Ending ESG?
Pushback on the investment strategy won't make those pushing it give up. The point was always to control the market.
Roughly 10 years ago the business elites that gather periodically at Davos in Switzerland at the World Economic Forum’s unofficial headquarters tried to devise some means of putting non-financial considerations into investment strategies. As a marketing point they argued that business needed to serve more than simply producing profit. However, as soon as early structures started to come out it was obvious that most of this was geared towards what would broadly be called Social Democratic viewpoints.
It ended up getting the label environmental, social, and governance investing, or ESG for short. One of the biggest problems out of the shoot was how few investors took to it voluntarily. This shouldn't be surprising as my objective is to try and produce an equity yield from a company I'm not particularly interested in trying to micromanage how that company goes about doing it. And more to the point, most business people recognise that the principal point of the entire exercise was for more government direction of how the business community functioned. That was it was a means for governments to take over an economy without officially doing so.
In practical terms it was always about trying to find some way for government policy to be able to micromanage how businesses do their jobs. That is finding some way to make a capitalist market serve socialist objectives. Most of the powers that are in Davos have always generally been smart enough to know that you would not ever have enough public support for an openly socialist economy. From this standpoint it was always the case of trying to find ways by stealth to increase influence. and more to the point not wanting any form of democratic oversight over what central administrations were going to do. It was sort of a creative way of trying to get Chinese style communism / capitalism into the West in many respects. The idea that a government could control most of the market and supply chains without actually appearing to run the business itself was an appealing front to most social justice politicians.
Not surprisingly as this was trying to be forced on the companies many continually tried to find ways to get around it. Terms like greenwashing came up where a company would try and put out reports saying that it was more environmentally conscious than it really was. The problem being most of the objectives that were being pushed by those in the ESG side of the argument were completely unrealistic. Mines that were producing things like aluminum or lithium were putting more carbon into the atmosphere than the end product, something like an electric battery was taking out. The official version of being more environmental was simply a front to what was the true purpose. As such the environmental quotient was never going to be realistic in the first place.
Well there's been some more forceful attempts, the European Union especially has tried to find ways to make government regulation force companies to comply, it's always resulted in a weaker business structure or even losses. In short, from a business standpoint ESG simply hasn't worked. It might be most notable that even some business executives who might have agreed with at least some of the principles have come out with books that have now criticized that ESG was never a reasonable goal.
Black Rock famously made the announcement that it was going to try and move away from ESG considerations last year. This sent most of the proponents into a different form of media spin. Black Rock is one of the principal investors associated with the World Economic Forum. It is without question one of the most important as far as optics for the marketing side of this. But it's hardly alone in its move to try and get rid of ESG as a component of its investing decisions. A number of banks have increasingly also started to move away and that's assuming that they were even trying to meet goals in the first place. A number of Canadian banks have been accused of intentionally ignoring the ESG guidelines. As such when Bank of Montreal announced last month that it was going to reintroduce investing in coal development it might have sent some of the activists into a tizzy but it didn't necessarily change what was actually going on behind the scenes. This is also more interesting as Canada is probably the most notable as far as trying to push the environment side of this equation.
Renewed calls from activists to try and find better enforcement mechanisms that force businesses to actually follow ESG protocols don't seem to be getting very far with a lot of regulators, but this isn't to say that they are avoiding it. Instead the bigger objective has never been optics so much is making sure there's compliance. Much like the war with DEI in the United States within education institutions when legal impediments or popular pushback occurs you simply look to try and change the terminology into something that's more acceptable. The same thing is generally going on here.
If ESG becomes a term that becomes sufficiently toxic they'll simply be a new phrase inserted instead. Things like sustainable investing or social conscious investing have already been substituted in some respects. This is to say no matter how businesses have tried to resist those that are the true believers in trying to bring much of the market forces under government control aren't likely to try and give up.
Anytime that there's an appearance of a victory where one of the woke social justice points seems to be in remission it's worth noting that it simply usually gets replaced by a new one. The specific term is never that important. Saying that you want more environmentally conscious investing is a sideshow compared to Simply saying that businesses need to comply with a government ordered mode of where money is transferred. From this standpoint whatever the label on it is a redundant feature.
For opponents of the ESG it's worth remembering what the point was rather than what the title was and from this standpoint anything that suggests government intervention in the financial markets needs to be viewed with the same skepticism.