The Oracle Will See Your Pension Now

I. The Séance

Let us begin, as one must when confronting a yet another truly spectacular piece of collective self-deception, with the sheer arithmetic of it. Between 2019 and 2022 something on the order of $120 trillion in assets fell under one ESG-linked commitment or another. That is not a sum. That is a geological event. It is more money than has ever been gathered behind any single idea in the history of the species, and the idea it was gathered behind was this: that a committee of analysts in Manhattan and Amsterdam, equipped with spreadsheets and a vocabulary borrowed in equal parts from the actuarial profession and the United Nations, could look at a company and divine its standing in the eyes of the future.

The future, you understand, does not answer letters. It cannot be subpoenaed. It declines to give interviews. And yet for the better part of a decade the largest pools of capital on earth were allocated as though the future had been reached by telephone and had expressed, in detail, its preferences regarding carbon intensity and board diversity. This was not investment in any sense a Victorian bank manager would recognise. It was haruspicy. It was the reading of entrails. The only modern touch was that the entrails were quarterly and the priests sent invoices.

Consider Raymond, who fixed the engines of American Airlines jets in a hangar outside Tulsa for thirty-one years and who would like, in the fullness of time, to retire. Raymond does not subscribe to MSCI. He has never read a sustainability disclosure and would, if handed one, use it to level a workbench. But Raymond’s retirement savings were marched into the séance on his behalf, his proxies voted on questions he was never asked, his future quietly — no. His future committed, by men he will never meet, to a set of propositions about the year 2050 that those men have since abandoned with the haste of arsonists leaving a building. We shall return to Raymond. He is the only honest party in this entire affair, and he is the one holding the bill.

II. The Courtesy of the Strongest Case

Before the demolition, the courtesy. Let us do the movement the favour of stating its case at its strongest, because a polemic that ducks the best version of its target is merely shouting, and there is enough shouting.

The case is this, and it is not contemptible. Redlining was real. For decades American banks drew literal red lines around minority neighbourhoods and refused them credit, and the Community Reinvestment Act of 1977 was a defensible response to a genuine injustice. Pollution is real; the firm that poisons a river and books the saving as profit has performed a theft, and the externality it has palmed off onto everyone downstream is a real cost that markets, left alone, do not price. Governance failures are real, and anyone who watched Enron mark its own homework, or Lehman conjure a balance sheet out of accounting cosmetics, can hardly deny that how a company is run bears on whether it survives. A world in which capital paid some attention to whether a firm was looting itself, fouling its surroundings, or run by a board of the chief executive’s golf partners would be a better-priced world. One concedes all of this. One concedes it gladly.

The trouble is not the impulse. The trouble is that the impulse was handed to a measurement apparatus that could not measure, enforced by institutions that did not believe it, and priced by a market that mistook the measuring for the thing measured. The disease is not the wish to do good. The disease is the conviction that good can be scored to two decimal places by a vendor, sold by subscription, and imposed on Raymond’s pension by a fund manager who has never set foot in Tulsa and never intends to. Everything that follows is an account of what happens when a moral sentiment is run through a billing system.

III. The Six Oracles, and Their Six Different Entrails

Here is the foundational scandal, and it is a scandal of arithmetic so elementary that it ought to have ended the whole enterprise in an afternoon.

When two of the great credit-rating agencies look at the same bond, they agree almost perfectly; their assessments correlate above 0.99. They are measuring something real — the probability that you get your money back — and reality has the inconvenient habit of constraining opinion. Now observe what happens when the ESG oracles examine the same company. Berg, Kölbel and Rigobon, in a paper for the Review of Finance in 2022 that ought to be tattooed on the inside of every trustee’s eyelids, measured the agreement between the major raters: MSCI, Sustainalytics, Moody’s, S&P Global, the old KLD and Refinitiv files. The correlations ran from 0.38 to 0.71. More than half of the disagreement — fifty-six per cent of it — came not from differing weights or philosophies but from the raters simply measuring different things and calling them by the same name.

Sit with that figure. Six oracles are led into the temple. The same goat is opened before them. The first declares the liver auspicious; the second finds the spleen damning; the third has been looking, it transpires, at a different goat entirely; and the fourth is reading the entrails of a goat that will not be born until 2031. They publish six verdicts, charge handsomely for each, and the institutions of the world allocate trillions on the strength of the consensus — except that there is no consensus, there has never been a consensus, and the divergence between the readings, averaged across thousands of firms and a decade of data, are the single best-documented fact in the entire field.

