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Over the past couple of years ESG Investment has taken the financial and corporate world by storm. Now, you might think that sounds unobjectionable, not so. In recent months, an anti-ESG backlash has been gathering steam and that's creating big headaches for some of the most powerful corporate leaders. So what don't people like about ESG?
Well, the loudest criticism of the so-called 'woke capitalism' agenda has come from America, and in a variety of forms. Controversial rightwing TV host Tucker Carlson has made ESG a recurring theme in his popular Fox News show. In fact, he calls it a, quote, 'destructive force pressuring governments to sabotage their own economies.'
And that reflects a much wider movement against ESG on the right of US politics. Florida's Governor Ron DeSantis, for example, has been in a high-profile battle with Disney over the company's criticism of a bill to ban classroom instruction on sexuality and gender identity in the state's public elementary schools. Texas has banned government agencies from dealing with financial firms that it accuses of boycotting the gun and fossil fuels industries. And a slew of other red states have followed suit, cutting off official business with financial companies over their ESG policies.
What they argue is that by focusing too heavily on environmental and social concerns companies risk neglecting their fiduciary duty to maximise returns for their clients and shareholders. These complaints are having an impact. Some US banks have warned they may actually pull out of the corporate alliances that have promised to cut carbon emissions across entire industries. But it's not just conservative politicians criticising the ESG agenda.
Tariq Fancy is a former head of sustainable investing at BlackRock, the world's biggest asset management company. He's claiming that by exaggerating what can be achieved by voluntary corporate action leading financial companies are actually undermining efforts towards serious government measures that could really make a difference. Meanwhile, Elon Musk has called ESG, quote, 'a scam' that's been, quote, 'weaponised by phony social justice warriors,' after the ratings agency S&P removed Tesla from a major ESG index.
The controversy around ESG, in fact, has become so intense that some are predicting the term could actually fall out of use altogether. But the key point to understand is this. Whatever the language we use, the challenges around sustainability and business are not going to disappear. On the contrary, they're becoming more urgent than ever.