ESG Backlash Rebuttal: Stakeholder Capitalism is the Preferred Way Forward
By Andrew Behar, Skytop Contributor / December 4th, 2022
Andrew Behar is CEO of As You Sow, the nation’s leading non-profit practitioner of shareholder advocacy and engagement. With a 30-year track record of success, As You Sow advances values-aligned investing and uses shareholder power to compel companies to reduce material risk on issues including climate change; toxins in the food system; ocean plastics; diversity, equity, and inclusion; racial justice; and wage equity. Previously Andrew was a documentary filmmaker and entrepreneur founding start-ups developing an innovative physiological monitoring medical device and grid-scale fuel cells. He is on the board of the Responsible Sourcing Network and a member of the XPrize Brain-Trust for Abundant Energy. His book, The Shareholders Action Guide: Unleash Your Hidden Powers to Hold Corporations Accountable, was published in November 2016 by Berrett-Koehler.
A Centrist Mandate
With most midterm votes counted, Americans made something abundantly clear: they choose moderation over extremism. This centrist mandate is particularly relevant to the financial markets, especially for responsible investors and shareholder advocates. Taking a centrist position also means rejecting the extremism perpetuated by a handful of “anti-woke” populists and grifters who wish to turn anti-ESG into the “Stop the Steal” of the financial markets.
Red Herrings
ESG foes foment outrage over “woke” corporate initiatives like workplace diversity training and emissions reductions, turning financial matters into cultural grievances. Just like the stolen election narrative attempts to distract voters from issues that matter, these ginned up ESG outrages are red herrings to distract investors from the real economic issues they care about, including living wages, reproductive healthcare, and unsustainable pollution.
Long-Term Success
If you believe politically-motivated attacks on ESG are misguided, you’re in good company. Indeed, KPMG found that 70% of CEOs surveyed believe ESG plays a critical role in their company’s long-term success. Another study found pensions voted ESG-aligned 90% of the time in 2022, including 80% for red state funds. Over the last two AGM seasons, ESG shareholder resolutions had record support, receiving an average 40% of the vote versus just 3% for anti-ESG resolutions. Not to mention the trillions invested in ESG funds, which are expected to grow to 15% of all investments worldwide by 2025.
The Free Markets Have Spoken
The free market has spoken with overwhelming support for justice and sustainability. That cohesion explains the underhanded tactics implemented by anti-ESG regressives who wish to divide the market and achieve through the backdoor of politics what they could not achieve in the free market. However, being on the right side of history won’t guarantee our success. If we remain silent, we risk ceding this hard-won higher ground.
Populist Political Hacks
You can easily differentiate professionals who genuinely want to improve ESG reporting from the populist political hacks. The hacks label corporations and executives as “woke” to score political points and publicly shame corporations into submission, damn the consequences to shareholders, employees, and customers. Even more pernicious are anti-ESG laws in red states that aim to lock in their minority view, and “bifurcate” the American market into red and blue economies.
“If you decide based on politics that certain things aren’t fiduciary even if they are material from a financial point of view, then we’ve got a major problem in finance that is going to cost all the pensioners.” – Julie Gorte, Senior VP for Sustainable Investing at Impax Asset Management.
Numbing the Mind
With the free market beyond their direct influence and red state treasuries a drop in the bucket, ESG foes have turned to shaming and silencing centrist views. Today’s executives and investment professionals are loath to be labeled “woke” as we might have been labeled “pinkos” last century. Their aim is to repeat, repeat, repeat until it sticks in the brains of the electorate and changes public opinion. They understand that repetition numbs the mind of their base and forces leaders to pay attention.
Four Ideas
None of us alone can overcome such prolific and well-organized disinformation and bad faith. Frankly, it’s a battle many of us would rather not fight – why give trolls the attention they seek? However, they still pose a potentially existential threat. That doesn’t mean we all need to write op-eds or appear on Squawk Box to defend ESG, but there is still much that you, as a responsible financial professional, can do, starting with these four ideas:
Speak in simple language your stakeholders can understand
Tell the truth about the imperfections of ESG as you work to improve it
Use the controversy as an opportunity to explain the power of shareholders
Fight disinformation immediately or risk losing the narrative to their big lie
Hard-Fought Progress Threatened
If you still don’t believe anti-ESG forces can reverse our progress, read the words of the reelected governor of Florida and the newly-minted 2024 GOP frontrunner: “We fight the woke in the corporations. We will never, ever surrender to the woke mob.” Make no mistake, anti-ESG laws can still go national, threatening decades of hard-fought progress.
A Front Row Seat
From apartheid to the climate crisis, shareholder advocates have engaged responsible leaders like you to help corporations align value and values for all stakeholders. As the CEO of As You Sow, I’ve had a front row seat to an epic transformation; the wind-down of the extractive economy and the birth of the regenerative economy based on justice and sustainability.
The World Economic Forum has called this the “The Fourth Industrial Revolution,” explaining how the emergence of stakeholder capitalism heralds “a new chapter in human development, enabled by extraordinary technology advances…it is an opportunity to help everyone, including leaders, policy-makers, and people from all income groups and nations, to harness converging technologies in order to create an inclusive, human-centered future.”
It’s been an imperfect journey to be sure, but the progress we’ve made together is undeniable and well worth the fight to achieve a safe, just, and sustainable world for all.