On a sultry day in Tampa this summer, Florida Governor Ron DeSantis took the podium to unleash an attack on what he claims is one of the major threats to the lives and liberties of upstanding American citizens. I was.
“This is something that’s crushing the little guy in a lot of ways,” he said.
DeSantis wasn’t talking about attacks from abroad, rising gas prices, inflation, pandemic lockdowns, or even Democrats.
Instead, he was talking about the rise of ESG. ESG is an umbrella term in the corporate world used to denote a company’s focus on issues such as climate change and diversity.
DeSantis stood in front of a banner that read “The government of law, not the CEO who wakes up” and lashed out at companies he said were trying to use force to advance a liberal agenda. .
“We have seen corporate elites, from Wall Street banks to large asset managers and big tech companies, use their economic power to impose policies on nations that they failed to achieve at the ballot box.” He said.
DeSantis has announced actions aimed at reducing the role of ESG (environmental, social and governance) policies in its investments in Florida’s pension plans. In doing so, he said, he was “asserting the constitutional system’s authority over the power of ideological corporations.” It was a message.
For almost two decades, developed countries around the world have adopted ESG investment policies. It set ambitious targets to reduce carbon emissions, use more renewable energy and add diversity to its workforce with virtually no controversy.
More such policies this week, as scientists, corporate sustainability chiefs, government officials, and others, including former Vice Presidents Al Gore and John Kerry (now US Special President). and the need for financial commitments for climate mitigation and adaptation will be one of the topics discussed. Climate Envoys meet in New York for the New York Times Climate Forward Conference.
The event is part of Climate Week, an annual global summit held during the United Nations General Assembly, highlighting the role of business in combating climate change and achieving social justice, entitled “The Equities and Economy Panels such as “Investment” will be held.
But in recent months, what has become a mediocre part of sustainability reporting in other parts of the world has emerged, along with the related term “stakeholder capitalism,” as the latest frontier in the culture wars to disrupt US politics. floating.
As companies and investment firms embrace efforts to reduce greenhouse gas emissions and address global and regional inequalities, conservatives in the United States are working closely with the oil and gas industry to advocate foul play. starting. And in recent months, they’ve gone beyond rhetoric and pushed to punish companies they say are too focused on issues they claim have nothing to do with their interests.
“There is a lot of politics going on around the term ESG right now,” said Reid Thomas, managing director of fund manager JTC. “There are different sides that oppose each other.”
But even as rhetoric heats up and management braces for further attacks by Republican politicians, most companies and investment firms are holding their ground. Many business leaders say that investing in climate change solutions and their employees is in their best interest as a long-term strategy, and in the short term it is worth the offensive public relations.
Larry Fink, CEO of BlackRock, the world’s largest asset manager, is an advocate for ESG and defended his company’s policies in this year’s annual letter to the CEO.
“Stakeholder capitalism is not about politics,” he wrote. “It’s not a social or ideological agenda. It’s not ‘woke up.’ It is capitalism, driven by mutually beneficial relationships between you and your employees, customers, suppliers, and the communities your company depends on to thrive. ”
“Ongoing Culture Wars”
Tensions between conservatives and entrepreneurs in America have been building for years. After President Donald Trump’s election, many CEOs are at odds with the White House on issues such as immigration, race relations and efforts to mitigate climate change by curbing oil and gas production and use. I noticed.
In addition to claiming policy positions unpopular with many Republicans, large corporations and investment firms are now working to integrate ESG more deeply into their businesses.
Setting such goals rarely results in rapid and dramatic changes in how a company operates. And indeed, many companies have been accused of greenwashing. In other words, they are selling their ESG efforts without implementing any real reforms.
Nonetheless, conservative leaders are now challenging the nation’s biggest companies, attacking ESG and portraying environmental and social priorities as bad for business and politically motivated. I’m trying left.
A record number of anti-ESG shareholder proposals were filed last year.
Texas became the first state to pass a law banning major financial institutions from doing business in the state if they are deemed to be “boycotting” the oil and gas industry. In fact, the financial firms covered by this law still do well in dealing with the fossil fuel industry, but they do not lend to some of the oil and gas businesses that are considered underinvested. I am withdrawing.
