(Politics+Opinions)>(Scientific Evidence) What Factors led to ESG Backlash in USA?
On July 17 2024, the FT Short Film “Who killed the ESG Party?” was release by the Financial Times, directed and edited by Daniel Garrahan. This film followed months of critique of the ESG movement in the USA, with CNN Business and other news organizations covering the backlash like a political scandal.
And the USA investment data in late 2023 was telling a similar story. The cumulative flow of investments into US ESG funds had flattened and become slightly negative since the first quarter of 2022, according to data shared exclusively with CNN by Lipper, a financial data provider. The USA assets under management in ESG funds also declined from $339 billion in the second quarter to $315 billion by the end of September.
But the USA, blessed with population of passionate citizens with strong political beliefs and fear of anything different, were quick to take sides and express outrage. ESG's downfall in the political arena stems from its association with stakeholder capitalism, a concept that aims to balance corporate profit-making with responsibilities to broader societal groups like employees, communities, and the environment. Initially championed by figures like Larry Fink, who argued that companies thrive through mutually beneficial relationships with stakeholders, ESG was supposed to represent the next evolution of capitalism. However, this vision has sparked backlash, particularly among conservatives who see it as a cover for liberal agendas.
For its critics, ESG has morphed into a tool that allows corporate managers to push political or ideological goals under the guise of serving "stakeholders." Unlike the traditional shareholder model that enforces accountability through stock market performance, stakeholder capitalism—according to its detractors—enables companies to pursue social and environmental goals without answering for declining profits. This tension has turned ESG into a flashpoint in the broader culture wars, transforming what was once a strategy for long-term value creation into a battleground for competing political ideologies.
April 2024 - ABC News captures supporters and foes of former President Donald Trump faced off in a park in lower Manhattan.
Above: Gender neutral restrooms and other "inclusive" policies have been adopted by corporations across the USA as part of DEI strategies.
With the media pressure increasing, and companies facing criticism for supporting a partisan and liberal agenda, many USA companies used this narrow “window of opportunity” to reverse ambitious climate commitments .
In early 2023, several well-known USA companies choose to withdraw from their Climate Action 100 commitments.
Key departures include JPMorgan Asset Management, State Street Global Advisors, and PIMCO. Additionally, BlackRock shifted its involvement to its smaller international subsidiary, BlackRock International Ltd. These firms have cited a range of reasons for their exit.
Several U.S. companies began rolling back their Diversity, Equity, and Inclusion (DEI) initiatives throughout 2023 and 2024.
This is in response to mounting pressure from conservative groups and political backlash against ESG and DEI policies. This pushback largely came from criticism that such initiatives were being used to promote liberal political agendas at the expense of corporate performance.
Target – In 2023, Target faced intense conservative backlash and boycotts over its Pride Month merchandise and displays, leading the company to remove certain LGBTQ+ items from its stores. This marked a shift in how the retailer navigated public visibility of its DEI efforts, particularly around LGBTQ+ inclusivity.
Starbucks – In 2023, Starbucks made headlines when it scaled back its diversity programs, including mentorships aimed at underrepresented groups, and reduced its public-facing DEI efforts. This change came after the company faced political pressure and legal challenges related to its DEI policies, including lawsuits alleging reverse discrimination. Starbucks’ decision to tone down its DEI programs reflected a broader trend of companies retreating from public DEI commitments.
Walt Disney Company – Facing similar pressure, Disney adjusted some of its DEI-focused efforts in 2023. The company had initially been vocal about supporting LGBTQ+ rights and DEI in its programming and internal policies. However, in response to political pressure, including the highly publicized conflict with Florida Governor Ron DeSantis, Disney made strategic decisions to pull back on some aspects of its DEI efforts. This included reducing public advocacy around specific social issues that had triggered the backlash.
Ford Motor Company – In late 2023, Ford began quietly scaling back its DEI programs, particularly those tied to public commitments around racial equity. The automaker faced criticism from conservative stakeholders, prompting internal reviews and adjustments to how prominently DEI was featured in its corporate strategy. Ford’s move mirrored those of other large corporations that reduced visibility around their DEI efforts in the face of mounting political pressure.
With the media pressure increasing, and companies facing criticism for supporting a partisan and liberal agenda, many USA companies used this narrow “window of opportunity” to quietly exit from corporate climate commitments.
By September 2023, more than 20 states have effective "anti-ESG" rules that limit the consideration of ESG factors in investment decisions. Several U.S. states have begun divesting public retirement systems and other state funds from financial institutions they claim are boycotting fossil fuel companies. For example, a 2021 Texas law mandates that the State Comptroller compile a list of companies that boycott the fossil fuel industry. Companies are placed on this list if they are members of initiatives like Climate Action 100 and the Net Zero Banking Alliance/Net Zero Asset Managers Initiative, which are designed to promote climate-conscious investment practices. These financial initiatives have come under fire from states like Texas, claiming they undermine the fossil fuel industry, a vital economic sector for these regions.
