ESG investing helps people choose investments that align with their values.  It works… if those values include a disdain for social obligations and governance norms.

“I invest responsibly”

Investors who used to feel guilty about having their retirement savings invested in pariah companies that did not reflect their values now have a choice.  They can channel their investments into “ESG funds,” which supposedly focus on companies that stack up well against a list of Environmental, Social, and Governance criteria, and rest assured that the companies they own a stake in are environmentally responsible, operate according to high ethical standards, and act as responsible citizens of their communities. 

Or can they?

Looking at the top holdings of ESG funds, you might be surprised to see that the holdings are much the same as the broader stock indices they represent – minus the coal producers.  As an indication, here are the top holdings of the S&P ESG Index as well as two of the largest ESG funds in the world (iShares, Vanguard), which supposedly integrate environmental, social and governance considerations:

  • Apple
  • Microsoft
  • Alphabet
  • Amazon
  • Tesla

Herein lies the problem.  None of these companies belong in a portfolio of “responsible investments,” let alone being the largest holdings.  They may produce cool gadgets, provide popular services, and deliver superlative returns to shareholders.  They are not coal or fossil fuel producers.  But, those are not the criteria for being ESG investments.  Collectively, these companies demonstrate a culture of tax evasion, a disdain for customers and employees, and a complete disregard for societal oversight, all of which should be grounds for disqualification.  Let’s have a brief look at these “responsible” companies.

Companies behaving badly


Although it’s now the most valuable company in the world, Apple still coasts on its history as an underdog; as an antiestablishment, anti-corporate rebel.   Its products attract a cult-like devotion, having become the favourite of artists, bohemians, and bearded hipsters.   But, Apple acts with all the arrogance and cynicism that one would expect of a corporate behemoth.  It treats its customers like shit.  It treats its employees like shit.  It doesn’t pay its taxes.  It should fail most ESG tests. But, there it is, among the top holdings.

Apple’s tax evasion efforts have become the stuff of legend.  For a long period, the company parked the bulk of its income in low-tax Ireland, by claiming a corporate residency of…nowhere. It was unabashedly unapologetic for its gaming of the international tax system.  CEO Tim Cook defended the tax avoidance scheme before Congress, saying repeatedly that Apple “paid all taxes it was legally required to.”   Hmmm.  Since when did “not breaking the law” become the acid test for ethical behaviour?  That’s a really, really low bar.

Payment of taxes isn’t just some frivolous issue – it’s fundamental to a company’s social responsibility.  Consider the following statement of Fiona Reynolds, Managing Director of PRI (Principles for Responsible Investing – “the world’s leading proponent of responsible investment”):

“Responsible investors and well-run companies will acknowledge that tax is not simply a cost to be minimised, but a vital investment in the local infrastructure, employee-base and communities in which they operate.” 

Apple has obviously shirked its responsibility in funding that investment.

Apple makes and sells cool technology.  So what?  Responsible companies don’t deliberately and surreptitiously slow the performance of older products, to force customers into buying newer ones.  Apple did just that in what was termed “Batterygate.”  Although Apple claimed innocence, the company paid hundreds of millions of dollars in fines and settlements due to its manipulation of the devices/customers. 

So, is Apple at least a responsible employer?  Consider the recent case of an Apple product manager who publicized accounts of workplace misconduct at the company – captured in a #AppleToo digest.  Within #AppleToo, over 500 Apple employees have accused the company of erecting “an opaque, intimidating fortress” that tolerates “racism, sexism, discrimination, retaliation, bullying, sexual and other forms of harassment.”  Apple’s response? The company fired the product manager.


Microsoft’s own tax evasion efforts saw the company shift at least $39 billion in profits to Puerto Rico, where it was taxed at “near zero,” then aggressively lobby the IRS to ignore the obvious tax ploy.  According to Fair Tax Mark, a group focused on tax transparency, Microsoft is one of the worst offenders when it comes to tax avoidance through profit shifting (along with Apple, Amazon, Facebook, Google and Netflix). 


There’s a reason why Amazon is now running recruitment ads in heavy rotation – it desperately needs more workers.  Mainly because it can’t or won’t keep the ones it has. Amazon’s hourly employee turnover rate is at 150%. Yes, 150%.  Some say this is by design – that Jeff Bezos considers workers inherently lazy and wants to have a workplace where only the strongest survive.  But, at that rate, Amazon is going to soon run out of workers.  Much has been written about Amazon’s work environment – most of it highly critical of the lack of respect for individuals, the endless push for higher productivity, and management by app and algorithm.  Observers note that Amazon manages packages extremely well, but has no clue when it comes to managing its own employees. Yet, here is Amazon, within the top holdings of ESG funds, whose criteria supposedly include employee relations, human rights, and labour standards.  Huh!

