I’m often accused of being too black and white in my thinking. My skepticism about ESG, a popular form of socially responsible investing, is a case in point. I applaud those who wish to apply moral considerations when investing in public entities, but companies comprising the biggest holdings of Vanguard’s ESG fund (ESGV) are hardly at the forefront of social responsibility.

Corporate America’s response to the Hong Kong protesters demonstrating against Beijing’s crackdown on democratic freedoms in the semiautonomous Chinese territory has heightened my ESG skepticism. One of the “social” metrics of ESG investing is a commitment to human rights. It seems reasonable to assume that companies with high ESG scores would be the most supportive of Hong Kong protestors who are risking their lives opposing Beijing’s tyrannical rule. The opposite is true.

Apple, the second largest holding in ESGV, removed from its App Store a crowdsourced map service that allowed Hong Kong protesters to track police activity after China’s government run newspaper derided the app as “toxic software.” Google, whose parent is the fourth largest ESGV holding, removed from its Google Play store a mobile game that allowed players to role-play a Hong Kong protestor. ESPN, a unit of Disney, ESGV’s 13th largest holding, prohibits employees referencing Chinese politics when discussing a supportive tweet for Hong Kong protesters posted by the general manager of the Houston Rockets.

Mark Kern

ESG principles prohibit investments in so-called “sin” stocks of companies peddling tobacco, alcohol, adult entertainment, and gambling and gaming. So, its noteworthy that one of the few persons willing to risk his livelihood and reputation to stand up to China and expose its alleged corruption is a prominent gaming designer named Mark Kern who oversaw Blizzard Entertainment’s development of the highly successful online role-playing game “World of Warcraft.”   

After Blizzard suspended for a year and seized the prize money of a player from Hong Kong for yelling “Liberate Hong Kong, revolution of our age!” Kern posted a series of impassioned tweets to his more than 70,000 followers declaring he was boycotting his former employer and revealed that he was offered a $2 million “kickback bribe’ to take an investment from China.

As Kern noted, Chinese companies dominate the highly profitable global gaming industry likely to the delight of ESG proponents. But the dominance helps fund China’s development of Artificial Intelligence, which president Xi Jinping has declared will enable China to achieve global domination. The next World War will be waged behind computers and servers and many experts say the U.S. isn’t technologically prepared.

Tencent, which like all Chinese companies is subject to growing control and interference by the Communist government, is one of the biggest investors in gaming companies, including Blizzard’s parent company, as well as Snap and Tesla. Tencent has streaming rights in China to NBA games and the company promptly suspended ties with the Houston Rockets after the team’s GM last week posted a tweet in support of the Hong Kong protesters.

Tencent is also at the forefront of AI development and is using American talent to gain supremacy. The company last year opened a Seattle AI research lab hoping to lure employees from Amazon and Microsoft which also have invested heavily in AI development. Baidu and Alibaba, China’s two other major technology companies, also have AI development hubs in the Seattle area.

AI requires the powerful graphic-processing units manufactured by Silicon Valley-based Nvidia Corp., whose customers include China-based companies. I image this is what Lenin had in mind when he said, “The Capitalists will sell us the rope with which we will hang them.”

Kern’s protest has received scant coverage in the corporate-owned media. The press has also largely ignored or played down the recent arrest of a naturalized U.S. citizen accused of spying for China. The arrest represents at least the sixth time in the past three years the Justice Department has prosecuted Americans for spying on behalf of China. Four of them, including three former U.S. intelligence officers, have been convicted. (See this Wall Street Journal op-ed for more details about China’s successful technology espionage).  

Mark Kern would seem a natural for Nike’s “Believe in something, even if it means sacrificing everything” marketing campaign but that clearly isn’t going to happen. Nike ordered Houston Rockets merchandise removed from at least five company stores in China, the company’s top source for revenue growth.

Nike, recently ranked 97 in CR magazine’s Top 100 Corporate Citizens list, has an ESG rating that places it among the top nine percent of global companies. However, the Motley Fool says it is reconsidering Nike’s rating in the wake of this Wall Street Journal story detailing CEO Mark Parker’s involvement in an experiment involving performance-enhancing drugs.