Advocates of more environmentally and socially responsible models of capitalism have had the upper hand in recent years. In the US, however, they have run into a serious backlash: red-state politicians have sought to blacklist banks and asset managers they deem to be boycotting fossil fuels, brands including Bud Light and Target are under attack over their marketing to LGBTQ consumers and some Republicans have made a so-called “war on woke” central to their 2024 presidential campaigns.
The backlash has put many companies and investors in an unwanted and sometimes costly spotlight, but it is achieving less than its proponents hoped. Anti-ESG measures have been scrapped or diluted in several Republican-led states and newly formed anti-ESG funds have raised relatively trivial sums. A surge in proposals from conservative shareholders at this year’s annual meetings has flopped, meanwhile, with the average anti-ESG resolution garnering just 2.6 per cent support, according to the Sustainable Investments Institute, a data provider. Outside the US, the backlash is having even less impact.
Even so, there are signs that asset managers’ belief that social and environmental stewardship should be part of their mandates is wavering in the face of pressure from the right. SII’s analysis of this year’s US proxy season found that fewer than a quarter of shareholders supported resolutions calling for more action on climate change or human rights, down sharply from 2022. Weak support for environmental resolutions at ExxonMobil and Chevron’s meetings is probably also linked to the jump in fossil fuel stocks after Russia invaded Ukraine.
Some of that may reflect large investors’ claims that too many proposals from shareholder activists are excessively narrow. But asset managers’ reticence about supporting such proposals risks feeding public scepticism about their environmental and social rhetoric.
There are substantive debates to be had about the commercial, practical and moral roles business and finance should play in tackling environmental and societal challenges. But with ESG’s proponents and their antagonists both suffering setbacks, it is time to start thinking about how to wrest those debates away from left-right politics.
Business leaders tempted to indulge in “green hushing” — hoping to dodge controversy by lying low — must instead make a more confident case if they believe that the central principles of stakeholder capitalism and ESG investing are just good business. The costs of climate-driven disruptions, restive employees or supply chain scandals are real. Working to reduce such risks while responding to demands for business to step up is not a leftwing agenda.
ESG investing itself remains a flawed catch-all, trying to encompass too many issues in one marketable acronym; there is a case for unpacking it into its separate elements. The success its opponents have found by pointing out its contradictions and hypocrisies should encourage supporters to reflect on how it has proved so vulnerable to attack. It should also prompt them to refocus on the core responsibilities that companies have to their employees, the planet and the people who hold their stock.
Doing so, in a way that acknowledges ESG’s flaws and looks for common ground between its critics on the left and right, may yet rescue a vital debate about business’s place in the world from the extremes of America’s partisan battles. But believers in cleaner, more equitable and more sustainable forms of capitalism have more to do to make the case that they are driven by their companies’ long-term interests rather than by ideology.
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