In the past year, ESG investing has become caught up in America’s culture wars, as prominent GOP politicians claim that it is a mechanism investors are using to impose a “woke” ideology on companies. Former Vice President Mike Pence has railed against ESG in speeches and in an op-ed. A variety of Republican governors and red-state legislatures are considering executive action and legislation to boycott asset managers that use ESG as a screening tool for their investments. And in Washington, various Congressional committees have pledged to hold hearings in which the Securities and Exchange Commission (SEC) and major asset managers will face public questioning about the legality of ESG investing.
Rescuing ESG from the Culture Wars
What started as a tool for investors to understand risk has become weaponized by both ends of the U.S. political spectrum.
February 09, 2023
Yaroslav Danylchenko/Stocksy
Summary.
In the past year, ESG investing has become caught up in America’s culture wars, as prominent GOP politicians claim that it is a mechanism investors are using to to impose a “woke” ideology on companies. Upcoming congressional hearings on ESG present an opportunity to put facts on the record and to begin the process of working toward a bipartisan consensus that will take the political passion out of ESG. The key will be returning ESG to its narrow and technocratic intention — as a means for helping companies identify and communicate to investors the material long-term risks the company faces from environmental, sustainability and governance issues. It is important to separate discussions about investors need for disclosures about material risk factors from debates about salient political issues.