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The term ESG is fine, according to a recent poll of 1,000 Americans. Despite continued polarization related to the acronym, which stands for environmental, social and governance, the majority of Americans believe it’s the best way to describe a company’s approach to improve business, society and the environment. Before we get to the data, though, it’s important to understand why we asked this question in the first place.

How did we get here?

Over the past year, a rising chorus of conservative U.S. voices have claimed that ESG is “woke capitalism,” or corporate virtue signaling about social and environmental concerns which they see as beyond the bounds of business.

The issue drew President Joe Biden’s first presidential veto in March of this year, defending legislation related to ESG investing and bringing the issue into the national spotlight. ESG is facing such a significant backlash that BlackRock CEO Larry Fink, long one of the financial industry’s staunchest proponents for purpose and ESG, doesn’t even want to use the term — though BlackRock's policies around society, the environment, and business governance remain unchanged.

It’s also important to establish that whatever you call them, sound ESG practices are not new, and are indeed vital to operating a responsible, ethical, and profitable business. As Fortune sustainability reporter Eamon Barrett observed, “major corporations documenting their environmental, social, and governance policies for investor scrutiny is actually a decades-old process.” At its core, ESG is a means to broaden the lens on what constitutes key drivers of business value, accompanied by efforts to measure and report on what matters for individual company operations via standardized reporting frameworks. 

Americans say ESG is a-okay

We partnered with Purpose Collaborative member Reputation Leaders, a global research and thought leadership consultancy, to ask Americans what term they feel best describes “the approach companies take to improve business, society and the environment.”
ESG and sustainability are tied for the top, at 23 percent each. Corporate social responsibility is second, at 21 percent, followed by purpose (11 percent), corporate citizenship (8 percent), stakeholder capitalism (7 percent) and stewardship (5 percent).

Across demographic groups, ESG and sustainability are the favored terms among men, while women prefer “corporate social responsibility,” a phrase that connotes a sense of obligation. ESG is also the top choice for younger audiences, particularly those aged 25 to 34, while consumers aged 55 to 64, prefer the term “sustainability.” There are regional differences, as well. People living in the Northeast prefer sustainability, while their Southern and Midwestern counterparts prefer ESG.

Reputation Leaders also analyzed the tone of media coverage related to Americans’ top three terms: ESG, CSR and sustainability. CSR garnered the largest share of positive sentiment at 37 percent, with sustainability in second place at 32 percent and ESG trailing at 20 percent. ESG was the only term to have a significant amount (10 percent) of negative sentiment.

What now?

This study can help support companies in exploring the terms they will use to discuss the impact their business has on society. It is important to develop a clear, shared perspective and take a long-term view.

From the United Nations to the World Economic Forum, global leaders are advocating for businesses to embed a net-positive approach into their operating models to accelerate innovation and impact. Increasingly, employees, customers, supply chain partners, and others are asking about the ESG commitments of the companies they work for or with. Business leaders need to have answers and a strong point of view on which issues are most important to their business, and why. Our best advice? Don’t worry about what you call it — stick to your organization’s long-term, strategic commitments to stakeholders, society and the environment.

When it comes to communications, here are three ways to help depolarize the conversation:

• Be clear about the goals of ESG. ESG is not about imposing a set of values on business. It provides a framework for companies to assess and optimize their value and impact. 
• Increase transparency around ESG data and metrics. This will help to ensure that investors and other stakeholders are making informed decisions.
• Embrace standardized reporting frameworks. This will make it easier to compare companies' ESG performance — think: the Task Force on Climate-Related Financial Disclosures (TCFD), the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB).

Yes, the polarization will continue, especially as the 2024 presidential election nears. As the world continues to endure climate impacts from extreme heat and flooding to record-breaking wildfires, there also will be greater demand for businesses to address environmental challenges.

Scores of studies suggest that ESG — done right — drives sustainable competitive advantage and can accelerate organizational growth over the long-term. An impressive 80 percent of investors believe that companies with strong ESG practices can generate higher returns and make for better long-term investments, according to research from Morgan Stanley.
 
By continuing to show a link between ESG issues and the business, we can help to make the debate around ESG more constructive and less polarizing. This will ultimately benefit businesses, investors and society as a whole.