Utah: Governor Spencer Cox signed a law on March 15, 2023, that goes beyond state investment policies. This law prohibits companies from coordinating with others to limit a third company's ability to access products or services, with the intent of harming or eliminating a "boycotted" company. Under the law, "boycotted" companies include those involved in the firearms industry or those failing to meet certain Environmental, Social, and Governance (ESG) standards. Speaking in support of the Utah bill, State Rep. Mike Petersen (R) argued that ESG is not merely a "conspiracy theory" but a "conspiracy truth," reflecting a broader view among critics that ESG represents an unaccountable regulatory framework, often seen as targeting industries like fossil fuels and firearms that traditionally align with conservative policies.
Florida: In 2023, Florida passed legislation that amends the state's banking laws to prohibit lenders from using "social credit scores" when making lending decisions. These social credit scores, which are often based on factors like a company's emissions, corporate board diversity, and other ESG standards, are now considered an "unsafe and unsound" practice under Florida law. This move categorizes the use of such scores as a violation of state financial institutions' codes and unfair trade practices laws, subjecting violators to sanctions and penalties. This new law builds on earlier efforts by Florida to restrict the influence of ESG. The state had already begun divesting its funds from institutions that prioritize ESG criteria, but the new legislation goes further by restricting private lending decisions as well. This could affect a wide range of financial institutions operating in Florida, effectively broadening the state's battle against ESG-driven financial practices.
Republican states began banning ESG asset managers in late 2023, such in Blackrock, from managing the state’s pension funds.
Several Republican-led states have taken steps to ban ESG-friendly asset managers like BlackRock from handling their state pension funds. These states argue that asset managers who prioritize Environmental, Social, and Governance (ESG) factors in their investment decisions are not acting in the best financial interest of retirees and taxpayers. By focusing on social and environmental criteria, rather than purely financial returns, these states claim that ESG-friendly asset managers are engaging in politically motivated investing. States such as Texas, Florida, Louisiana, and West Virginia have either divested from BlackRock and similar firms or implemented policies barring these asset managers from managing state pension plans. These states assert that ESG investing poses a financial risk, particularly to industries like fossil fuels, which remain a significant part of their economies. The criticism continued. At the 2023 S&P Global Energy Conference, Saudi Aramco CEO Amin Nasser predicted that “fossil fuel demand will continue to grow and it is a “fantasy” that oil and gas will get phased out.”
But fast forward to 2024, and the party’s over. So, what happened? Was ESG just a multi-trillion-dollar marketing scam, or is this just part of the "evolution of capitalism," as we’ve been told?
Let’s take a look at the list of political officials and media influencers to see if one can determine what caused the USA Anti-ESG movement to accelerate so quickly.
1. Vladimir Putin—The Geopolitical Wrecking Ball 🎯 Putin’s invasion of Ukraine didn’t just upend geopolitics—it sent ESG into a tailspin. Suddenly, energy security became more important than sustainability. Everyone who had been pushing for green investments got a wake-up call: oil and gas stocks were booming while ESG investments flopped.
2. Tucker Carlson—The ESG Grinch 🎤 Who needs facts when you’ve got Tucker Carlson? This guy single-handedly dragged ESG into the American culture wars, making it sound like companies trying to be socially responsible were secretly plotting to ration your electricity and ruin your life. And let’s not forget Ron DeSantis and friends, who took things further by pulling billions from ESG funds.
3. Greenwashing—The Faker at the Party 💚➡️💰 The biggest scandal? American companies readily slapped on the ESG label like it was a shiny sticker, while behind the scenes, they were as dirty as ever. Greenwashing became the norm, and people started realizing they were investing in companies with as much credibility as a three-dollar bill.
4. Larry Fink—The ESG Poster Boy (Currently hiding under alias of “Sustainability Boy”) 🤫 Larry Fink, BlackRock’s CEO, was the face of the ESG movement. He loved talking about how capitalism could save the world—until the political pressure got too hot. Now he’s quietly stepping back, admitting he’d rather not use the term ESG anymore. He’s not a villain, just someone who realized that you can’t please everyone, especially not the Republican states boycotting his funds. But hey, at least he gave it a shot. 👏
5. Asset Managers—The Opportunists 💸 Did the big asset managers kill the ESG party? Not really. They just did what they do best—follow the money. When ESG was hot, they were all in. But as soon as the political winds shifted and profits weren’t quite as rosy, they pivoted faster than a hedge fund in a market crash. In other words: nothing personal, just business.
