Introduction
The concept of ESG (Environmental, Social, Governance) has become a focal point in the debate over the future of capitalism. While intended as a moral market correction, in practice, it balances between rigorous risk analysis and dangerous moral mandatism. This article analyzes how ESG affects company valuations, why it faces resistance globally, and whether technocratic indicators are replacing democratic debate. You will learn how financial ratings can become tools for the "privatization of politics" and the risks this poses to citizens.
ESG: Between Risk Analysis and Financial Modeling
The foundation of ESG should be an epistemology of risk, not moral grandstanding. As an analytical tool, ESG identifies real threats: regulatory, demand-based, and operational. In the classic DCF (Discounted Cash Flow) model, these factors matter only if they increase future cash flows or lower the cost of capital. Everything else, as Aswath Damodaran points out, is merely rhetoric leading to value erosion.
A fundamental conflict with fiduciary duty arises here. Capital managers are obligated to act solely in the beneficiary's interest; however, ESG is sometimes used to push non-financial goals without the owners' consent. This phenomenon, known as greensmuggling, involves hiding political preferences under the guise of risk language. It is worth remembering that ESG is not a permanent source of above-average returns but a cyclical variable, heavily dependent on market conditions and investor appetite.
Energy Geopolitics and the Social Costs of Transformation
The approach to ESG reveals deep civilizational rifts. Europe sees it as an extension of the welfare state, the US as a matter of contractual voluntarism, and Asia as a tool of industrial policy. These differences often cause ESG to function as a hidden energy tax. Coordination among investment funds that raises the cost of capital for the fossil fuel sector hits the poorest consumers hardest, for whom energy prices are regressive.
A particular paradox is the situation of nuclear energy. Despite negligible emissions, it was excluded from ESG portfolios for years due to emotional factors and cultural fears. Such distortion of the Environmental component by emotion highlights the weakness of current ratings. A transition forced too quickly by financial markets, lacking democratic legitimacy and social safety nets, leads to economic crises and the rise of populism, as evidenced by the collapse of agriculture in Sri Lanka.
The Privatization of Politics and the Iron Cage of Bureaucracy
Modern ESG suffers from institutional isomorphism—companies copy empty reporting rituals (greenwashing) to gain legitimacy in the eyes of financial giants. This leads to the privatization of politics: the arena for debating the common good is no longer parliament, but a rating agency’s spreadsheet. According to David Beetham’s model, the legitimacy of power requires legal rules, moral justification, and the expressed consent of the governed. ESG ignores this last pillar, marginalizing the role of the citizen.
In this way, ESG can become a Weberian iron cage of rationality, where technical metrics dominate the meaning of human life. Companies report hundreds of indicators, losing sight of the real value of their services. An alternative to this technocratic approach is the African philosophy of Ubuntu, which builds ethics on authentic relationships and community rather than cold scoring. True corporate responsibility requires intellectual honesty and humility toward hard data, not the replacement of democracy with bureaucracy.
Summary
ESG risks becoming a technocratic mask for capitalism that, instead of civilizing capital, colonizes morality through accounting. Attempting to confine justice or ecological wisdom within Excel cells risks losing their profound meaning. In the pursuit of measurable good, will we lose what is most precious: our capacity for empathy and collective decision-making? True morality is not born from spreadsheets but from responsibility. If ESG is to survive as a lasting paradigm, it must regain democratic legitimacy and cease being a tool for the financial aristocracy.
📄 Full analysis available in PDF