Reputation Leaders is a global thought leadership consultancy. Our people are passionate about business as a force for good, believing that profit and purpose can co-exist by aligning brand purpose with responsibility towards the environment, society and corporate citizenship. Reputation Leaders Ltd managed the study which ran with 1,000 nationally representative respondents in the U.S. in July 2023.

The Purpose Collaborative is a global group of 45+ firms and subject matter experts in 20+ countries with 500+ professionals, all developing breakthrough work to help organizations accelerate their purpose, ESG, and sustainability commitments. Member capabilities include research and data analytics, employee engagement, sustainability strategy and reporting, digital marketing, creative programming and storytelling, and video production. Learn more here. 

Image credit: blacksalmon/Adobe Stock

Women entrepreneurs play a key role in climate resiliency and adaptation, says Lizz Welch, CEO of International Development Enterprises (iDE). “Women in leadership … are much more communal in our approaches and recognize the benefits that can accrue based on really taking into account climate change,” she told TriplePundit.

The global economy could increase by a net $5 trillion to $6 trillion by empowering women at the same rate as men, according to a recent study from the Women Entrepreneurs Financial Initiative. Likewise, it stands to reason that the response to the climate crisis could look different under equitable leadership. Yet women continue to face significant barriers to entrepreneurship.

Welch and iDE are working to support and empower women entrepreneurs in the developing world. It is from this capacity that women have a stronger connection to the environment — and they’re quicker to adapt to changes in that environment, Welch said.

“In the smallholder context, iDE does a lot of work in African agriculture, for example," she said. "The role of women, often both in the family and in the community, is that they're in charge of the cooking, in charge of energy for the household, often in charge the labor that needs to go into the farm. So, women are very aware of the patterns and changes in the climate and rainfall and are quicker adopters of improved seeds and technology.”

These women consistently reinvest about 90 percent of their profits back into their households and communities — whereas the men only reinvest about 30 to 40 percent, Welch said. Female agricultural entrepreneurs in Africa also produce 70 percent of the food, though they only own 15 percent of the land.

The recognition of changing patterns and willingness to adapt that women entrepreneurs demonstrate has the potential to spill over to climate action when they are in positions of power that allow them to affect larger change. Researchers have known for some time that governments with a larger percentage of women in their national assemblies were more likely to agree to climate treaties.

This is, at least in part, due to women having a better understanding of the risk the climate crisis poses to themselves, wider society and the environment. And their personal risk is greater. Of those displaced by climate change and its ensuing disasters, 80 percent are female, according to the United Nations.

Women’s potential to take a stronger stand on climate action is layered, Welch said. “Starting at the very smallest unit of change. It’s at the household level, then it’s communities and districts, [then] national and international,” she said. “Women bring much more of that community fabric into what they're working on, so when you add that up, you're seeing changes at each one of those levels. It becomes a bit of a snowball effect.”

While gender parity is a long way off, it isn’t a magic fix for the climate crisis either. “I still think there's a chunk of the global population that hasn't fully recognized the depths of impacts that climate change is having on everyday life,” Welch said. “I think that's still a limitation that we have to overcome as a global community.”

Still, women are demonstrating their resilience in real time. “The big distinguisher here is really that [women’s] community level focus is not only on improving things within their household but really within the community and within the country,” she said. “Women are very, very quick to identify barriers to growth and progress, and then to invest their time and energy in solving those issues.”

The accumulation of microplastics in the environment has drastically increased since 2006, resulting in over 170 trillion microplastic particles in the world’s oceans, researchers estimated in a recent study. The authors highlight years of increased plastic production and waste generation as potential culprits. Plastic can be found in almost everything, including fabrics like polyester and nylon. And laundering clothes that are made with those fabrics is a primary source of the microplastic pollution that makes its way into waterways and, eventually, the ocean.  

Roughly 60 percent of all textiles are made from plastic fibers, which can release up to 700,000 microplastic fibers each laundry cycle that do not break down naturally, according to Gulp, a company offering a potential solution to this problem.

Gulp’s washing machine filter is the first sustainable, long-lasting, microfiber filter of its kind. And it catches up to 90 percent of the microfibers from each load of laundry. 

