At the end of this blog, I specify four recommendations for corporate action.
There was been a new very disturbing trend recently in state governments. They are now waging a culture war on corporations and investment organizations that focus on socially responsible investing. These same misguided elected officials are also attacking corporations with solid ESG (Environment / Sustainablity / Governance) programs and initiatives. Link to ABC news article “What is ESG investing and why are some Republicans criticizing it?”
ESG investing is a type of investing that takes into account non-financial information about a company, such as its climate impact and staff diversity. Supporters of ESG, including financial firms that manage trillions in assets, have said considerations beyond the bottom line deliver the best financial gains. In weighing the economic threat posed by climate change, for instance, investors ensure the long-term health of their portfolio.
Case 1 – Florida: In December, Florida said it is pulling $2 billion in state money managed by BlackRock over opposition to their ESG policies. Republican leaders have criticized the giant firm for putting sustainability goals above returns. This is blatantly false since strong ESG initiatives result in higher profitability in the long term as well as a better society. Sadly enough BlackRock is also being attacked (instead of supported) by activists who feel BlackRock does not go far enough.
Case 2 – North Carolina: In my own state of North Carolina, the state treasurer Dale Folwell is seeking the ouster of BlackRock’s CEO Larry Fink. North Carolina has over $14 billion invested with BlackRock, and Folwell states that he has lost confidence in the firm’s ESG initiatives and investments. Folwell offers no data to back up his reasoning; he is obviously simply waging a “culture war” to position himself for the next Republican Governorship nomination.
Unfortunately money managers are now caught in the unfortunate political cross-fire.
Data shows that companies with strong ESG programs are more profitable.
Corporate America must now take the lead in supporting solid business strategy over political divisive noise based on division instead of analysis and facts. I urge corporations to take the following four actions.
1. Continue to develop and execute your own meaningful ESG programs and continue to communicate to employees and publicly the business rationale and value.
2. Continue to invest your own cash with money managers with solid ESG investment practices.
3. Refuse to provide any financial support to any national or state politician who is waging this unfounded culture war on socially responsible investing.
4. Make strong public statements supporting ERG and socially responsible investing.
Once again, as politicians battle to dismantle the excellent progress the country is making around diversity, equity and inclusion (DEI) and ESG; corporations will now need to provide the leadership in this area. See my recent blog about corporations needing to lead in DEI.