This is not a measurement that happens to be noisy. A measurement that happens to be noisy converges as you add observations. This converges on nothing, because there is no underlying quantity for it to converge upon. An ESG score is not a thermometer reading taken with a shaky hand. It is an opinion product, manufactured to the specifications of the institutional buyer who subscribes, and its commercial genius lies precisely in the fact that it cannot be checked against anything. The thermometer that reads whatever the customer hoped the temperature would be is not a poor instrument. It is a superb business.

And here the priesthood reveals its cleverest sleight. Having no stable object to measure, the oracles measured the one thing within reach: disclosure. They scored the companies that filed the longest reports, retained the slickest sustainability consultants, and printed the most photographs of wind turbines and racially balanced boardrooms. The score rewarded the confession, not the conduct. It was an examination one passed by submitting the most pages. Goodhart’s Law — that a measure which becomes a target ceases to be a good measure — was not so much proven as set to music and performed nightly to a full house.

IV. The Indulgence

The medieval Church, in its decadence, perfected an instrument of genius: the indulgence. For a fee, the sinner purchased a remission of punishment; the coin clinked in the coffer and the soul, allegedly, sprang from purgatory. Tetzel sold them; Luther objected; a continent caught fire. The modern green bond is the indulgence restored to commerce, and it is sold by the same logic and to the same end, which is the purchase of absolution at a price.

The mechanism is called the “greenium,” a word that should be spoken only with tongs. A green bond — a bond whose proceeds are pledged, with whatever sincerity, to virtuous ends — has historically yielded less than its grubby conventional twin. The European Central Bank’s own working paper puts the broad-market discount at around three basis points; ABN AMRO, examining euro investment-grade corporates, found something nearer fifteen. The number is not the point. The point is its sign. Investors paid for the privilege of lending. They accepted a thinner return in exchange for a cleaner feeling, and the issuers — who are not fools — pocketed the difference and built the same pipelines under greener letterhead.

Who, then, pays the indulgence? Not, it turns out, the saved. Pietsch and his co-authors, dissecting the question in the Journal of International Money and Finance in 2025, traced the cost to its source and found it borne overwhelmingly by investment funds, banks and insurers — which is to say, by the institutional buyers whose own mandates compelled them to buy. The greenium is not the market’s verdict on superior creditworthiness. It is the sound of an institution tipping itself. The fund is required by its prospectus to hold green paper; the requirement creates the demand; the demand creates the premium; and the premium is then presented to Raymond as evidence that virtue pays. It is a closed loop with a man’s pension trapped inside it, and the only genuine signal it transmits is the strength of the mandate, not the quality of the asset. Tellingly, in the emerging markets, where no such mandate compels anyone, the greenium simply vanishes. The miracle, it seems, requires a congregation that has already been told to believe.

There remains the deepest embarrassment of all, the one the movement least likes discussed. Suppose the whole apparatus worked perfectly. Suppose capital really did flow to the green and away from the brown, exactly as designed. Would emissions fall? Berk and van Binsbergen, in their study of what they drily call “counterproductive sustainable investing,” constructed a measure of how much a firm’s actual environmental footprint changes when its cost of capital is shifted, and found the link weak to perverse. Starving a brown firm of capital does not abolish the brown firm; it abolishes the brown firm’s ability to fund the very transition technology the exercise was meant to encourage. You have not slain the dragon. You have merely ensured it can no longer afford the dentist, and a dragon with toothache is not a safer dragon. It is a crosser one.

V. This Has All Happened Before, and It Always Ends the Same Way

The ESG enthusiast believes himself an innovator. He is, in fact, a re-enactor, performing in modern dress a play whose ending is known to every economic historian and to no one in sustainable finance. The script is old. A legitimate grievance summons a mandate; the mandate is handed to institutions; the institutions optimise for the metric rather than the world the metric was meant to describe; capital piles up where the metric points and drains away from where it does not; and the whole edifice runs splendidly until the day reality presents its accumulated invoice. There are three productions of this play worth the price of admission.

The first ran in Moscow for sixty-odd years. Gosplan, the Soviet planning ministry, undertook to allocate the capital of a continent by quota rather than price. It is easy now to sneer at the central planners, and one should, but one should sneer for the right reason. Their failure was not insufficient zeal or inadequate computers. Their failure was structural: they attempted to direct roughly half a million planned product positions in an economy that actually produced some twenty-five million distinct goods, and the gap between the plan and the world was filled, necessarily, by lies. Factories optimised for the target. When the target was set by weight, they made the famous monstrous chandeliers, vast iron things too heavy to hang, because the plan rewarded tonnage and was indifferent to light. The ESG score is the chandelier by the kilo. It rewards the disclosure, the gesture, the kilogram of reported virtue, and it is serenely uninterested in whether the room is any brighter. Alec Nove observed in 1980 that where prices bear no relation to scarcity or need, profitability can play only a subordinate role in any decision. He was describing the USSR. He might as well have been describing a fund whose holdings are dictated by SFDR Article 9 classification.

