Guggenheim’s Minerd Says Uniform ESG Scoring Impedes Progress

A one-size-fits-all approach to scoring companies on environmental, social and governance standards is inhibiting the progress of firms wanting to adapt to more sustainable businesses.

That’s according to Scott Minerd, the chief investment officer of Guggenheim Investments, who told a panel at the Future Investment Initiative conference in Riyadh on Thursday that uniform ratings don’t work for companies wanting to evolve.

Guggenheim’s Minerd Says Uniform ESG Scoring Impedes Progress

A tobacco company seeking to be responsible by transitioning out of the industry, for example, will be given the same assessment as a competitor choosing to remain in the sector.

“We’re punishing them,” Minerd said, “and choking them from the capital they need to evolve.”

Investors around the world are stepping up efforts to ask companies to identify and address issues such as diversity and inclusion, human capital, board effectiveness and climate change.

The standards are being embraced by Saudi Arabia’s stock exchange, which is trying to help the corporates in the world’s biggest oil exporter to understand how to meet ESG requirements, Khalid Abdullah Al Hussan, the chief executive officer of the Tadawul exchange, said on the same panel.

The bourse has been putting in place the guidelines on what evaluators are looking for and helping companies to implement them, rather than creating its own standards, he said. The Saudi exchange signed on Thursday a memorandum of understanding with the FII-Institute to advance ESG awareness in the kingdom.

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