Fightback Against Anti-ESG Agenda and Investment Bans in US
As counter-intuitive as it may sound, 2023 saw a sharp spike of ESG pushback in the US.
Not just gentle pushback or difference of opinion, but in some instances banks and financial institutions were ‘banned’ for taking a stance against fossil fuels and other social impact initiatives.
These were giants of the financial industry, including BackRock, which saw several states shun them as managers of their state retirement assets because of the firm’s association with using ESG considerations in its investing.
Both Vanguard and BlackRock have reported steep declines in support for ESG-related shareholder proposals.
Dubbed the ‘anti-ESG movement’, Harvard Business Review describes it as a “loosely defined collection of beliefs and actions aimed at fighting a perceived shift towards ‘woke’ or progressive ideas in society and business”.
This has led many financial companies to now list anti-ESG efforts as a risk in their annual reports.
But there is now a response to that backlash, with Unlocking America’s Future launching a multi-million dollar campaign to protect what it calls ‘responsible investing’.
As a non-profit, Unlocking America’s Future is committed to highlighting the economic harm posed to workers, families, businesses, and the environment by what it calls these ‘coordinated attacks’ and interference from politicians that are pushing the anti-ESG agenda.
“Over the last few years, we have seen politicians, who accept campaign contributions from the oil and gas industry, attack and attempt (in some cases successfully) to ban responsible investment,” says Kyle Herrig, spokesperson for Unlocking America’s Future, talking to Sustainability magazine.
Herrig, an Executive Director at Congressional Integrity Project and Senior Advisor at Accountable.US, highlights a number of states that have already enacted anti-ESG laws – pointing to Texas, Tennessee, and Oklahoma.
“At least eight states have anti-ESG bills in their legislatures that carried over from 2023 to 2024: Iowa, Kansas, Michigan, Minnesota, Nebraska, Ohio, Oklahoma, and South Carolina and more 2024 bills are expected in other states as well.
“This is deeply troubling because, as we have already seen in states like Texas, these laws create unfriendly business environments, hurt the economy, and prevent progress on climate change.”
Anti-ESG movement is weaponising the term
The situation is exacerbated by the fact that only 22% of Americans have a good understanding of ESG, according to a recent report from Global Strategy Group.
Herrig says this weaponising of the term ESG and the anti-ESG movement is damaging the US economy, and impacting consumers.
“Not only are attacks on responsible investing deeply unpopular, these attacks hurt working families, are bad for business, and threaten the environment,” he says.
Herrig cites the example of Texas, a state that prides itself on its low taxes and business-friendly environment. He says since the state took an aggressive stance against responsible investing, their reputation has taken a hit and it is now being labelled “bad for business” by J.P. Morgan Chase CEO Jamie Dimon.
Sticking with Texas to highlight the issue, Herrig says the state adopted anti-ESG legislation that required state entities to divest from companies that take ESG into account in their investment strategies. This resulted in divestments from 11 financial firms, which has been estimated to cost taxpayers up to US$500 million.
The business case for responsible investing seems clear.
Business Case for Responsible Investing
According to Bloomberg, the world’s largest banks made about US$3 billion by underwriting bonds and providing loans for green projects in 2023. That means they earned more than fossil fuel projects for the second year in a row.
“Unlocking America’s Future is pushing back on the campaign against ESG by educating policymakers and the public about the risks of passing harmful policies that hurt working families, businesses, and the economy,” says Herrig.
“The movement against responsible investing is being funded by large corporate polluters and special interest groups that have contributed hundreds of millions of dollars to elected officials who have subsequently pursued their anti-ESG agenda.
“These campaigns are well-funded and coordinated. We are working as a counterweight to educate the public about the harmful impacts of their campaigns and stem the tide of anti-ESG legislation in states across the country.”
It is widely accepted that responsible investing is good for business, the economy, and the environment. Corporate sustainability initiatives drive better performance, open up new markets, and decrease the amount of downside risk on mutual funds.
Herrig believes 2024 is the year that we will see pushback against those that claim otherwise.
“The public is waking up to these thinly veiled attacks and see them for what they are: efforts to enrich and protect the fossil fuel industry,” he concludes.
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