Encouraging News From the Front Lines of the ESG Debate

G&A's Sustainability Highlights ( 02.01.2024 )
Mar 5, 2024 10:00 AM ET

According to a recent Bloomberg report, BlackRock, the world’s largest asset manager with over US $9 trillion in AUM, has been “expanding its dominance” in ESG investing, with net ESG investment inflows in every quarter of the last two years. This is good news, since this time period coincides with ever-rising anti-ESG commentary and some actions to slow sustainable investing on the part of Republican and conservative forces in various states, and in the U.S. Congress.

The term “anti-ESG” has joined the ranks of the “antis” of the right – along with “anti-woke”, “anti-CRT”, “anti-DEI”, and other initials that serve as shorthand for attacking progressive societal ideas and concepts. Where the damage could be done to asset managers is the ending of relationships in Red states with managers of public employee pension funds, state treasurers, and others in positions of decision-making regarding state monies.

So far, the slings and arrows of the right have for the most part missed their mark. As reported by Bloomberg, Morningstar estimated that BlackRock’s ESG-designated funds grew by more than 50 percent in 2022 and 2023, to roughly US $320 billion. Forced by the anti-ESG political players to drop positive public references to ESG, BlackRock’s CEO Larry Fink has moved away from public use of the term. But that did not slow the dramatic inflow of funds to ESG-designated investments managed by BlackRock.

On the other side of the front lines: the anti-ESG forces continue their attacks. Writing in the Harvard Business Review, an important publication for tens of thousands of corporate managers, author Andrew Winston (“Green to Gold”) suggests that managers should stay the course, and do what is right for their business, and for society. “Build a better, more resilient business that profits by helping to solve challenges and contributes to a thriving world,” he advises in his HBR article.

There are pro and con statements on both side of ESG, Winston tells readers. There is no single “ESG movement,” and a more nuanced approach is needed to address ESG critics. A possible model for corporate (and investor) response to critics could be a simple framework to map voices on both sides of the issue, such as a 2x2 grid. One side could assess the criticisms of ESG, and the other is for evaluating the critics – are they arguing in good faith, interested in solving issues and improving society?

For some critics, the steadily rising embrace of ESG by investors is a threat to the status quo; oil and gas producers, for example are being screened out of ESG funds, a threat to be addressed by the industry. For short-term investors, ESG may not make sense. While the impacts of climate change will continue to affect planet, profit, and people over the longer term, we’re reminded of other initials as we witness the anti-ESG combat – “IBG” and “YBG”. I’ll be gone / you’ll be gone, so climate change over the long term does not matter to short-term thinkers.

The HBR essay (“Why Business Leader Must Resist the Anti-ESG Movement”) and related commentary are in our Top Stories below and are definitely worth your time to read. The G&A Institute team continues to monitor the ESG and sustainability landscapes and will bring you news from the front lines of the pro/con debate. Can we help your company in positioning your ESG policies, actions, programs, as the anti-ESG players continue their attacks? Let’s talk if you are looking for strategies and guidance from our experienced team.

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