What Is Anti-ESG?

Published on:
by Eric Burdon,

Exxon Mobil

Image of Earth globe nestled in rocks on desolate plain
Image by bedneyimages on Freepik.

There are always at least two sides to an issue. One for something, one against the same thing. It should come as no surprise that as the ESG movement continues to grow, there is equally a force pushing against it in the form of Anti-ESG.

Otherwise called anti-”woke investing”, this movement has created funds of its own and has created one of the biggest emerging barriers to corporate action on climate change and other social issues. Largely this source stems from America, where the conservatism movement marks ESG as “woke ideology” and is doing anything in its power to stomp it out.

Related: The Anti-ESG Movement Explained

Related: What is the ESG movement all about?

What The Movement Has Done Thus Far

In essence, anti-ESG is simply a regression backwards rather than forwards. It’s designed to be a blockade for companies to make any meaningful changes to their business practices pertaining to ESG. The actions thus far really show that as so far this year Republican lawmakers in 37 states have introduced 165 pieces of legislation to tackle ESG in various ways.

These new laws effectively ensure funds, contracts, and pensions can no longer consider commonplace risk factors. In other words, these funds (and even companies) can no longer consider ESG factors in any investments nor offer products that suggest ESG measures factors were considered.

These bills vary widely from boycotting companies and blocking them to government funding or contracts. In other states, state fund managers won’t be able to consider ESG factors in their investments.

Overall, this movement is largely contained in America since Canadian investors aren’t so keen on it for some key reasons. The biggest being investors have a positive attitude towards ESG and even Canada’s oil patch supports ESG considerations.

Featured: What Are Anti-ESG Funds and Why Should We Care?

The Movement’s Origins

But looking through the events, the anti-ESG movement didn’t just spring up at the start of 2023 through these legislative bills in America. The movement has a bit more of a history as sources date it back farther during particular moments.

Today, it’s largely focused on climate change denialism, with some of the biggest advocates being Steve Milloy and Tom Borelli. Milloy is a former coal company executive and paid advocate of ExxonMobil and Phillip Morris. He built his career around downplaying the risks of tobacco and fossil fuel pollution.

Borelli is cut from the same cloth, where he devoted to promoting anti-science rhetoric. Particularly around climate change (something he still does).

But the two of them in 2004 formed a non-profit called the Free Enterprise Education Institute. The idea was to educate the public about the comings and goings of business development. They did this through a website called CSRwatch which highlighted and attacked corporations that tried to show some responsibility for their actions.

Back in the early 2000s, there were attacks on companies that had climate change in mind or refused to invest in child labor or overseas sweatshops. There were even attacks on companies who had pro-indigenous corporate policies.

Overall, the movement was more about whining on the internet. Yes, there was certainly hatred and anger, but it didn’t influence any law-making or policies. The extent of Milloy and Borelli’s influence was appearing on the news speaking against climate change or some other cultural issue. As a result, any kind of funds these movements brought during those times were very shaky and worse off than the anti-ESG funds we are seeing today.

Related: ESG vs. CSR vs. Sustainability: What's the difference?

The Movement Is Still Largely Insignificant

Despite the fact that modern anti-ESG funds do have legs to stand on, the reality is these funds aren’t going to last and that this movement is going to crumble more than it already has. The reasoning is simple.

It’s not so much that pro-ESG voices are going to override any criticism, but more to do with business practices as a whole. Back in 2006 when an anti-ESG fund was created, a Slate piece noted that:

Judging by the early returns, these free-marketers are failing the test of the marketplace. The fund has attracted a paltry $5.2 million in assets as of March 31. Returns have lagged the S&P 500 badly. In its first 10 months in business, the fund returned 2.32 percent while the S&P 500 rose 4.72 percent.

In other words, the poor performance of the fund back then coincided with the poor performance these anti-ESG funds are facing today. It’s strictly bad business to just ignore environmental and social risk factors.

Takeaway

Ultimately, the anti-ESG movement is a disconnected thinking process from the rest of the world. After all, these bills are politically charged despite Republicans saying they’re not. The fight in their mind is purely ideological, even though in the end, ESG is not at all ideological at this point in time.

ESG used to boil down to philosophy. But businesses are seeing now that it’s not just a way of thinking or an idea. It’s actually the smartest long-term financial decision right now in a world that is facing climate disaster after climate disaster.

It’s really that simple.

Track company sustainability performance at our KnowESG Company Profiles listing.

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