GOP War On ‘Woke’ Investing Elicits Shrug From Companies

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As a broad concept, ESG investing is relatively straightforward. The acronym “ESG” stands for “Environmental, Social and Governance” and ESG-conscious investment managers take these issues into account when making decisions.

A focus on ESG does not mean that companies and investors are neglecting their pursuit of profit. Rather, it’s about internalizing costs that certain companies have traditionally tried to outsource to the masses, while at the same time making a profit.

As a term, ESG is a relatively new term. But in the past there have been many examples of why someone needed to come up with that name.

For example, consider the opioid epidemic. Pharmaceutical companies have made huge profits while causing hundreds of thousands of preventable deaths. If ESG were more important when the problem started, perhaps the big investors would be socially responsible for marketing and distributing far more opioids than could have been responsibly consumed. Realizing the costs, it would have put pressure on pharmaceutical companies to try and force them to mitigate the harm. they were causing

It’s not like the companies responsible for this sort of thing don’t pay the price in the end. Lawsuit after lawsuit, regulatory action after regulatory action, is turning back as much as possible from the private sector responsible. for the opioid crisis.

Yet society will never get back more than a penny for every dollar it has to bear as a result of irresponsible corporate behavior. It’s a court order and obviously not to ring a bell when a person dies.

The ESG model favors prevention and risk management over applying a tourniquet after the fact.

BlackRock, which oversees about $8 trillion for investors as the world’s largest asset manager, faced a lot of scrutiny in 2022, putting increasing pressure on companies to follow their own ESG philosophies.Specifically, BlackRock To advance the transition to a low-carbon economy, businesses will need to reduce their carbon emissions and make other changes. — or risk accessing a large pool of capital managed by BlackRock.

BlackRock has been praised by many, but has also faced heavy criticism from some activist investors and lawmakers. For these critics, the purpose of corporations is to make money for their shareholders, regardless of environmental, social, or governance outcomes.

In 2023, ESG-hostile Republicans will gain a meaningful foothold in the House of Representatives. They vowed to use their newfound clout to crack down About what they see as an “awakened” investment.

Without Senate or White House control, Republicans cannot actually pass federal legislation to counter asset managers’ focus on ESG. But what they can do is hold hearings, get documents, and potentially influence where investments in government-controlled Republican strongholds are going. Florida Governor Ron DeSantis has already overseen the withdrawal of nearly $2 billion worth of state assets previously controlled by BlackRock.

The reaction from the financial industry was largely a shrug. ESG is not particularly controversial among listed companies and asset managers Responsible for investment funds. BlackRock recently promised “little change” in its annual update on its stewardship policies, but a handful of asset managers have succumbed to the anti-ESG backlash. Vanguard, for example, chose to exit a group that aims to have zero greenhouse gas emissions by the middle of this century.

given that After all, more than half of Americans have a direct stake in the stock market.and that More than 7 in 10 believe climate change is realIt’s also hard to imagine a principled stance against BlackRock’s ESG investing style becoming a scathing political stance.

Even as the Republican House decides what to do with its new majority, the world of ESG investing still has to answer to the market, which is ultimately the more powerful ruler. In response, core ESG-focused funds fared far better, even though investors withdrew more than $250 billion from US investment funds by November 2022. These funds actually had a small net inflow of capital over the same period.

Don’t think ESG is going nowhere.

Jonathan Wolfe is a civil litigator, Your Debt-Free JD (affiliate link). He taught legal documents, contributed to various publications, and made economic and scientific reading and writing both a business and a pleasure.The views he expresses are probably pure gold, but they still belong only to him and not to any organization he belongs to. He would not want to share credit anyway. I can do it

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