Inclusive Development International’s new ESG Watch website and company database illustrates how ESG investment routinely flows to companies linked to human rights abuses. 

Today, Inclusive Development International launched ESG Watch – a company database and website that tracks over $39 billion in environmental, social and governance (ESG)-focused investment flowing to companies that are linked to serious social and environmental harm. ESG Watch provides a platform to amplify the voices of communities affected by harmful corporate activities, publicize evidence of harm and hold financial services firms and investors accountable for fulfilling their human rights responsibilities.  

Companies found to be benefiting from this “ESG-washing” include fossil fuel and mining giants facing numerous human rights complaints, weapons manufacturers implicated in war crimes, and over a dozen companies that maintain business ties to Myanmar’s military despite its well-documented commission of genocide and crimes against humanity.     

“Any company that maintains commercial or business ties with the junta are ultimately complicit in the crimes and violations committed against the Burmese population in Myanmar,” said Mike, a human rights defender with the Blood Money Campaign, who uses a pseudonym for security reasons. “None of these companies should be rewarded with the financial and reputational benefits that come with high ESG ratings and investments by ‘responsible’ investors.” 

All financial firms and investors have a responsibility to avoid contributing to human rights abuses through their investment products, but especially those that describe and market their products as environmentally and socially responsible options. When these firms find themselves linked to human rights abuses through their products, they have a responsibility to use their leverage to address the harms. The ESG Watch website explains why so many ESG investment products fall short and who is responsible, including the role of passive investing approaches that rely on ESG-labeled investment indexes that are created and marketed by MSCI, FTSE Russell, S&P Dow Jones Indices and others.  

We created ESG Watch to call these actors out and demonstrate the need for reform, because if they lived up to their promises to the investing public, they could be a powerful force to incentivize responsible business conduct.  Exposing ESG-washing and publicizing the environmental, social and human rights impacts of corporations is particularly important at this time, as the European Commission is rolling back its proposed mandatory human rights due diligence and sustainability reporting directives and the new U.S. administration is dismantling climate disclosure and other environmental regulations. 

“The ESG investing industry needs to be held accountable to its human rights responsibilities, even as the very notion of responsible investing is under attack from the political right,” said David Pred, Inclusive Development International’s executive director. “Some asset managers may be retreating from ‘ESG’ labeling and rhetoric amidst these attacks, but they will continue to cater to the significant consumer demand for responsible investing options, which isn’t going anywhere. We cannot let that demand be coopted by false solutions—no matter how they are labeled.” 

When misapplied, the ESG label can do more harm than good 

When companies involved in human rights abuses benefit from ESG-focused investment, it not only betrays would-be ethical investors by directing their investments to unethical companies, it also poses a huge barrier for advocates and affected communities seeking remedy and accountability for those abuses.   

“Harmful companies cite high ESG scores or their inclusion in ESG investment indexes and funds as proof of their good human rights and environmental practices all the time,” said Inclusive Development International’s senior legal & policy associate Coleen Scott. “The ESG stamp of approval makes it harder to convince shareholders, lenders and other key stakeholders that the company needs to change.”   

We invite fellow advocates and affected communities to contribute to the database.  

The 28 companies currently included in the database—all of which Inclusive Development International and our partners are familiar with through ongoing advocacy and case work—represent a fraction of the harmful companies that are benefitting from ESG investment. We will be working with civil society partners and affected communities around the world to add new companies to the database on an ongoing basis, and to hold them and the ESG investment industry accountable.  Visit the contribute page to learn more.    

The ESG Watch company database reveals the extent of ESG investment going to a number of notoriously harmful corporations.  

Each company profile in the ESG Watch database presents evidence of the company’s human rights and environmental abuses alongside a tally of ESG-labeled funds that own shares in it, and the value of those shares. For example:  

• TotalEnergies, a top contributor to global carbon emissions that is linked to numerous human rights controversies, including related to its East African Crude Oil Pipeline, benefits from over $1.6 billion in ESG investment.   

• Rio Tinto, one of the world’s largest mining companies and the subject of numerous human rights and environmental complaints, benefits from over $480 million in ESG investment.  

• Heidelberg Materials, a cement manufacturer accused of developing mines and factories over the objections of local and Indigenous communities in multiple locations, benefits from over $300 million in ESG investment.  