6. Stuart Kirk—The Guy Who Said the Quiet Part Out Loud 📢 Stuart Kirk, former HSBC head of responsible investing, stepped up at a conference and basically said what a lot of people were thinking: ESG might be overhyped, and nobody’s really panicking about the end of the world. He got fired for it, but at least he opened the door for people to criticize ESG without getting canceled. 🗣️💥
While all of the “suspects” likely played a role in the movement, it was the USA’s polarized political environment that enabled it to grow and thrive. As we embark on October 2024, don't worry - ESG, or “sustainable”, business and investment practices are a global movement that is here to stay.
In June 2024, S+P Global reported that the ESG backlash has led to a significant recalibration. While the backlash has resulted in bans, divestments, and legal challenges in some regions, ESG is still widely embraced in other parts of the U.S. and internationally. In Europe, for example, ESG remains central to regulatory frameworks, and many multinational corporations continue to adopt ESG policies to meet sustainability goals.
Moreover, while the term "ESG" might be less visible in some U.S. companies, many aspects of it—such as climate risk assessment and sustainable practices—are likely to persist under different labels, especially as long-term concerns about climate change and social impact remain relevant.
The volume of anti-ESG legislative activities also has slowed in 2024, as lawmakers struggled to get their bills across the finish line as S+P’s July 2024 data showed. In all, 95 bills banning ESG investment risk and opportunity assessments from state contracts or pensions were introduced in 2024, the June 18 report said. Another 55 bills carried over from 2023. So far, states have enacted 42 laws in 19 states, according to Pleiades' database.
Lawmakers proved less eager to pass anti-ESG laws in 2024 — an election year when politicians can ill afford criticism from business groups on whom they depend for donations, Connor Gibson, a co-author of the report, said in an interview. Even so, 373 bills have been introduced in 39 states since 2021, according to the Pleiades Strategy tally, showing the breadth of the Republican-led backlash against ESG policies in the financial industry and beyond.
The ongoing “civil war” against ESG is rapidly losing public interest and attention. Yet while the Anti-ESG movement has slowed, it continues to be well-funded by wealthy conservative donors and 15+/- special interest firms, according to the Pleiades Strategy report.
“ESG investing prioritizes far-left, ‘woke’ policy and other non-financial factors as part of the decision to invest in a company.”
From the “ESG Primer Report”, Foundation for Government Accountability (FGA) , September 2024
Media Bias and Political Propaganda keeps US Citizens split on this issue.
In September 2024, less than twenty "Anti-ESG" special interest groups create and propose policies as well as other lobbying activities across the United States. The Foundation for Government Accountability (FGA), based in Florida, lobbied on behalf of 36 bills in 13 states, creating and submitted special bills to state governments in addition to issuing 1-page explainer documents, including this "The ESG Primer" focused at retirees.(linked on image)
One group, the Florida-based Foundation for Government Accountability, lobbied on behalf of 36 bills in 13 states, more than any other, Pleiades Strategy reported.
"The full effect of these messaging wins and the legal uncertainty brought by even weak bills with robust escape clauses is not easily measurable, but it is clear that these state policies are having a chilling effect on corporate dialogue on key issues, such as climate change and diversity, equity, and inclusion," the report said.
The Foundation for Government Accountability did not immediately return a request for comment.
Lawmakers "leveraged government to cause delay in the private sector on climate change," Gibson said, citing, among other things, Vanguard Group Inc.'s 2022 decision to exit the Net Zero Asset Managers Initiative, an international group of asset managers supporting net-zero greenhouse gas emissions by 2050.
In February, two other large asset managers, JP Morgan Asset Management and State Street Global Advisors Inc. dropped out of the high-profile emissions mitigation network Climate Action 100+. Around the same time, asset manager BlackRock Inc. transferred its membership to a smaller subsidiary in the UK.
Above: Actual real photo of ESG in October 2024, now known as sustainability, now living at an unknown location in the United States wearing a masterful disguise.
ESG isn’t gone; it’s just keeping a low profile in the USA, using the alias “sustainability” until the rage subsides and the public is distracted by the upcoming presidential election. The world is big, and beyond the US borders, the ESG continues to penetrated consumer preferences and government policies.
One wonders that if the USA put the same effort into solving the climate crisis as it does into political infighting, could we already be celebrating the end of global warming? Imagine if politicians campaigned for innovative solutions that could benefit both profits and the planet—rather than prioritizing party lines and ideological sensitivities. With the U.S.'s immense resources, technological prowess, and entrepreneurial spirit, the climate crisis could have been addressed more swiftly and effectively. Either way, the consequences will be indisputable.