The second production ran in Tokyo. From 1961 the Bank of Japan practised “window guidance,” directing the commercial banks to lend toward favoured sectors — not by law, which would have been honest, but by moral suasion backed by control of the discount window, which was a great deal more effective and a great deal less accountable. The state, meanwhile, emasculated the bond and equity markets so that capital had nowhere to flow but through the banks the state could lean on. It worked, in the sense that a runaway train works, right up until financial liberalisation gave the best borrowers other doors, the banks redirected their now-surplus credit into property and shares, and the Nikkei climbed to nearly 39,000 by the end of 1989 on the strength of nothing whatever. The index would not see that level again until February of 2024. A thirty-four-year hangover, administered by men who were certain they had abolished the business cycle through superior coordination. The parallel to ESG is exact in the one respect that matters: a directing mechanism that relied on institutional compliance rather than law, and that therefore lost all control the moment the institutions found it convenient to comply no longer.

The third production is the most recent and the most painful, because we have not finished paying for it. The Community Reinvestment Act began, as we conceded, in genuine virtue. But the mechanism it established — allocate credit toward a politically favoured category, measure success by volume rather than by quality, and assume the underlying asset cannot fall — was then seized and amplified by actors the original statute never touched: the housing agencies, the securitisers, the rating agencies who priced mortgage paper on the serene assumption that American house prices had never fallen nationally and therefore never would. Subprime origination went from $35 billion in 1994 to $625 billion by 2005. Homeownership climbed from 64 to 69 per cent on incomes that did not climb with it. And then, in 2006, the one assumption on which the entire structure rested — that the favoured asset could not decline — turned out to be false, and Lehman Brothers discovered the meaning of gravity. The honest scholars will tell you, correctly, that the CRA itself did not cause the crisis; most of the worst lending was done by non-bank originators outside its reach. Quite so. But the template it pioneered — mandate, amplify, optimise for volume, assume the asset class is exempt from physics — is precisely the template ESG has rebuilt, with green assets cast in the role of the house that only ever goes up.

Three plays, three catastrophes, one plot. And the sustainable-finance industry, which fancies itself the most forward-looking enterprise in the history of money, sat through all three and concluded that it had invented the theatre.

VI. The Bill Arrives by Tanker

Metaphor has its limits, and the limit of this one is that entrails and indulgences do not, in the end, keep the lights on. Capital misdirected is not merely an accounting curiosity; it is barrels not drilled, mines not sunk, turbines built where pipelines were needed. And the physical world, unlike an ESG rating, cannot be talked round.

The doctrine held that capital should flee the brown and flood the green, and capital obediently did so. By the International Energy Agency’s own 2025 reckoning, clean-energy investment now runs at roughly $2.2 trillion a year against about $1.1 trillion for oil, gas and coal — a ratio of two to one. A handsome ratio, were it not for the awkward detail that fossil fuels still supply something near eighty per cent of the world’s primary energy. We are funding the world we have been promised at twice the rate we are funding the world we actually inhabit, and the gap between the two is not bridged by good intentions. It is bridged by shortage. Upstream oil and gas spending collapsed by about thirty per cent in 2020 and has not, in real terms, recovered; meanwhile the existing fields deplete at five to eight per cent a year, which means that merely to stand still the industry must run, and it has been told, on pain of a downgraded score, to sit. This is not prudence. It is the eating of the seed corn whilst congratulating oneself on the tidiness of the empty barn.

The consequence has a name, and the name is greenflation, and it is the least surprising economic phenomenon of the decade. Goldman Sachs estimated as early as 2022 that the net-zero transition could add one to two percentage points to annual inflation across the years to 2040, through carbon pricing, the capital demands of the build-out, and the writing-down of stranded assets. The Network for Greening the Financial System — an organisation founded by central bankers explicitly to advance the transition, and therefore the least likely body on earth to invent the charge — conceded in its own assessment that the green transition is, in the short run, likely to be inflationary. When the arsonists’ own fire-safety committee admits the building is warm, one may take it that the building is on fire.

And then, in April of 2026, the bill arrived by tanker. The Strait of Hormuz closed; oil vaulted past $100; and across Europe, Japan and South Korea, more coal began creeping back into the energy mix — coal, the very substance the entire exercise existed to banish. This is the moment the haruspices dread, the moment the future declines to be read and instead simply happens. A decade of underinvestment, undertaken to appease a metric, met a geopolitical shock it had made the world less able to withstand, and the response of the virtuous Continent was to fire up the dirtiest fuel it owns. One could not design a sharper rebuke if one set out to. The séance was interrupted by the electricity bill.

