Supporting Chinese Coal when you buy ESG clean energy companies

Being ESG is now as fashionable as drinking juice-infused alcohol. Between 2012 and 2017, North America experienced a 32% increase in flavored beer launches, which according to research is partly because consumers perceive fruit flavors as having nutritional value. It’s like how I drink fruit-flavored alcohol (yes Strong Zero: Triple Peach has zero sugar and maybe some peach goodness: https://yabaishopping.com/products/196-c-strong-zero-triple-peach-350ml-6-pack) and tell myself that’s healthy-ish. Never mind the 9% alcohol.


WSJ just came out with an expose article about how the surge in the use of solar panels in the US and Europe is built on “a mountain of Chinese Coal”: https://www.wsj.com/articles/behind-the-rise-of-u-s-solar-power-a-mountain-of-chinese-coal-11627734770

“For years, China’s low-cost, coal-fired electricity has given the country’s solar-panel manufacturers a competitive advantage, allowing them to dominate global markets.

Chinese factories supply more than three-quarters of the world’s polysilicon, an essential component in most solar panels.”

The article picked out Daqo New Energy and GCL Poly as examples of companies that “rely overwhelmingly on coal”. Others like JinkoSolar are more ESG because they built a panel assembly plant in Florida to supply NextEra Energy, a US renewable energy company.

But if you look at the stock price charts of the “bad” vs. “good” companies, they all just seem to have gone up, probably due to the inflow of money into ESG funds:



Actually the “bad” company went up more than 5x more than the “good” company over the same time period. (Yes, I’m sure there are a lot of other factors that go into the share prices too)

I think it is a great idea to support sustainability. But maybe people should pay a bit more attention to what’s under the hood - not all companies who describe themselves as clean tech are truly as ESG as you think. For that matter, it seems that all fund managers are ESG now, even for strategies which do not involve picking single stock names. Like really, quant strategy trading indices need to be ESG. At least we use recycled paper here at GAO