ESG green woke agenda represents a significant policy risk. The Centre for Public Policy and Economic Analysis brings a summary of its analysis, “Ideological risks as the other side of ESG.”
Originally published in Croatian at Ekonomski Lab and the brussels report. This version contains some updates.
Daniel Hinšt is the founder and currently a member of the Executive Board of CEA
Focus on the side effects
The focus is on the ideological risks or side effects that may arise from ESG (environmental, social, and governance). The analysis shows the criticisms among US think tanks and in certain states.
It is important to build a free and open society of individual responsibility based on hard work and merit. This is the alternative to the radical progressive green and gender ideology.
Ideological risks of ESG green woke agenda
The ideologically charged application of ESG can lead to societal pressure on companies through expectations for addressing various global environmental and social issues. The influence of the radical green agenda can negatively affect businesses in oil, gas, livestock, food, aviation, and other industries where CO2 emissions are inevitable.
The EU prescribes standards for detailed corporate reporting on sustainability, determines environmentally sustainable economic activities, prefers green bonds, authorizes ESG rating assessors, requires in-depth analysis of business and supply chains, etc. Also, the US legal framework was moving towards more and more regulation (during the former Biden administration).
Influence of radical activists
A strong influence of radical environmental activists could lead to social pressure on companies for faster fossil fuel phase-out. Such policies detract from profit generation as a business goal.
There is also a dilemma related to the “social” component of ESG: encouraging diversity is already implemented in many companies. Such companies can be an example to others on the market. Therefore, what new does this social segment of ESG bring? While the principles of diversity and equality are undisputable, the problem is the scope of diversity.
Namely, who will determine when the scope of diversity is large enough? Consequently, what happens if the company hires based on individual and not identity criteria? Also, should the company enable the equality of men and women, or count on many genders beyond the “binary” categories?
Moreover, ESG promotes diversity by encouraging positive discrimination in favor of some identities. In the second case, the background is the influence of the ideologies of Intersectionality and Identity Socialism.
Therefore, the theory of intersectionality starts from overlapping systems of privilege and oppression, that is, different levels of discrimination. [1] The concept refers to intersections (intersections) of inequality based on gender, race, gender identity, sexual orientation, ethnicity, and class. [2]
In contrast, classical liberal principles, nowadays conservative principles, are based on equality of opportunity and merit. Thus, individual responsibility and merit should prevail instead of creating a new form of collectivism.
Criticism of ESG green woke agenda
Below are some reviews and discussions on this topic in Canada and the US.
Fraser Institute: Companies pursue profit maximization
Canada’s Fraser Institute asks why companies would not voluntarily disclose their ESG information if ESG contributes to lower costs of capital and adds that companies could avoid or delay mandatory disclosures. [3]
Heritage Foundation: ESG vs. freedom of choice in the fight for social justice
The US Heritage Foundation believes that ESG serves the advocates of progressivism to promote a left-wing ideology that threatens freedom of choice as the American cultural fabric while using attempts to radically transform corporations into fighters for so-called social justice and so-called Critical Race Theory. Climate alarmism especially leads to the punishment of gas and oil energy [4] and those who do not want to submit to one-sided narratives that do not allow for diversity in the consideration of proportionate responses to climate change.
Heartland Institute: ESG makes subjective judgments about social groups
The US Heartland Institute warns that ESG is a risk for free markets and individual liberty, promoting subjective judgments about social groups rather than individual merit. [5]
Texas: boycott by those who boycott oil and gas
Texas ordered divestment from financial companies participating in the boycott of oil and gas companies. [6] The Texas law, supported by the think tank Texas Public Policy Foundation, prevents insurers from applying ESG criteria. It is the answer to the so-called Sunrise Movement, which promotes the complete abandonment of fossil fuel investments. [7] At the same time, Texas sees ESG in the service of the ideological goals of gender and racial identity politics and a radical approach to the environment. [8]
BlackRock has had to admit that ESG activism carries risks for their business, as ESG policies insist on compliance with race, gender, and climate agendas. Thereby, it excludes certain companies. Especially after the Texas withdrawal of more than 8.5 billion dollars of investments from BlackRock [9] and the Texas ban on the largest pension fund from investing in any of the 350 funds managed by BlackRock and other major financial companies [10], this world’s largest asset manager recognizes ESG as a risk. Namely, Texas made the aforementioned decisions because it does not want its state funds to invest in companies that boycott the oil and gas industry due to the application of ESG.
Also, shareholders of major oil companies Chevron and Exxon Mobil have rejected calls for stronger climate change mitigation measures. [11] Exxon Mobil even filed a lawsuit against climate activists, seeking to remove them from shareholder meetings. [12]
Moreover, Texas Governor Greg Abbott points out that ESG requirements threaten millions of jobs in the US. That forces investors with trillions of dollars in pension funds to choke American energy, whose capital is Texas. In this regard, Abbott warns of “climate radicals.” [13]
Texas has suspended tax financing of mandatory programs related to so-called DEI (diversity, equity, inclusion) in public higher education. Thus, job candidates are released from the obligation to sign a DEI statement. [14] Therefore, university employees no longer need to ask job candidates questions about understanding diversity. Nor can they require education about ethnicity, race, sexual orientation, or gender identity. Supporters of such a law believe that DEI officials force students and faculty to accept political beliefs about social justice. [15]
Oklahoma: Excluding ESG from investing
Oklahoma has decided to prevent investments in state funds by those entities that boycott oil and gas with ESG policies [16] that secure Oklahoma’s state finances. [17] The Oklahoma Council of Public Affairs think tank sees ESG pressure on companies concerning non-economic issues such as gender redefinition and Critical Race Theory. [18]
Florida: Protecting Individuals from Risks to Economic Freedom
Florida has banned state and local governments from using ESG as a criterion when investing public money or selling public debt. Back in 2023, Governor Ron DeSantis gathered several states (Alabama, Alaska, Arkansas, Georgia, Idaho, Iowa, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Oklahoma, South Dakota, Tennessee, Utah, West Virginia, Virginia, and Wyoming) in opposition to the policy of the federal Department of Labor. [19] Several states have enacted laws against the application of ESG. [20]
19 governors joined to emphasize the importance of protecting individuals from movements that pose a risk to economic freedoms [21]. Also, they oppose political ideology in corporate governance and investment decisions. [22]
Conclusion on the ESG green woke agenda
It is time for common sense policy. Trump’s victory will help to overcome such ideological risks. The starting point should be individual responsibility and merit, equality of opportunity, and respect for diversity among individuals.
