ESG credentials of Apple, Alphabet (Google) and Microsoft called into question

Apple, Microsoft and Alphabet, three of the biggest tech giants, have been ranked among the top 12 ESG (Environmental, Social, and Governance) companies in the world for 2022, according to Yahoo Finance. 

However, doubts have been raised about the trustworthiness of ESG ratings for these companies after analysing their impact scores.

After conducting an impact analysis on the three companies, each was found to have an impak Score™ of less than 200 out of 1,000, which makes them average rather than global leaders. To put things into perspective, the average impak Score™ for impak’s large-cap universe is 145 out of 1,000 points, with best-in-class scores above 400.

The study revealed that the traditional financial metrics alone do not provide a complete picture of a company’s impact on ESG factors. 

A narrow focus could be detrimental to achieving the United Nations’s 17 Sustainable Development Goals or investor returns in the long run. Therefore, assessing the global impact of a company requires a holistic analysis.

The study’s goal was to show that the current ESG approach does not fully evaluate the global impact of these three companies. It highlighted the importance of their many severe controversies in understanding their commitment to sustainability.  

Additionally, the study explained that merely reducing negative impacts is not enough to have a positive impact. The analysis showed that Apple, Alphabet and Microsoft fail to be the real proponents of sustainability, going beyond the financial materiality of ESG assessment. 

The research highlights how societies today are at a pivotal moment for non-financial reporting, and that the market has all the tools, theories and data to prevent further misleading ESG ratings on large-cap companies. 

Investors rely on ESG ratings to make informed decisions about companies. The report’s findings suggest that the current approach to ESG ratings may not be as effective as it seems. The survey has also called for a more holistic approach to assessing the impact of companies on ESG factors to avoid further misleading ratings.