The Anti-ESG Movement Takes on “Woke Capitalism”

Groucho Marx once said, “Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies.”

Whether you believe this or not, one can certainly argue that politics has become a pervasive part of the ESG movement. This idea dovetails into a comment we received from one of our astute readers.

In our June 15 newsletter, we analyzed the 41 racial equity audit proposals that were filed at S&P 500 companies this proxy season. Our reader pointed out that eight of these proposals – statistical outliers, all of which had less than 5% shareholder support – were in fact “anti-ESG” proposals filed by the conservative National Center for Public Policy Research (NCCPR). In one example, its proposal at Johnson & Johnson cites concern over racial equity programs that “redistribute pay and authority” and are “deeply racist and otherwise discriminatory.”

NCCPR’s proposals are part of a formidable anti-ESG movement, which has been garnering considerable attention lately. In May, Elon Musk tweeted that ESG is “a scam that has been weaponized by phony social justice warriors,” following Tesla’s removal from the S&P 500 ESG index. Also in May, potential presidential candidate Mike Pence penned a widely read WSJ opinion piece, where he called the ESG movement a “pernicious strategy” and an attempt at “woke capitalism.” 

While all of this is going on, the Biden administration is attempting to unwind several anti-ESG efforts made by former President Donald Trump – including the labor department’s suspension of diversity training restrictions on federal contractors, and its proposal to remove barriers that would have limited plan fiduciaries’ ability to consider ESG issues as risk factors.

In addition, as we previously reported, “anti-board diversity” lawsuits filed by conservative Edward Blum’s Alliance for Fair Board Recruitment also appear to be having an impact. Briefly, Blum’s pending lawsuit against the SEC has the support of 17 state attorneys general, while in California, both of state’s board diversity laws have been rejected by courts (our data previously showed a positive correlation between the laws, and the number of diverse board members).

In related news, comments are currently open for the SEC’s two proposals that focus on enhanced ESG disclosure requirements for U.S. funds.

Battle lines appear to be drawn, and there’s a lot more to this story than we can fit here. If you want to delve in deeper, we’ve included a few great articles below. 

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