One of the strangest targets of America’s cultural wars is a nearly two-decade old investment criterion known as environmental, social, and corporate governance, or ESG for short.
The concept is simple. In addition to measuring financial returns, investors should seek out companies that act responsibly and avoid those with risky or unethical practices.
Companies that take into account ESG are expected to have a more sustainable business model, and therefore long-term growth and success.
However, right-wing critics say investors should only look at the money, with no regard for environmental, social or ethical responsibility because that would be “woke.” Republican-led Texas and Florida now have laws prohibiting public funds from being invested in companies that follow ESG guidelines.
But the reality is that some of the most profitable companies in the world are big supporters of ESG. A case in point is Sempra, the San Diego-based utility holding company that owns San Diego Gas & Electric and Southern California Gas.
This week the FTSE4Good Index Series, a benchmark for ESG created by the London Stock Exchange, included Sempra for the eighth year in a row.
The index recognized Sempra’ performance in biodiversity, human rights, and community and labor standards, awarding top scores for anti-corruption practices and corporate governance. Specifically noted was the company’s energy transition plan, including projects in battery storage, green hydrogen, climate resilience, carbon sequestration, wind and solar.
“The 20,000 high-performing employees across Sempra’s family of companies embrace our vision to deliver energy with purpose, and this means upholding high standards and sustainable business practices,” said Lisa Larroque Alexander, senior vice president for corporate affairs and chief sustainability officer for Sempra. “We are honored to be part of an index that acknowledges our efforts to connect millions to safe, reliable and cleaner energy.”
Sempra has been widely recognized for ESG, with Investor’s Business Daily including it among the “100 Best ESG Companies.” It’s a list that includes Apple, Coca-Cola, Marriott and even Exxon Mobil.
And all this goes hand-in-hand with profitability. Earlier this Month, Forbes Magazine cited Sempra as one of the 10 best utility stocks with a 10-year annualized return of 9.4%. CNBC analyst Jim Cramer recently named Sempra as one of his favorite utility stocks, and the company just announced a 2-for-1 stock split that typically heralds future growth.
It’s hard not to conclude that ESG can be good for business and that companies like Sempra will be rewarded over the long term. Why wouldn’t an investor seek a company that acts responsibly?
If there’s an irony in the culture wars, it’s perhaps that protesters sometimes gather outside Sempra’s headquarters in downtown San Diego to attack its use of fossil fuels. Perhaps those protests would be more appropriate in Texas or Florida.
Chris Jennewein is editor and publisher of Times of San Diego.
