse than you think.

The Stellantis deal isn’t a strategic investment, it’s a bailout with no brakes. And every month, billions continue to bleed out of the treasury while ministers issue press releases pretending we’re building an economy.

We’re not. We’re building someone else’s. And we’re paying full price.

This isn’t over.

Click here to see the entire conversation with Rick Perkins 

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Health

Canada surrenders control of future health crises to WHO with ‘pandemic agreement’: report

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From LifeSiteNews

By Anthony Murdoch

Canada’s top constitutional freedom group warned that government officials have “relinquished” control over “future health crises” by accepting the terms of the World Health Organization’s (WHO) revised International Health Regulations (IHR).

The warning came in a report released by the Justice Centre for Constitutional Freedoms (JCCF). The group said that Prime Minister Mark Carney’s acceptance earlier this year of the WHO’s globalist-minded “pandemic agreement” has “placed Canadian sovereignty on loan to an unelected international body.”

“By accepting the WHO’s revised IHR, the report explains, Canada has relinquished its own control over future health crises and instead has agreed to let the WHO determine when a ‘pandemic emergency’ exists and what Canada must do to respond to it, after which Canada must report back to the WHO,” the JCCF noted.

The report, titled Canada’s Surrender of Sovereignty: New WHO health regulations undermine Canadian democracy and Charter freedoms, was authored by Nigel Hannaford, a veteran journalist and researcher.

The WHO’s IHR amendments, which took effect on September 19, are “binding,” according to the organization. 

As reported by LifeSiteNews, Canada’s government under Carney signed onto them in May.

Hannaford warned in his report that “(t)he WHO has no legal authority to impose orders on any country, nor does the WHO possess an army, police, or courts to enforce its orders or regulations.”

“Nevertheless, the WHO regards its own regulations as ‘an instrument of international law that is legally binding on 196 countries, including Canada” he wrote. 

Hannaford noted that “Surrendering Canada’s sovereignty” to the IHR bodies is itself “contrary to the constitutional principle of democratic accountability, also found in the Canadian Charter of Rights and Freedoms.”

Among the most criticized parts of the agreement is the affirmation that “the World Health Organization is the directing and coordinating authority on international health work, including on pandemic prevention, preparedness and response.”

While the agreement claims to uphold “the principle of the sovereignty of States in addressing public health matters,” it also calls for a globally unified response in the event of a pandemic, stating plainly that “(t)he Parties shall promote a One Health approach for pandemic prevention, preparedness and response.”

Constitutional lawyer Allison Pejovic noted that “(b)y treating WHO edicts as binding, the federal government has effectively placed Canadian sovereignty on loan to an unelected international body.”

“Such directives, if enforced, would likely violate Canadians’ Charter rights and freedoms,” she added.

Hannaford said that “Canada’s health policies must be made in Canada.”

“No free and democratic nation should outsource its emergency powers to unelected bureaucrats in Geneva,” he wrote.

The report warned that new IHR regulations could mandate that signatory nations impose strict health-related policies, such as vaccine mandates or lockdowns, with no “public accountability.”

“Once the WHO declares a ‘Pandemic Emergency,’ member states are obligated to implement such emergency measures ‘without delay’ for a minimum of three months,” the JCCF said.

“Canada should instead withdraw from the revised IHR, following the example of countries like Germany, Austria, Italy, the Czech Republic, and the United States,” the JCCF continued. “The report recommends continued international cooperation without surrendering control over domestic health policies.”

Earlier this year, Conservative MP Leslyn Lewis condemned the Liberal government for accepting the WHO’s IHR.

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