5/18/2023 0 Comments Protection racket![]() ![]() The average level of shareholder support was just 3%. During the 2022 proxy season, companies were presented with no shortage of “anti-ESG” shareholder proposals. ![]() Investors have also spoken with their votes. Is it really credible that many of the largest and most sophisticated investment managers in the world have been pressured into pursuing strategies at odds with their clients’ interests? A preference for investments in firms deemed socially responsible companies is no less valid or inherently political than a preference around a firm’s R&D strategy. ![]() Investor perceptions of risk and potential return and the preferences of their own clients deserve respect. Given the scale of the movement of assets into ESG-screened funds, the suggestions that ESG is all about politics seems far-fetched. One recent study from Bloomberg Intelligence projects more than one-third of all globally managed assets could carry explicit ESG labels by 2025. Let the market speakĮSG investment has gone mainstream. Fundamentally, I believe in the efficiencies of the marketplace, including the marketplace of ideas. Spending corporate resources to build the trust of those stakeholders is hardly an anti-capitalistic strategy. No company is entitled to consumer confidence or stakeholder trust. No company is entitled to quiet investors single-mindedly focused on the next quarter’s financial results. Pressure to disclose ESG data is different. Some of the backlash is also a reaction to bad behavior: greenwashing, ESG marketing ploys, and activist pressure on narrow issues unrelated to a company’s business.īut a protection racket involves pressure on businesses to pay for something they are already entitled to receive. Those include persistent challenges, such as the difficulty and expense of measuring progress on ESG goals, and the incoherent multiplicity of disclosure frameworks, raters, and rankers in the space. One recent editorial characterized ESG stakeholder engagement as a “protection racket.” Given the hyperbole, a serious look at the at these charges is warranted.Ĭertainly, the ESG movement has suffered growing pains. The ESG movement has been condemned by some state attorneys general as being rife with “destructive, illegal business practices” that politicize financial decisions. The harshest critics characterize ESG-informed investing and corporate ESG programs as great destroyers of shareholder value, undertaken for political reasons, and without resulting in any benefit to society. A backlash against ESG investing fills the headlines of The Wall Street Journal and certain other business publications. ![]()
0 Comments
Leave a Reply. |