ESG Newsletter | Volume 02
In our last ESG newsletter of the year, we look ahead to 2023 and shed light on ESG themes and battles we expect to play out at the national and state levels through next year and beyond. This debate will be noisy and likely strengthen the resolve of anti- and pro-ESG forces alike, raising the stakes for companies to carefully plan their ESG initiatives and communicate meaningfully with core stakeholders.
We hope you find these short synopses and our takeaways for companies and their communications teams helpful. As always, we welcome your comments and input at Inquiries@AugustCo.com.
You can expect the next installment of our newsletter in the new year. In the meantime, the August team wishes you a happy holiday season.
Washington vs. Wall Street
The Washington-Wall Street ‘woke’ war has only just begun
Politico | December 7, 2022
Senate Banking Republicans recently released a 20-page report taking on Blackrock, Vanguard, and State Street over their endorsement of ESG and DEI initiatives, recommending Congressional investigations, new financial reporting standards, and changes to shareholder voting practices.
However, Politico points out that without a Republican majority in the Senate, it likely will be the House Financial Services Committee that ultimately takes any formal action against financiers that support ESG-related initiatives and changes. Nonetheless, hearings (and headlines) are expected.
Our takeaway: While broad Republican attacks on ESG are unpopular with voters on both sides of the aisle, these efforts show no signs of slowing. Now more than ever, companies need to consider elected officials, political journalists, and commentators as stakeholders when planning ESG-related communications. There should be close coordination with government relations teams and advisors to understand the relevant risks and prepare for potential criticism.
Read the full story here.
Commonalities between Pro and Anti-ESG Activists
Pro-ESG and anti-ESG activist investors have more in common than you might imagine
Fortune | December 8, 2022
A recent Fortune piece contends that pro-ESG and anti-ESG activist investors agree on at least one thing: they both want to keep the companies they invest in out of politics.
On the pro-ESG side, hedge fund Bluebell has called for BlackRock to replace CEO Larry Fink, claiming the company’s ESG messaging is hypocritical given its continued investment in fossil fuels. Bluebell says that investment managers should not dictate policy, contending that the blowback BlackRock has drawn from Republican lawmakers has become a “distraction,” and created a “source of E.S.G. risk” for its clients’ investments.
On the anti-ESG side, investment fund Strive Asset Management has criticized ESG initiatives at Chevron and Home Depot, claiming they are prioritizing progressive politics over maximizing long-term value for shareholders and threatening to wage proxy fights against them. Considering these two situations together, Strive founder Vivek Ramaswamy called Bluebell’s discouragement of politics “very compelling” and acknowledged that Strive and Bluebell may have common ground.
Our takeaway: It’s becoming increasingly difficult for companies to simply “stay out of politics.” As we’ve seen with BlackRock, denying a political agenda hasn’t prevented elected leaders in red states from taking punitive action against asset managers, banks, and others (to the tune of more than $3 billion in pulled assets). In the new year, while companies may strategically limit their use of the “ESG” buzzword to avoid unnecessary political scrutiny, the underlying tensions will remain. We expect environmental, social, and governance initiatives to become further engrained in how companies do business – making it even more important for companies to clearly and consistently articulate the tangible value they derive from embracing this approach.
Read the full article here.
Investing in ESG Amid an Impending Recession
Execs aren’t convinced ESG investments deliver profits. The skepticism might undercut sustainability budgets.
Business Insider | December 9, 2022
Business Insider predicts that, amid a possible recession and continued inflation, ESG investing may slow in 2023 because executives believe such efforts impact reputation more than they provide a tangible return on investment (ROI). This prediction was informed by the results of a recent survey of more than 2,500 ESG leaders across the globe, in which respondents cited concern about budgets, the timeline for ROI, and whether there would be a payoff at all.
However, as this story notes, certain changes – such as those to a company’s governance structure and processes – cost almost nothing but can still deliver significant returns. The same survey found that installing chief sustainability and diversity officers, putting an ESG committee at the board level, and allowing chief sustainability officers to sign off on funding for new projects have all led to better financial outcomes – with governance being cited as having one of the strongest correlations with profit growth.
Our takeaway: While budgets may be tighter next year, there are still tangible, cost-effective ESG initiatives – such as governance changes – that a company can implement for a positive impact. And, if positioned effectively through transparent communications to key stakeholders, these efforts may not only benefit how a company runs internally, but also may enhance how customers and investors perceive the company, all of which can have a material positive impact on ROI.
Read the full story here.