• Elbit Systems, a defense firm accused of selling drones and drone parts to the Myanmar military, benefits from over $26 million in ESG investment. In total, 16 companies with business ties to Myanmar’s military are benefitting from over $36 billion in ESG investment, according to ESG Watch.    

ESG-labeled funds have over $13B worth of holdings in companies linked to Myanmar’s brutal military regime, a financial investigation reveals.

Companies with ties to Myanmar’s military are benefitting from over $13 billion in ESG-labeled investments, according to financial records and other information compiled and published today by Inclusive Development International and ALTSEAN-Burma. In their report, “The Myanmar ESG Files: How ‘responsible investment’ is enabling a military dictatorship,” the human rights advocacy groups document how hundreds of ESG (Environmental, Social and Governance) funds hold shares in 33 corporations that are enabling a brutal regime responsible for genocide and crimes against humanity. 

The $3.9 trillion ESG investing industry, which promotes itself as a way for investors to align their money with their values, is the fastest growing sector of financial services.  

“Activists on the ground have been risking their lives and liberty to stop the flow of money, weapons and other resources that has allowed the military to maintain its illegitimate grip on power,” said Debbie Stothard, founder and coordinator of ALTSEAN-Burma. “It’s shocking and devastating to see so-called ‘responsible investment’ doing the opposite.”

Companies receiving “sustainable investment” include weapons dealers that are arming the regime, tech firms serving the military-controlled national police force, and others that direct profits to the military, allowing it to surveil and violently crush dissent. Data compiled by Inclusive Development International and published today in an open-access online database show that ESG-labeled funds continued to hold shares in these companies even after Myanmar’s military was found responsible for two of the most egregious and well-publicized human rights crimes in recent history: the genocide perpetrated against the Rohingya and last year’s bloody coup and subsequent crackdown on pro-democracy protesters.  

“That dozens of companies with ties to Myanmar’s genocidal regime are included in ESG portfolios shows just how large the gulf is between ‘responsible investment’ marketing claims and reality,” said David Pred, executive director of Inclusive Development International. “The foundation of this fraudulent industry is a deeply flawed ESG ratings system, which is in urgent need of regulation.”

From responsible investing to ESG greenwashing

Tailoring investment strategies to consider ESG issues is increasingly common. Yet while the ESG investing industry is capitalizing on public demand for ethical and sustainable investing options, it is directing capital in ways that are neither – as evidenced by information revealed in the Myanmar ESG Files. 

This is in part because the process through which companies’ ESG practices are rated and then used to tailor investment portfolios typically only reflects information considered “financially material.” That means a company’s links to gross human rights abuses are only relevant insofar as they threaten its future profitability and share price. 

ESG ratings can also mask serious human rights abuses because they are based on an amalgamation of information about numerous indicators and a diverse range of environmental, social and governance issues. As a result, a company making and selling weapons used to perpetrate genocide and war crimes in Myanmar can effectively compensate for the reputational risks of that behavior and raise its ESG rating by, for example, committing to reduce its greenhouse gas emissions. 

The role of ESG index providers 

Firms that translate ESG ratings into suggested investment portfolios (ESG indexes), including MSCI, FTSE Russell and S&P Dow Jones Indices, have enormous leverage to improve human rights compliance among companies seeking a spot on their indexes. Under the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises, they have a responsibility to exercise that leverage – including by excluding companies that refuse to stop enabling the Myanmar military’s human rights abuses. Information documented in the Myanmar ESG Files demonstrates that all three firms are failing to do so.

The low bar for securing a place in ESG funds does more than direct “responsible investment” to the wrong place. It makes it harder to hold some of worst corporate offenders accountable. The “ESG” stamp of approval undermines the efforts of communities and human rights defenders to secure redress for corporate abuses by making investors less likely to engage and use their leverage to compel action. 

“Real socially responsible investing could be a crucial catalyst for advancing human rights in business,” said Pred. “But without a complete overhaul, the ESG investing industry is actually doing the opposite – greenwashing abusive companies and diverting energy from this potentially powerful force for good, with real human costs in Myanmar and around the world.”

Read the full report and access the Myanmar ESG Files database here: http://www.inclusivedevelopment.net/MyanmarESGFiles