“Gulp is about creating a long-term solution for one of the biggest challenges of our time. Gulp is a sustainable, scalable piece of technology that empowers people to become part of the solution and make a real difference,” Adam Root, the founder and CEO of Gulp’s parent company, Matter, said in a statement. “It’s easy to install and use, and it’s designed to fit washing machines across Europe in millions of homes."

Consumers don’t need a plumber to install the self-cleaning filter. It connects to washing machines with simple push-fit connections compatible with the standard hoses in the U.K. and EU. An LED light signals when the filter is full, and consumers have the option of sending the filtered microfibers back to Matter for analysis or disposing of them in their trash. The majority of landfill sites in the U.K. and Europe are sealed due to the regulatory requirements, so the filtered microfibers likely will not end up leeching into nearby waterways. 

Matter recently raised $10 million of Series A funding that enables the company to scale its microplastic filtration technology and accelerate its solutions for commercial and industrial applications. The funding is “rocket fuel across the entire business,” Root told us. 

“We are looking at how we can scale the laundry side of the business, but also we’re moving to the industrial space, such as wastewater treatment plants, textiles, factories, really developing it at scale,” Root said. While Matter is moving forward with scaling its industrial technology, the Gulp filter is probably the product closest to being ready for broad commercial application. 

A major driver of Matter’s effort to scale is the legislative environment, Root said. France set the benchmark as the first country to take legislative steps in the fight against plastic microfiber pollution with mandatory microfiber filters on washing machines to be introduced by 2025. 

In the United States, a microfiber filtration bill was also introduced in California, the world’s largest sub-national economy. Starting in 2029, all new washing machines sold in the state must contain a microfiber filtration system with a mesh size of 100 micrometers or less. The bill passed its first committee hearing in March 2023.   

“The legislation moving into place is moving the big players. There are around eight manufacturers to represent about 80 percent of the West’s market for [washing machines],” Root said. “Matter’s position is to be a brand behind a brand, so we are really looking at us working into other people’s supply chains and then scaling it through to get into the mass market. I think legislation will be a big driver toward that, and that will then enable the biggest players to be moving in that space.”

The Gulp filter is only available in the U.K. and EU, but the company is working to introduce the technology in the United States in roughly a year and a half, Root said.

In the meantime, educating consumers about the problems posed by plastic microfiber pollution — and that current options for dealing with the problem may do more harm than good — is really important, Root said.

“We’ve seen disposable filtration systems coming onto the market, but you are throwing away more plastic than you are capturing, so that’s not going to work at scale,” he said.

In addition, there needs to be greater awareness of the impact of microfiber pollution on microorganisms, such as the plankton that live in bodies of water, consume carbon dioxide for food, and release oxygen back into the environment, Root said. 

“These guys represent the largest sequestration of carbon on our planet and also produce the majority of the world’s oxygen,” he said. “People think of washing machines and oceans being so disconnected, but unfortunately they’ve never been so connected in our time.”

Images courtesy of Matter

With wildfires ravaging Canada, devastating coastal Maui and sparking elsewhere around the world, it’s been a bad year for fire. In our hard-hit neighbor to the north, an area about the size of Mississippi has burned, while Maui’s blazes were the deadliest in over a century. These punishing wildfires — occurring more frequently and devouring more land — seem to be a new normal.

Unsurprisingly, a major factor behind this is global warming. Higher temperatures and droughts dry out fuels like grasses, debris, shrubs and trees during the fire season, leaving forests like a giant tinderbox waiting to be set off. With more active and longer fire seasons on the horizon, projections for the future look bleak. The United Nations Environment Program predicts a 50 percent increase in the risk of extreme wildfires globally by the year 2100.

Slowing down the juggernaut of global warming is complex, but is combatting this evil spinoff as daunting? Fortunately, we can take steps to prevent wildfires that are good for the environment, too.

The woes of wildfires

It’s hardly a shocker that wildfires come with substantial costs for humans, the environment and the economy. Wildfires caused $81.6 billion in damages in the U.S. from 2017 to 2021, nearly 10 times the amount for the previous four-year period, according to the U.S. Cybersecurity and Infrastructure Security Agency. Fires destroy and damage properties, while other social and economic losses — displacing individuals, ruining businesses and driving away tourists — are quick to follow. However, wages and employment can actually rise temporarily when large wildfires occur, presumably due to fire suppression efforts in these counties. 

