In a recent opinion piece published in Bloomberg, journalist John Authers reflects on the current backlash against ESG, arguing that the principle's real failure lies in its ineffectiveness rather than ideological controversy.
Authers notes that ESG investing is under legal and political attack, with Tennessee's attorney general declaring it "dead" after BlackRock settled accusations of misleading investors about its ESG principles. Separately, a Texas court ruled that American Airlines had acted disloyally by allowing BlackRock to vote proxies with ESG considerations, with Judge Reed O'Connor claiming ESG funds "underperform traditional investments by approximately 10%." However, Authers challenges this assertion, noting that ESG performance varies widely depending on definitions and benchmarks.
Judge O'Connor also contended that BlackRock had harmed ExxonMobil by supporting environmentalist-backed board members. Authers refutes this, explaining that Exxon's stock has outperformed industry benchmarks since the board shake-up. He argues that ESG has neither significantly diverted money from fossil fuels nor impacted climate change. "The story is not that it's warped markets and the economy," Authers argues, “but that it's been utterly ineffectual.”
"Indeed, the most important issue for ESG, and its opponents, is that it seems to have had little effect on anything," he writes. "The world is still getting warmer, and voters still hate capitalism. Backers have to explain how their strategy has had so little impact on stocks and on the real world."
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