And, Amazon is a long-time tax evader.  It’s currently under scrutiny for avoiding European corporation tax by booking European revenue through Luxembourg-based subsidiaries.


Tesla the manufacturer makes expensive products for wealthy individuals trying to demonstrate environmental credibility.  Tesla the company has a shit-load of governance issues.

It’s no secret that Elon Musk, Tesla’s founder and CEO, has little time for government or regulators, and runs the public company as his personal plaything.  He ran afoul of securities laws several times, including when he publicly stated he was ready to take the company private, thus prompting a run-up in Tesla’s share price, when all he really wanted to do was stick it to short-sellers. When Tesla acquired SolarCity for $2.6B, furious shareholders alleged that it amounted to nothing more than a bailout of SolarCity, whose founders and owners were Musk’s cousins.  Lawsuits are still outstanding.

Tesla is also in the midst of moving its headquarters from California to Texas. Officially, it’s because the Texas location offers better living conditions for Tesla employees.  Unofficially though, it’s because CEO Elon Musk is still irate about his California factory being affected by local lockdown orders.  When Alameda County authorities imposed restrictions aimed at controlling a rapidly spreading pandemic, Musk called them “fascist” in an expletive-laden rant, and threatened a lawsuit against the County.  He promised them he would move the company; he’s moving the company. 

Sound governance guards against erratic executive behaviour, but earlier this year Musk fully committed the company and its $1.5 billion in cash to Bitcoin, only to reverse the decision the following month.  That’s typical. It’s governance by whim.

Any wonder why FTSE Russell ranked Tesla last among global automakers on ESG issues? It’s because there are three letters in “ESG” and Tesla gets a failing grade on two of them.


Alphabet (Google) could be included if a) it didn’t operate as though its users’ personal data was its own to use as it pleases, b) it didn’t abuse antitrust regulations, and c) it pays its taxes.  It doesn’t.

Google is the undisputed king of surveillance capitalism.  Heavy on the surveillance.  That is how Google makes its money – by sucking up all available data from users’ searches, internet habits, sites visited, purchases, contacts, locations, links, and whatever else it can get its hands on.  The business model – the one that has made Google so immensely profitable – is predicated on gathering as much data on individuals’ behaviour and attitudes as possible, and monetizing it through targeted advertising.  The model has a long history of challenges in terms of maintaining privacy of individuals’ personal data. And Google has a long history of violating privacy laws then negotiating settlements with governments and enforcement bodies. 

It’s hard to get a good score on an ESG category that includes “privacy” when your basic business model is based on the collection and exploitation of what used to be (and still is) considered private, personal data.

Maybe Google is being a good corporate citizen in other ways? No. A EU court recently reaffirmed that Google abused its market position by illegally steering search queries to its own shopping services, and upheld a fine of €2.4 billion.  That’s not the only European antitrust case Google has lost – two other cases with fines totaling over €8.2 billion are under appeal by the company.  It’s obviously a serial offender when it comes to abusing its dominant market position.

Some of these transgressions may be excused if the company at least paid its fair share of taxes.  But, it has gone to extraordinary lengths to avoid paying its taxes.  Consider its use of the “Double Irish, Dutch sandwich” to channel profits from the U.S. through low-tax Irish subsidiaries to even lower-tax havens in the Caribbean – a ploy that Google halted only when the Irish government finally disallowed the practice.

Marketing ESG – lipstick on the proverbial pig?

ESG-based investing is big.  It’s estimated that by 2025, over half the asset base in the US money management industry will be subject to ESG analysis (Deloitte).  The problem is that there are few rules around what qualifies for ESG funds, or what gets labelled as “responsible.” In the absence of rules, it all comes down to marketing. Well-intentioned millennials are led to believe that they’re buying into “responsible” companies that “align with their values.”  But, as it stands, that’s only true if their values are aligned with corporate tax deadbeats, companies running afoul of antitrust laws, and companies that treat their customers, shareholders and/or employees with disdain or contempt. Lipstick on the pig.

The basic premise of ESG investing – rewarding companies that are environmentally responsible, operate according to high ethical standards, and act as responsible citizens of their communities – is sound.  It’s time to put it into practice.  

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