Wildfires also damage the environment. They degrade watersheds, lead to soil erosion and harm wildlife populations. And, through a positive feedback loop, they fuel climate change. Canadian wildfires have emitted 300 million tons of carbon already this year, three times the amount for a regular fire season, according to the NASA Earth Observatory.

While the risk of death or injury from fire remains low in the U.S., it is worsening. Wildfires emit a mix of hazardous pollutants, including fine particulates. This pollution is linked to cardiovascular and respiratory diseases, cognitive impairment, memory loss and even premature death. Disturbingly, wildfire smoke can travel hundreds of miles, as witnessed in the hazy skies of New York City from Quebec fires earlier this summer. 

Ways to reduce wildfires 

Despite this dismal picture, we can reduce the risk of wildfires. One easy method is through fire education and prevention programs. For instance, Indonesian communities participating in the Fire Free Village Program decreased the amount of burnt land by 90 percent during one of the worst fire seasons on record. The program informed communities about the risks associated with using fire to develop agricultural land, helped them implement alternatives, and provided infrastructure grants when “no burn” targets were met.

EcoForests Asset Management, a forestry investment management company, also engages local communities in fire safety and mitigation. It sponsors workshops and training programs, employs and trains fire response teams, and works to suppress garbage burning, which can trigger fires.

Another prevention method is eliminating the non-native plants that often fuel fires. For instance, European ranchers in Maui introduced African vegetation such as Guinea grass, molasses grass and buffelgrass for livestock forage in the 18th century. These grasses spread rapidly along roadsides and become highly flammable when they dry out. Both the recent fires and a blaze in 2018 were attributable, in part, to these non-native shrubs and grasses. 

Maui County recommended replacing these invasive grasses and abandoned sugarcane fields with native vegetation to reduce wildfire risk in 2021. It also recommended introducing fire breaks, especially around power lines. Tragically, it seems little was done.

In addition, fires also clear the land and make it easier for non-native vegetation to invade or regrow. A coordinated set of restoration and plant management strategies may be required to break this cycle.

Fires and forests

Forests are a fertile ground for combatting fires. Decades of logging and fire suppression lead to woodlands with a high density of trees and a lot of fuel, which is a recipe for wildfires. Active management of forests — including thinning dead and dying trees, removing brush, pruning and controlled burning — can reduce fuel loads and the risk of fires in certain environments. 

But that’s just the start. Technology also plays an important role. “You can use technology to detect a fire early, which is one great advancement,” said Michael Ackerman, CEO of Ecoforests Asset Management. “In most of the fires we're seeing across British Columbia, California, Greece and Maui, the fires expanded much quicker than they were detected. And then you don't have time for a rapid response.”

Drones, satellite technology, and the remote sensing method lidar can detect heat and moisture in the ground to determine high-risk areas, Ackerman said. Then, firebreaks can be set up by intentionally removing swathes of vegetation to slow or stop the spread of wildfires. The management company also proactively treats dry areas by adding fire-resistant species or planting vegetation to increase the forest’s canopy, and consequently, soil moisture. And it employs networks of wireless sensors that can detect combustion in a forest and send alerts.

In tropical forests, disturbances like deforestation can raise the temperature and dry out forests, increasing the risk of wildfires. To combat this, forestry companies can reforest gaps between forested areas which helps reduce the occurrence, intensity and speed of wildfires, Ackerman said. 

Fighting climate change may help fight fires, too. “The world of carbon credits is allowing for more management of forests,”  Ackerman said. “We reforest deforested areas, but you can also manage older forests. For example, JPMorgan Chase purchased $500 million of forests in the U.S. in October of last year, and they manage it to obtain carbon credits. By obtaining carbon credits, they have a duty to that forest area to protect and conserve it.”

There’s ample room for corporations to step up and play their part. Reducing and offsetting emissions, adopting sustainable practices, raising awareness, providing training programs and engaging with local communities are all steps companies can take. 

Despite the growing risk of wildfires, if everyone chips in, we can pave the way to a safer and less fiery future.

