Despite recent eulogies for the environmental, social and governance (ESG) movement, as well as diversity, equity, and inclusion (DEI) policies, many insiders say the funeral is premature.
“Their demise is inevitable, and it has been accelerated,” David Bahnsen, chief investment officer of the Bahnsen Group and formerly an asset manager at Morgan Stanley, told The Epoch Times.
However, “they are not over,” he said.
The ESG movement began two decades ago with a U.N. initiative, sketched out in a 2004 position paper called Who Cares Wins, to get private companies in line with the U.N.’s Sustainable Development Goals.
Those goals included, among other things, climate action and gender and racial equity, and they aligned with corporate trends such as “conscious capitalism” and “stakeholder capitalism,” which redirected companies from merely serving owners to serving employees, the community, and the environment.
Institutional asset managers gave the ESG movement critical leverage over companies because they collectively own about 80 percent of the shares in S&P 500 companies. Immediately upon its introduction, ESG was endorsed by 23 financial institutions collectively representing more than $6 trillion in assets at the time.
Most major banks, asset managers, and insurance companies quickly joined U.N.-sponsored climate clubs, including the Net Zero Banking Alliance, the Net Zero Asset Managers initiative, and the Net Zero Insurance Alliance. This was followed by a proliferation of ESG rating agencies, consultants, accountants, and others dedicated to measuring companies’ compliance with ESG criteria.
Twenty years later, the winds appear to have shifted. In 2024, half of the Net Zero Insurance Alliance members quit, while the Net Zero Asset Managers initiative suspended its activities in January after several of its largest members, including BlackRock, left the group.
A 2024 Securities and Exchange Commission (SEC) order that required listed companies to produce audited reports of their CO2 emissions and their plans to reduce them, faced numerous court challenges and was recently shelved. And on the social justice front, a parade of companies recently announced that they are downsizing their diversity programs.
“ESG is on death watch,” Daniel Cameron, CEO of the 1792 Exchange, an analytics nonprofit, told The Epoch Times. “You saw a lot of iconic brands last year walk away from DEI in particular.”
Companies stepping back from diversity programs include Amazon, Google, Target, Meta, Walmart, Boeing, Molson Coors, Lowe’s, Ford, Toyota, Harley-Davidson, Jack Daniels, Caterpillar, John Deere, McDonald’s, Nissan, Stanley Black & Decker, and Tractor Supply.
Rethinking or Rebranding
Some experts say this trend may be little more than rebranding.
“Boeing, who just got rid of its [DEI] department, noted in the press release that none of them were laid off; they were distributed across the company in other roles,” Will Hild, executive director of Consumers’ Research and a longstanding critic of ESG, told The Epoch Times.
And many companies, including Apple, Cisco, Costco, Microsoft, Delta Airlines, and JPMorgan Chase have defended their DEI programs and insist they will keep them in some form.
Tim Schwarzenberger, portfolio manager at Inspire Investing, says the notion that “DEI is dead or it’s on life support” is wrong.
“I was talking to a major energy company, talking to their chief diversity officer—they have their livelihood on the line,” Schwarzenberger told The Epoch Times.
Defenders say that the ideas behind ESG have been wrongly maligned.
BlackRock CEO Larry Fink, formerly an outspoken advocate for ESG, stated in 2023 that he no longer uses the term because it has been “politicized and weaponized.”
“DEI is not a synonym for the ’S’ in ESG,” Julie Anderson, a professor of management at American University’s Kogod School of Business, told The Epoch Times. “When I refer to the ‘S,’ it’s usually labor, health, and human rights.
“Politics has intentionally conflated and stolen the ‘S’ category and turned it into a gender and racial issue, which is a fraction of what it really is.”
Whether it goes by ESG or another name, its underlying principles appear to be alive and well.
According to a November 2024 study on ESG-related shareholder proposals by Harvard Law School, over the past decade, “the number of proposals on environmental and social topics exploded, surpassing the governance and compensation topics that had dominated the discourse in mid-2010s.”
The study found that environmental and social proposals accounted for 62 percent of the total in 2024, up from 44 percent in 2014. More recently, environmental and social proposals increased by 57 percent between 2020 and 2022 and hit a record of 610 proposals for the year ending in June 2024.
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