VII. The High Priests Flee the Temple

There is a particular comedy reserved for the moment when the prophets stop believing the prophecy, and ESG has now reached it. The institutions that built the temple, staffed the altar, and shamed the laggards into the pews have read the runes, found them unfavourable to their own interests, and bolted for the doors with a speed that would be impressive were it not so contemptible.

Observe BlackRock, whose chief executive made an annual liturgy of the stakeholder gospel and who, as recently as 2021, backed better than forty per cent of environmental and social shareholder proposals. In the 2025 proxy season BlackRock supported fewer than two per cent of them. Two. The high priest did not merely lose his faith; he repudiated it under oath and asked for his donation back. The same chief executive announced, with the air of a man who has discovered a draught, that he had stopped using the term “ESG” altogether because it had become weaponised — a remarkable confession from the figure who did more than any other living person to weaponise it. Vanguard, not to be outdone in apostasy, supported precisely zero environmental and social proposals out of some four hundred it assessed in the 2024 season, dismissing them as “overly prescriptive,” which is the sound a fund makes when it has noticed which way the regulator is now pointing.

For the regulator has indeed turned, and turned with teeth. In January 2025, in Spence v. American Airlines, Judge Reed O’Connor of the Northern District of Texas found that the airline’s benefits committee had breached its fiduciary duty of loyalty under ERISA by allowing ESG considerations to colour the management of its employees’ retirement plan. And here is the detail that should chill every trustee in the country: the court found the breach of loyalty even though the investments cleared the prudence standard. It was not that the ESG strategy lost money. It was that the fiduciary served two masters, one of them the planet, and the law permits a pension fiduciary exactly one master, who is Raymond. The judgment is now a template, and the class-action bar has read it with the appetite of men who have found a new and well-stocked lake.

The rest of the apparatus is being dismantled in the same spirit. In December 2025 a presidential Executive Order set the SEC, the FTC and the Department of Labor upon ISS and Glass Lewis, the proxy-advisory duopoly that between them sway the votes attached to some $35 trillion, on the charge of elevating political agendas over fiduciary duty. The Attorney General of Texas, Ken Paxton, has sued ISS directly. The SEC under Mark Uyeda has loosened the engagement rules that gave the asset managers their leverage. The enforcement machinery that made ESG compulsory is being fed, joint by joint, into the very fiduciary mincer it spent a decade pretending to honour. Frankenstein’s monster has not merely turned on its creator; it has retained counsel.

What, then, becomes of the doctrine, now that its enforcers have fled and its courts have turned? It does not die. That is the final, weary joke. It moults. Watch the language slough its skin in real time: “ESG,” now radioactive, becomes “sustainability”; “sustainability,” wearing thin, becomes “resilience”; “resilience” hardens into “material risk management,” at which point the creature has shed every distinguishing feature and may pass, unrecognised, back into the respectable bloodstream of ordinary finance. The London Business School notes that mentions of ESG in corporate reports peaked in 2023 and have begun to fall. The acronym is being dropped down the memory hole; the holdings remain, relabelled. In Europe, where the CSRD and the SFDR have given the whole apparatus the permanence of statute, it will not even bother to change its clothes; it will simply become the law, and the Continent will discover, as the Soviets and the Japanese discovered before it, that a directed economy grows slowly and complains loudly and cannot be argued out of its own arithmetic.

Which leaves Raymond, in his hangar outside Tulsa, contemplating a retirement that was voted away from him by men who have since decided they never meant it. He was sold a prophecy by institutions that have stopped believing it, priced by oracles who never agreed on it, enforced by a duopoly now under federal subpoena, and underwritten by an energy system that is presently burning coal to keep the lights on whilst the index that punished the coal congratulates itself on its foresight. He paid the greenium. He paid the consultants. He is paying, at the pump, for the barrels that were never drilled. He has paid for everyone’s virtue except his own, and the one thing he was never offered, in this entire decade-long communion with the future, was a vote on whether he wished to attend the séance at all.

The future still does not answer letters. But it has, at last, sent the invoice; and it is, as these things always are, made out to the man who was never asked.

Sources underpinning this essay — the Berg, Kölbel and Rigobon divergence study (Review of Finance, 2022); Berk and van Binsbergen on counterproductive sustainable investing (SSRN); Pietsch et al. on the incidence of the greenium (JIMF, 2025); the ECB and ABN AMRO greenium estimates; IEA World Energy Investment 2025; the Goldman Sachs and NGFS greenflation assessments; Spence v. American Airlines (N.D. Tex., 2025); the BlackRock and Vanguard proxy disclosures; Nove (1980) and Hoshi (1999) on Gosplan and window guidance.