Image credit: Marcus Kauffman/Unsplash

LGBTQ+ workers earn about 10 percent less over their lifetimes compared to straight white men — and LGBTQ+ people of color, transgender people and nonbinary people earn even less. A host of factors contribute to this, including a shortage of LGBTQ+ role models in leadership positions and fewer opportunities for sponsorship and mentorship from leaders outside the community.

Another factor that's less discussed is the mental toll that comes with being "different" from what is perceived as the norm. 

"Part of the challenge for folks who are part of the community is that there's a constant feeling of having to 'come out' at work. People who are heterosexual, they don't have to constantly come out to people," said John Volturo, a partner at the coaching, consulting and investment firm Evolution. "It's draining emotionally. People who are part of the community often don't have as much energy at the end of the day because they're constantly in a fight mode." 

Understanding the LGBTQ+ pay gap

The gender pay gap is generally well known: White women earn 20 percent less than men on average, a figure that increases for women of color — including a 30 percent gap for Black women and a 35 percent gap for Latina women. 

The LGBTQ+ pay gap is less understood, though the factors that drive pay discrepancies for people in the community often mirror the experiences other historically marginalized groups report at work. 

Take, for example, this longitudinal study of Black women who received an MBA from Harvard Business School, arguably the most competitive business school in the United States. Though published in 2018, the study offers a rare glimpse into the long-term effects of being an "other" in the workplace. Within 40 years of graduation, only 13 percent of Black women who received a Harvard MBA went on to reach the senior executive ranks in their fields, compared to 40 percent of Harvard MBAs overall.

Of the Black women who managed to reach the top, many said they struggled to “be themselves” at work and often felt “on display” in their workplaces. “It makes you work hard to make sure you’re never misstepping,” one Black woman CEO told the Harvard Business Review.

Of course the experiences of a Black woman and a white man in the workplace will be very different, regardless of sexual orientation or gender identity. But the internal conflict that comes from feeling "on display" is echoed by people in the LGBTQ+ community — and many say it holds them back from growing in their roles. 

"Yes, more people than ever feel comfortable coming out," said Evolution partner Peter Gandolfo. "But there's this question looming over them: Will their decision to be 'out' and 'how out' they're going to be have a detrimental impact on their standing within the organization?"

It can seem even harder to be open at work as increasingly hostile rhetoric toward the community continues to make headlines in the U.S. "Ten years ago, being out was one thing. Today it feels like you're opening yourself up for a political debate that could ensue in the workplace," Gandolfo said. 

The constant need to "come out," and the fear of what could happen when they do, adds up to LGBTQ+ people feeling they can't be their authentic selves in the workplace, which research shows has detrimental effects on career growth. 

How to counter the LGBTQ+ pay gap: From leadership ranks to corporate culture 

Openly LGBTQ+ people hold just 25 of the 5,670 board seats in the Fortune 500, a mere 0.40 percent. Of those 25 seats, only two are held by LGBTQ+ people of color, according to Out Leadership, a global LGBTQ+ business platform. 

"Some of the key challenges LGBTQ+ workers face are specifically around the idea that they don't see role models at the top," said Volturo, who spent decades serving in C-suites and on corporate boards as an out member of the community. "We call it the Rainbow Glass Effect — emphasizing how the lack of those LGBTQ+ individuals in leadership positions really creates a glass ceiling and keeps people pushed down."

To help answer this need for their community, Volturo and Gandolfo co-created Evolution's Gay Men's Leadership Circles, a peer group of directors, managers and C-suite leaders from across organizations. Members range from aspiring leaders in their 20s and 30s to seasoned executives in the golden age of their careers. They meet regularly to support each other, opening the door for personal connection and mentorship that may not exist within their own workplaces. 

"One of our biggest drivers for creating this was the desire for connection and community," said Gandolfo, who helped launch the LGBTQ+ employee resource group at Mattel, among other leadership roles before joining Evolution. "There are a lot of LGBTQ people in leadership roles who can feel quite alone — either because they don't have peers they can confide in around their business challenges, their worries, or they're the only LGBTQ person within their organization." 

The space to connect helps younger leaders learn from veterans and creates a platform to discuss ideas or concerns without judgment. As a result, members have grown in their careers, become champions for inclusion within their organizations, and found the courage to come out at work for the first time. But many LGBTQ+ workers don't have access to this type of space, which means every organization has more to do when it comes to championing LGBTQ+ people in leadership and building a culture in which people feel they can be themselves. 

"This increasing rise in the culture war is causing us to have to work a lot harder to make people feel safe — and not only feel safe, but feel like they don't get penalized for being who they are wherever they go," Volturo said. 

Inclusion benefits businesses as well as workers, and everyone has a role

For LGBTQ+ workers who don't have a space to connect with peers in their workplaces or communities, the power of self advocacy can go a long way toward breaking down the barriers that contribute to the LGBTQ+ pay gap, even if it feels scary at first.

"When you're more of yourself, you're performing at your best and people can respond to you in deeper, more connective ways," Volturo said. "Make sure you're advocating for yourself, questioning things and doing it in a way that feels safe for you. The most important thing is for you to feel safe, physically and emotionally, but when you start talking to people and you realize who your allies are, those allies become really important folks for helping to create a dialogue and for defending you during meetings, defending you during hiring. And by ‘you’ I mean the community itself, to make sure that we have a voice."

"Any parts of coming out that were hard paled in comparison to the benefits and empowerment that I felt by being able to be out and to be more of myself," Gandolfo added. 

But just like it isn't up to Black employees to "fix racism" within their organizations, creating workplaces more conducive to the advancement of LGBTQ+ workers is everyone's responsibility. In other words: Those who consider themselves allies to the community need to act like it. "Allyship is a verb," Gandolfo said. "We don't just get to say we are an ally. Leaders and organizations have to take active steps to support inclusion of LGBTQ workers or anybody else that's marginalized."

Taking action on the host of evidence-based ways to build inclusion within organizations is not only good for workers, but it's also proven to have a bottom-line benefit that should make leaders look twice. 

"We know through lots of qualitative and quantitative studies that when people are showing up authentically at work, the bottom line improves for companies," Volturo said. "The work has an emotional component for creating psychological safety, but it also has a profit component, too. Imagine your best workers doing their best work because they're in an environment that supports that."

Image credit: Mercedes Mehling/Unsplash

With the 2023 proxy season in the rear-view mirror, financial analysts noted a sharp decline in shareholder support for environmental, social and governance proposals. However, anti-ESG proposals also failed to stick, and signs of an ESG resurgence are already beginning to emerge.

Mixed support in the 2023 proxy season

Most U.S. companies hold proxy sessions between April and June, enabling shareholders to vote on issues without being present.

Based on the outcome of the 2023 season, shareholders seem to be losing interest in ESG issues. In a June analysis, the firm FTI Consulting noted that “2023 has seen investors support significantly less environmental and social proposals than in past years.”

The question is whether or not the drop-off marks a permanent trend or a temporary reaction to current events. FTI attributed much of the decline to the “anti-ESG" agenda, explaining: “The scrutiny on institutional investor vote behavior…by the anti-ESG activists has caused institutional investors to support less environmental and social proposals in 2023.”

At the same time, anti-ESG proposals also failed to garner much support from shareholders over the past five years, the analysis found. FTI advised that other factors can also have a significant influence on ESG support. Analysts cited the 2022 proxy season, which also saw a drop in ESG support after a rules change by the U.S. Securities and Exchange Commission. The change fostered a spike in the number of prescriptive proposals to come up for a vote, and prescriptive proposals generally receive low support from shareholders regardless of their subject matter. 

We don’t talk about ESG, but we do it

One area where the anti-ESG movement has clearly had an impact is in the way in which bankers, money managers and other financial stakeholders communicate. Many continue to put the principles into action while avoiding specific references to ESG, as shown by a recent Bloomberg survey.

“About two-thirds of respondents in a survey of roughly 300 Bloomberg terminal users said the anti-ESG movement that started in the U.S. last year will force firms to stop using those three letters in conversations with clients,” Alastair Marsh and Lisa Pham of Bloomberg observed last month. “However, they’ll continue to incorporate environmental, social and governance metrics in their business."

Financiers under fire

The Bloomberg analysis is among those attributing ESG avoidance to an aggressive, partisan political environment of legislative and legal attacks on ESG investing. 

Though the issue seems to have failed to gain traction among voters, fossil energy stakeholders have been credited with motivating Republican office holders to act. Their efforts reportedly include model bills created by the American Legislative Exchange Council (ALEC), which has established a right-wing reputation with an emphasis on protecting fossil fuels.

“The finance industry is now grappling with a second year of attacks on ESG by key members of the Republican Party, including threats of litigation from state attorneys general, as well as outright bans on the strategy in some U.S. states,” Marsh and Pham of Bloomberg noted.

The attacks prompted one of the highest-profile proponents of the ESG investing movement, BlackRock CEO Larry Fink, to stop using the acronym altogether.

"I don't use the word ESG any more, because it's been entirely weaponized ... by the far left and weaponized by the far right," Fink told a gathering at the Aspen Ideas Festival last summer, as reported by Reuters. In the same speech, he reaffirmed BlackRock’s commitment to discussing decarbonization, corporate governance and social issues with the companies in its portfolio.

Financiers fight back

Despite the political headwinds, financial stakeholders continue to act in support of social and environmental principles. Part of the effort is happening behind the scenes, as financial stakeholders seek to convince legislators that anti-ESG bills will result in financial harm to their states.

In a recent analysis, S&P Global identified 12 states in which Republican legislators “successfully pushed anti-environmental, social and governance legislation across the finish line.” In all, 19 states now have one or more anti-ESG laws on the books. 

That may seem like a substantial gain, but the legislative failures outweighed the successes. “Many anti-ESG bills introduced in 2023 … failed after chambers of commerce, banking associations and public pension officials raised concern over costs or free market principles,” S&P observed. 

In addition, only four of the 25 new anti-ESG laws to pass this year remained intact by the time of the August analysis. The other 21 were substantially revised to protect state pension funds. S&P cited Indiana and Texas as examples, both of which would have faced billions in losses over 10 years without the revisions.

Taking it to the courts

Financial stakeholders are also taking their case to court. For example, last month the Securities Industry and Financial Markets Association (SIFMA) — an industry group that counts BlackRock among its members — moved to challenge new Missouri rules on ESG documentation.

The rules went into effect on July 30. As described by SIFMA, they stipulate burdensome documentation that no other state requires. SIFMA argues that the new rules put Missouri in direct conflict with the 1996 National Securities Markets Improvements Act, under which states cannot preempt standard federal record-keeping rules.

“Under existing federal securities laws, broker-dealers and investment advisers are already required to provide investment advice that is in the best interest of their customers," the group argued as it announced the suit. "The Missouri rules are thus unnecessary and create confusion."

The climate factor

New reporting rules established by the European Union may also motivate U.S. companies to continue making progress on ESG principles, regardless of what's happening at home.

The new EU Corporate Sustainability Reporting Directive became effective last January. “This new directive modernizes and strengthens the rules concerning the social and environmental information that companies have to report,” the European Commission's website reads. The new rules cover large companies as well as small and midsized companies.

In June, the Republican-led ESG Working Group in the U.S. House of Representatives released an interim report that recommended protecting U.S. companies from “burdensome EU regulations.” However, Republican leadership will have a hard time reconciling protectionism with their party’s longtime support for free market principles.

The anti-ESG movement is also floundering on the national stage. Surveys routinely reflect public support for ESG principles. Moreover, high-profile Republicans aren't helping the case.

The hapless presidential campaign of Florida Gov. Ron DeSantis is one example. Among other issues, the Republican governor has cultivated a reputation for opposing ESG investing, highlighted by a high-stakes legal feud with Florida’s top employer, Disney, over LGBTQ rights.

Another example is the looming impeachment of Texas Attorney General Ken Paxton, a prominent anti-ESG Republican, on charges of corruption and bribery. His wife’s reported involvement with a shell company has raised additional questions about allegiance to the principles of fiduciary duty.

Looming over all this is climate change, a factor from which Florida, Texas and other anti-ESG states are hardly immune. With the exception of fossil energy stakeholders, the rising threat of climate risks will continue to influence and motivate corporate behavior regardless of the outcome of the upcoming 2024 proxy season. 

Image credit: Justin Luebke/Unsplash