ESG soon to be DOA Embracing Marxist values doesn't enhance corporate bottom line
Cowardly boardrooms wilted at the first disparaging tweet sent their way by angry activist groups, not realizing by giving in to them, they ceded their corporate agenda to progressives.
ESG soon to be DOA
Embracing Marxist values doesn't enhance corporate bottom line
![Illustration on the hazards of environmental, social and governance (ESG) policy by Alexander Hunter/The Washington Times Illustration on the hazards of environmental, social and governance (ESG) policy by Alexander Hunter/The Washington Times](https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F5bc5703b-e631-42a5-9d06-0258f177a664_885x516.jpeg)
COMMENTARY
By Editorial Board - The Washington Times - Wednesday, May 22, 2024
OPINION:
Environmental, social and governance concerns used to be all the rage on Wall Street. Cowardly boardrooms wilted at the first disparaging tweet sent their way by angry activist groups, not realizing by giving in to them, they ceded their corporate agenda to progressives.
That was a mistake. Consumers interested in buying a pair of shoes or grabbing a cold drink on a summer afternoon aren’t looking for political posturing. As measured in a report released last week by the Committee to Unleash Prosperity, companies are beginning to respond to the growing backlash against ESG.
ESG took hold after “woke” money managers at big investment houses used the power of proxy voting to bully publicly traded companies into endorsing progressive political positions. Funds wield enormous power, mostly from retirees who just want a healthy return for their lifetime contributions.
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The free-market economists at the Committee to Unleash Prosperity decided to help retirees and other investors decide which funds were making decisions based on political objectives by grading the response of the most active funds to a series of leftist ESG shareholder resolutions. If they, for example, embraced bans on plastic, condemned the use of fossil fuels or declared they would waste internal resources in a futile attempt to alter the global thermometer reading, then they’d receive lower marks.
The scorecard skipped funds with words such as “Climate” or “Responsible” in their name, because those operations are open about their politicized intentions. People put their money in such funds because they want to feel good about themselves.
On the other hand, investors seeking the best returns took notice when the committee’s first scorecard came out last year. By Morningstar’s reckoning, $13 billion was pulled out of funds endorsing socialist causes — presumably to be invested more wisely elsewhere.
As a result of the shifting sentiment, scores improved 25% among the top 40 funds evaluated in the latest report. That certainly doesn’t mean ESG is dead, as a dozen funds still earn a mediocre C grade. Twelve funds flunked, and they will pay a price for their choices.
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The more resources companies waste on virtue signaling, the less they put toward making products that people want to buy. Ask Budweiser how well it worked out to hire a man in drag to represent its top-selling product. North American sales of Bud Light dropped 27% in the wake of the “woke” advertising misstep and still have not recovered, according to first-quarter results posted last week by Anheuser-Busch InBev.
BlackRock has also felt the sting of the ESG pushback. At the beginning of the year, the asset management firm decided to send 600 employees, mostly from the ESG department, packing. Its grade improved from a C to a B in 2023, and could be higher on the next scorecard.
Red states can take some credit for this, as lawmakers harnessed the power of their pension investments to encourage funds to stop politicizing what ought to be financial decisions. South Carolina yanked $200 million it had invested in BlackRock in 2022, and Florida withdrew $2 billion. Texas earlier this year pulled a whopping $8.5 billion out of BlackRock over lingering ESG concerns. That had to hurt.
With results like that, don’t expect ESG to hang around much longer.
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I have a dissenting view. The fiduciary risks were obvious before DEI/ESG was ever rolled out. "Get Woke, Go Broke" is a red herring.
The Stakeholder Capitalist policy makers don't care about the profit as much as the control, once they have their monopolies.
I based this on watching holding companies constantly purchase viable, healthy businesses only to gut them, out-source and off-shore them, as the chosen tax dump for that year to benefit their other companies.
And its cyclical and repetitive. At one Fortune 500 company, an industry leader, I went through 3 different cycles of this.