I recently came across this thought-provoking article by Laura Peterson from the Union of Concerned Scientists, discussing the ongoing proxy season and its intersection with the urgent issue of climate change. The article dives deep into the tactics employed by defenders of the fossil fuel industry and sheds light on the importance of Environmental, Social, and Governance (ESG) investing.
For those who don’t know, Proxy Season is the time of year when shareholders can vote on issues for companies they own shares in.
But before we go into the excellent point that this article highlights, let’s go over the Anti-ESG movement.
The Anti-ESG Movement
Over the past year, the attempted mischaracterization of Environmental, Social, and Governance (ESG) investing as “woke capitalism” has largely been successful. This is something I would like to dive into deeper in this blog.
ESG, in its current form, has many issues. But not the problems that anti-ESG activists like Vivek Ramaswamy and Florida Governor Ron DeSantis claim. This anti-ESG rhetoric took off around the end of 2021 and has culminated with the Florida legislation prohibiting asset allocators from considering ESG factors in their investment decisions. (Katz, 2023)
If you want to see misinformation on ESG in full force, search ESG on Twitter and see the results.
Like many issues, one side of the aisle has somehow charged its base to adopt a vehement stance against an issue, typically represented by an acronym (like ESG or CRT), where most laypeople don’t fully understand or see the nuances.
Peterson is correct. The anti-ESG arguments are primarily strawman arguments. At the risk of making a strawman myself, some of the main arguments against ESG are:
To briefly respond to these self-admitted strawman arguments:
When ESG proponents use the government to force companies to take stances that promote Climate, Diversity, and good practices, that could be reasonably considered by some as socialism. But using the market, instead of the government, to solve these issues is about as capitalistic as it gets. If a moral Christian didn't want to invest in porn, tobacco, alcohol, and other things that they would consider pervert society, would that be considered socialism?
Profitability and sustainability can go hand-in-hand: it can attract and retain employees, increase brand reputation and consumer demand, highlight new opportunities for corporations, and create a clear competitive advantage.
ESG funds perform pretty well, especially for how new they are. They aren't perfect, but let's look at the U.S. Sustainability Targeted Value Portfolio (DAABX), which performed 7% ahead of the S&P 500.
The Strawman Argument in Proxy Season
Circling back to Peterson’s article, it seems that these anti-ESG activists have mobilized their followers with shares in public companies to participate in proxy voting sessions to help “liberate” these companies from “woke” business practices.
This is highly concerning.
Peterson is correct. The anti-ESG arguments are primarily strawman arguments, not rooted in any fact whatsoever, filing “a record number of shareholder resolutions attempting to block ESG initiatives at corporations this year.” (Peterson, 2023)
And unfortunately, it is working, with some companies like Chevron rolling back Climate targets.
I agree with Laura Peterson: I am not entirely convinced that this misguided shareholder activism convinced a company with a history like Chevron to roll back its climate targets. Instead, it just opened up an opportunity for them to do what they wanted to do.
It is evident that there is a worrisome trend in the anti-ESG movement. If we, as climate activists, aspire to achieve anything akin to ESG in the future, we must consider adopting strategies employed by our opposition. I suggest marking your calendar for next year's proxy meetings, making your voice heard, and coming up with innovative means to hold companies responsible for the environmental repercussions of their actions.
Comments