American flag waving with the Capitol Hill in the background
ESGI – an index that evaluates Environmental, Social, and Governance risks by nation, worldwide, and published recently by Swiss-based Global Risk Profile (GRP) — ranks America 44th in 2019, four notches behind the 2018 ranking.That’s one notch behind Chile and a notch ahead of Albania!
GRP specializes in third-party risk management related services. It uses 45 variables to measure risks in 177 countries, related to the environment, human rights, and health & safety. Then it ranks those countries between 0-100, where 0 represents the lowest risk and 100 the highest.
America's modest and sliding ESG ranking comes at a time when the American economy is booming. And it should be of great concern to every American, including Wall Street investors fixated on short corporate performance and Federal Reserve moves.
Why such a low ranking? It's mainly because America receives a low score in the Human Rights Component of the ESGI index, which concerns engagements related to international law.
That's according to Sonia Thurnherr, lead data analyst for GRP. "We mainly want to determine the state's consent to be bound by a human right treaty but also its compliance to the engagements it has (diligence in the reporting process) and if it has extended a standing invitation for country visits to the special procedures of the human rights council," says Thurnherr.
What's the problem with the US? "As concerns the USA, they have ratified only 5 treaties of the 18 considered, which makes them an exception among developed countries, and even in the world. Actually, only St. Kitts and Nevis, Bhutan, Tuvalu, Palau, Tonga, and Niue have ratified fewer treaties than the USA," she says.
Wait, there's more. "As opposed to 127 other countries, there is no standing invitation extended by the US government for country visits," adds Thurnherr. "The objective of these visits is to examine the human rights situation at the national level by mandate-holders that consequently report their findings to the Human Rights Council and issue recommendations. This is not possible in the USA."
Group of American activists is protesting
SESGI's ranking has drawn the attention of some observers. One of them is former prosecutor Andrew Leven. "I am not familiar with ESG, so I can't speak to the particulars of what it measures," he says. "Nor do I have a detailed about regulatory rollbacks, which would (at least in general) be expected to play a role in environmental and workplace safety issues.
But he's concerned about the environmental record of the current administration. "One example that comes in mind is the Trump administration's efforts to loosen gas mileage requirements in the face of opposition from automobile manufacturers. Another is the (rather absurd) effort to subsidize dirty coal."
Leven is skeptical about the human rights issue, however. "To the extent those measures look to immigration policies and entry restrictions based on country of origin (i.e., the so-called Muslim ban), one could argue that political agendas of the ESG testers may be bleeding into the results of the tests," he says.
John Tamny, the Director of The Center of Economic Freedom at Freedomworks and former editor of Real Clear Markets, agrees. "Oh please, American workers are desperate and destitute? If so, why do the world's poorest routinely risk everything just to be an "illegal" worker stateside, with all the difficulties that come with being underground?" he asks.
Wall street sign with American flag in the Financial District of Lower Manhattan
Tamny is also puzzled with the appeal of American consumers to foreign producers. "And if American workers are so desperate, why do the world's producers line up to meet their needs?" Figure that 1% is just that; a tiny portion of the American whole. The world's producers get rich meeting the needs of all Americans, which reveals the fatuity of the study."
Political scientist Apostolos Pittas is skeptical about the survey altogether. "Such surveys can be misleading in that they may not accurately reflect the quality of life in respective countries," he says. "If they were accurate, Americans would be immigrating to Chile, and not the other way around."
Although the United States is not perfect, says Pittas, its economy is robust and still leads the world in many sectors. "The US is a leader in technology, higher education, and even in democratic governance. If anything, other countries should aspire to be more like the United States, especially in terms of the freedom it guarantees to its citizens, not less."
