Aswath Damodaran: I Absolutely Despise The ESG Goodness Cloak

In his latest presentation with CFA UK, Aswath Damodaran discussed his contempt for the ESG movement. Here’s an excerpt from the presentation:

Many of you might be familiar with the story of Theranos. Elizabeth Holmes drops out of college at the age of 19. Creates a blood testing company. She claims she’s going to revolutionize the business and make the world a better place. Who doesn’t want a revolutionized blood testing business and making the world a better place?

People bought in and nobody asked the question. You know what the question is? Does your damn blood test work and then four years later we wake up and find that she’d been cooking the books and there was no real blood test and of course the entire company is kind of spun apart. There’s a book on it. There’s a movie on it. She’s up for trial right now for committing fraud.

But my point is people didn’t ask questions because they wanted the story to be true. I call these ‘runaway stories’. You know what the common feature of these runaway stories is? The people who tell these stories cloak themselves in goodness.

I have only contempt for the ESG movement. I’ll tell you up front. This is the most overhyped, oversold concept in the business, and I have some terrible things to say about ESG but this is not the place I want to say them. But one of the reasons I absolutely despise this goodness cloak is it’s being used by frauds and con-men to cover up their frauds and cons, so check your story.

You can watch the entire presentation here: