In the following opinion piece, Witold Henisz, associate dean and faculty director at Wharton’s Environmental, Social and Governance (ESG) Initiativeexplains why the anti-ESG investment movement is gaining traction and what can be done to mitigate its impact.
The anti-ESG or anti-woke investment movement is following the classic disinformation and propaganda playbook by creating a false equivalence between the ESG movement and its opponents. In the same way that many of the same funders and politicians tried to discredit climate science, they are now working to discredit efforts to better incorporate climate science and other ESG factors into valuation models used by investors, consultants and investors. Business. Make no mistake, this is a concerted and organized effort, and it is having a substantial and dangerous impact.
“Climate risk is investment risk. There is no other credible side, just an ideological opposition cynically seeking a key issue for upcoming political campaigns.”
There is a growing false and dangerous perception that these developments imply that there are two equivalent sides in this debate: pro and anti-ESG, and even that the latter is somehow winning. It is important to explore the factual basis for the relative importance of these two claims.
- When the state of Texas restricted their ability to engage with financial institutions that recognize climate risk, they ruled out working with the largest and most sophisticated municipal bond issuers and forced themselves to work with smaller, less experienced and less sophisticated banks that prioritized ideology. . economics Guess what. They paid more. How much more? My colleague Dan Garrett finds that Governor Greg Abbott and other opponents of ESG cost Texas taxpayers more than $500 million in higher fees.
- It is true that Strive and other investment vehicles have amassed several hundred million dollars from investors who wish to ignore the materiality of ESG factors. However, more than $35 trillion of assets under management want to take such factors into account.
- And what did those conservative shareholder resolutions actually ask for and achieve? They asked ExxonMobil to ignore all other resolutions and JP Morgan to transform into a public benefit corporation in order to fulfill its commitments to stakeholders and formally abandon shareholder interests. Many other conservative shareholder resolutions ask companies to explore the impact of diversity, equity, and inclusion practices on their white (male) employees. These resolutions were not designed to shape corporate policy or to win. They were designed solely to generate news and make it appear that there are two sides to this debate. But let’s count the actual votes, not the claims. Of the 43 conservative proposals submitted by the National Law and Policy Center, the National Center for Public Policy Research, and Steven J. Milloy, the average level of support received was 7%. Excluding these 43 proposals, the average success rate was 30%. This is not equilibrium or a victory for anti-ESG and anti-awakening investing. This is a resounding defeat. Shareholders analyzed these proposals and concluded that anti-ESG proposals are far less important than ESG proposals. A recent Morningstar analysis agrees, concluding that “the reality is that most of these proposals didn’t get much support. However, these proposals received much attention, and maybe that was the point” (emphasis added).
- New research published in Nature this week highlights how successful the conservative effort has been to confuse the public about the science of climate change. When asked about their estimate of the percentage of support for climate change mitigation policies, respondents estimated between 37% and 43%. The actual number is 66%–80%. Once again, the perception of two sides fighting doesn’t compare to the data, but the opponents, thanks to decades of propaganda, have perceptions on their side.
While we need more objective third-party research, like what we conducted on the ESG Initiative at Wharton, as well as work to improve and critique the still-developing field of ESG investing, we also need advocates for such improvement to fight back on place of silence We all have a stake in the outcome of this now highly politicized debate. US SIF: The Forum for Sustainable and Responsible Investing provides a clear, robust, accessible and useful rebuttal.
Climate risk is investment risk. There is no other credible side, just an ideological opposition cynically seeking a key issue for upcoming political campaigns, and so far it seems to be working. Advocates of climate science and more sustainable investment must plan and execute their fightback. Silence in the face of such an attack is complicity. What side are you on?
This article originally appeared on LinkedIn.