Several more states passed similar laws this year, including West Virginia and Oklahoma.
At the same time, Republican state attorneys general have targeted BlackRock, supporting and tackling the goals set at the 2015 Paris Climate Conference, thus prioritizing the “climate issue” over customers and collaborating with climate activists. accused of forming an alliance. Phase out the fossil fuels that are dangerously warming the planet.
Former Vice President Mike Pence, a potential 2024 presidential candidate, said this summer that he wanted to “reinforce” ESG.
Inspire Investing, a financial firm that claims to be guided by biblical principles, has lashed out at companies pursuing ESG initiatives, describing the term as “advancing a toxic and socially Marxist agenda by liberal activists.” It has been weaponized for
Even the world’s richest man, Elon Musk, is unhappy with the term. “ESG is a scam,” he wrote on Twitter earlier this year. “It has been weaponized by false social justice warriors.”
And with each passing week, more states are taking steps to penalize companies they say focus too much on climate issues — including many of the world’s largest banks.
“We believe this anti-ESG movement is the next continuation of the ongoing culture wars,” said Christopher Inton, an analyst at research firm Morningstar, in a recent report. Many, even some, bills have been written without a good understanding of sustainable investing, and investors who ignore ESG risks like any other risk do so at their own risk.”
But as the right wing has stepped up its attacks on companies, most executives have stuck with it, at least for now.
Gene Rogers, Head of ESG at Blackstone, the world’s largest private equity firm, said: “So we don’t really see any political strife.”
Companies say that efforts to reduce emissions are a sound long-term investment and efforts to promote workforce diversity improve corporate culture as the risks of climate change become increasingly significant.
“Fund managers and investors aren’t really put off by all the hype,” says Thomas. He said that “funds are flowing” towards investing in issues such as climate change and equity.
BlackRock has defended its stance as a sound investment strategy. “We believe that investors and companies that take a positive stance on climate risks and impacts on the energy transition will produce better long-term financial results,” the company wrote.
Many other large companies have taken a similar position.
“The market recognizes this and it’s good for business, not because it’s part of the political agenda,” said the Ceres Accelerator for Sustainable Business, a group that supports sustainable business. said Steven M. Rothstein, managing director of Capital Markets.
Additionally, many opportunistic companies feel that more renewable energy projects are being built around the world, making them more profitable.
“This transition can lead to great opportunities,” says Rothstein. “Trillions of dollars will be invested in green technology.”
‘Confusing and inconsistent’
Given the lack of uniform standards, what people mean by the term ESG is constantly evolving. After Russia launched its full-scale invasion of Ukraine in February, Citi analysts said arms makers and defense contractors were seen as socially positive investments because they helped protect democracy. I argued that it should be
Meanwhile, a whole new industry of providers of reporting, data, metrics and technology services is emerging to help large companies track their ESG efforts.
“There are hundreds of different reporting frameworks, all confusing and inconsistent,” says Thomas. “There are hundreds of companies selling reporting software.”
Worse still is the fact that even those who support corporate efforts to combat climate change admit that some funds and companies that boast of their environmental contributions exaggerate their impact. .
Mary Cerulli, founder of Climate Finance Action, said: “It has tainted the entire legitimacy of the wider framework.”
‘Climate is a risk’
For now, at least, conservatives seem to have the upper hand in the battle for control of public opinion.
“They are spinning this narrative that ESG has ‘woke up’ and is giving them a big head start in messaging,” said Cerulli.
Prominent conservative commentators amplify the message and often misrepresent the meaning of the term.
Fox News host Tucker Carlson said in a segment this summer, “ESG has no real definition, but in effect companies and countries are the most productive sectors in the name of climate change and equity.” must be closed.
Despite the ongoing attacks, big companies appear to be making efforts to prioritize environmental issues.
A Morningstar report found that the majority of anti-ESG shareholder proposals failed to gain investor support. Over 90% of his companies in the S&P 500 index now publish his ESG reports. The U.S. Securities and Exchange Commission is also considering adopting new rules requiring listed companies to submit more detailed analyzes of their climate-related risks and greenhouse gas emissions.
“Private markets are talking,” Rothstein said. “And they say the climate is a risk.”
This article was originally published in The New York Times.