Measuring Environment, Society, and Governance (ESG)

In the market today, there is an increasing awareness and support for positive effects on ESG as a defining factor in investment and purchasing. But the market also lacks a consistent and meaningful way to measure these things. This article is about our attempt to do so.

There are tradeoffs

Like most activist activities, the strongest proponents tend to be blind to their own weaknesses. It is quite literally impossible to be 100% positive in all ESG areas for several reasons:

There are tradeoffs and we cannot crisply define them all. But even if we could, the definition of them all itself would take time and energy and the process of defining and distributing the concepts is itself a tradeoff with the other things we could be doing that might be better or worse for the ESG of the universe.

Our metrics today

We chose a rating system that has 7 levels, ranging from very negative (-3) to very positive (+3) across the three major areas (E, S, G) and in each of the approximately 12 drill-downs in each area. We got the drill-downs from a combination of looking at what others have done and our own existing metrics and descriptives for companies. Here are the ratings:

I know, these ratings are imprecise and require supporting information to be evaluated by the reader. But we are trying to take affirmative steps and perhaps be a bit activist by putting these out as metrics and rating ourselves and others by these measures.

One more thing... The default should be "Careless". If you haven't taken it into consideration, you are being careless with respect to it.

But what issues do we measure?

When we looked, we found that most folks were measuring fairly nebulous things. So are we... but we are trying to be specific in what we are nebulous about. Here's the current (and changing over time) list:

Of course each of these has a more specific description of the endpoints by giving a sense of what would be malicious and activist situations. For example, "Peace and happiness" ranges from "Actively support and encourage conflict" to "Using niceness to bring happiness and joy to the world". As I said, not exactly continuous metrics or things you can count, but I think you get the idea.

How do we rate?

As you know by now, if you know us at all, "we eat our own dog food". Or in other words, we do what we tell others to do (for the most part). So here are our (self-assessed) ESG ratings at A2E:

Ethics and ESG Scorecard
Angel to Exit
Evaluation CriteriaRating Basis
Waste and pollution 0 Neutral Reduce, reuse, recycle
Resource depletion 0 Neutral We seek to avoid consuming deplete-able resources
Climate change 0 Neutral We try to get to carbon neutral and use passive wherever we can reasonably do so
Water cleanliness and purity 0 Neutral
Air quality and purity 2 Affirmative We plant and grow terrs to help improve air quality and use good air filters in our HVAC systems.
Energy consumption and cleanliness 2 Affirmative We try to reduce consumption where feasible, minimize platform energy usage, favor low energy usage, choose zero emissions when we can from providers and are seeking solar for facilities.
Space junk 0 Neutral
Oceans and waterways 0 Neutral
Ground and soil 2 Affirmative We use only organic fertilization and yard and garden components.
Underground and stability 0 Neutral
Animals and Plants 2 Affirmative We actively support organic everything and care for plants and animals where we control them.
Circular economy approach1 Reasonable We support companies in this arena, but have no active efforts of our own.
Environmental Score = 62.5% Reasonable (9 points on 12 items)
Meritocrisy and Fairness1 Reasonable We pay people largely what they ask for and refuse to allow work for free or ultra-low wages
Working conditions 1 Reasonable Most everyone works from home and we generally support them being in a safe and healthy home environment.
Community participation and support 3 Activist We are active in our community and seek to bring more people into sound growth companies, provide free content, and work with local non-profits.
Health, Wellness, and Safety 1 Reasonable We provide insurance for employee families and encourage health and wellness in our treatment of all we work with.
Conflict reduction and resolution0 Neutral
Peace and Happiness 1 Reasonable We try to be nice and promote peace, and we don't fund or support those who seek war and violence.
Discrimination and Equality 1 Reasonable We all try to work together for mutual benefit and respect, but we are also quite direct and offend some people by our approach.,
Privacy 1 Reasonable We support privacy, but our portals are also focused on transparency. We let people providing content decide what they wish to have released.
Recordkeeping 3 Activist We use systems of records and seek to keep strong contemporaneous records of meaningful actions while promoting others to do the same.
Influence Operations 3 Activist We seek to counter malicious influence operations and try to put out the best information we have as part of that effort.
Societal Score = 75% Activist (15 points on 10 items)
Renumeration fairness 2 Affirmative Equal pay for equal work, however, we mostly let workers dictate what they gat paid and only work with them as/when we can afford it.
Political influence, Corruption, and Bribery 2 Affirmative We are strongly against it and don;t work with people who use these methods when we find it.
Representative board and executives 0 Neutral We are an LLC - no board.
Board independence 0 Neutral We are an LLC - no board.
Shareholder and stakeholder engagement 2 Affirmative We seek out interactions with and opinions from all stakeholders, and try to engage and listen to everyone in our ecosystem.
Transparency, honesty, and integrity 3 Activist We are highly transparent, will not stand for dishonesty, and do our best to maintain and encourage integrity in the work we do to help grow companies and in those companies themselves.
Ethical standards and practices 1 Reasonable We have standards we include in contracts and agreements, but in practice have no affirmative way of enforcement except when we find out about bad behavior.
Healthy management control architecture 2 Affirmative We have control diagrams of our overall process and metrics and checklists we use to try to assure we do what we are supposed to do. We also encourage this in others.
Strong separation of duties 0 Neutral The only real internal separation of duties we have is between our outside accountant and our managing member. No other internal controls are in place, but as a single member LLC, none can really be in place.
Well defined and followed duties 1 Reasonable Our duties are not very well defined in a formal sense. We have duties to protect in the cyber-arena, and we follow them and publish them in our policies.
Reasonable and Prudent practices 3 Activist We seek to continuew to define these for ourselves and execute as defined, and we help others define theirs and teach and publish on the subject.
Audit and responses -1 Careless No real audit processes or practices other than the CPA checking for tax purposes.
Governance Score = 70.85% Affirmative (15 points on 12 items)
Overall ESG Score = 69.1% Affirmative (39 points on 34 items)
Points system: [-3=Malicious (0%) ... 0=Neutral (50%) ... 3=Activist (100%)]

The rating basis is::

  • -3 Malicious: Actively seeking to do harm.
  • -2 Negligent: Knowingly neglectful. According to the legal definition, something like 'A failure to behave with the level of care that someone of ordinary prudence would have exercised under the same circumstances. The behavior usually consists of actions, but can also consist of omissions when there is some duty to act (e.g., a duty to help victims of one's previous conduct).'
  • -1 Careless: Not knowingly neglectful, but not paying enough attention to care or find out, or knowing a little bit about it but not bothering to act on it in a meaningful way.
  • 0 Neutral: Either not involved at all, as in we don't use any or produce any or have any effect one way or another, or the net effect is so insignificant as to not make a difference.
  • +1 Reasonable: Taking reasonable steps to not do harm and perhaps do a bit of good, and being prudent in paying enough attention to not do careless or negligent things.
  • +2 Affirmative: Taking steps specifically oriented toward improving the issue and producing better outcomes than would occur if not in business at all.
  • +3 Activist: Actively seeking to make changes in the world that improve this issue.

A call to action

With the importance of ESG to investors, you should evaluate yourself and let investors know the results. And you can do so as part of your Go To Angel process. All you have to do is join us:

Go To Angel

In summary

Environment, society, and governance are important to investment and ultimately success in the world. Start to pay attention, and make your results known to the world.

Copyright(c) Fred Cohen, 2022 - All Rights Reserved