ESG dissenters: Consider these facts
When I started RedEye Coffee in 2004, I did so with the belief that being environmentally and socially responsible brought value to the brand. Over the years, RedEye has partnered with thousands of people in Tallahassee to realize the vision to “Drink coffee locally. ( and) Change lives globally.
Since then, there has been a massive shift in capitalism that I call the evolution of business. This shift is the movement from shareholder capitalism to stakeholder capitalism. Research has shown that this shift has happened because millennials, now the largest consumer group, prefer environmentally friendly and socially responsible brands.
Recently, however, the idea that business can play a vital role in curbing climate change and putting social inequities right is being attacked. The attorney general of Arizona, Mark Brnovich, joined by 18 other states in publishing a critical open letter to Blackrock, claiming that using Environmental, Social, and Governance (ESG) to inform investment decision puts clients at financial risk.
Last month Florida’s Governor, Ron DeSantis, championed an anti-ESG rule for the state’s $186 billion pension plan and subsequently signed a resolution to prevent the state’s $186 billion pension fund from considering ESG factors when making investment decisions. In other words, DeSantis is using a government-issued knife to cut off the “invisible hand.”
I want to point out some essential facts that the lawyers, Florida’s governor, and other ESG dissenters are missing. First and foremost, ESG is a free market-driven solution to the environmental and social problems that politicians have not been able to fix. This The movement has two sides; first, shareholders are demanding more transparency because environmental and social corporate scandals have cost investors billions of dollars. Second, stakeholders such as consumers, employees, and exploited workers in the global supply chain are demanding better from corporations. They are investing in and spending their money with proactive social and environmental governance companies.
Mike Bloomberg wrote last week, “The fact is: Climate risk is financial risk.” He also concluded, “In a world rapidly moving to clean energy, companies dependent on fossil fuels put investors at greater risk.” Blackrock, one of the largest investors in public energy companies, with currently $170 billion in holdings, requires companies to provide climate-related financial disclosures to improve transparency and make quality investment decisions for clients. Bloomberg called this “investing 101.”
Bloomberg and Blackrock are responding to the market shift from shareholder to stakeholder capitalism, and investors understand that poor ESG strategies increase the risk to shareholders. In fact:
- ·79% of investors cited ethical parameters & values
- 78% cited positive environmental or social impacts
- · 77% cited a belief that ESG factors play a crucial role in broader financial performance
To conclude, I would like to remind the GOP of President Reagan’s famous words, “The nine most terrifying words in the English language are: I am from the Government, and I am here to help.” I remember Reagan articulating the Republican laissez- faire platform; however, many in the GOP have lost their footing. In these crazy times of pandemics and superpower land grabs, now we have conservatives trying to use the power of the government to control the free market.
Mark McNees is an entrepreneur in residence at FSU’s Jim Moran College and the lead faculty advisor for the nation’s first master’s degree in social and sustainable enterprises. He is an evangelist for using business as a force for good. Follow him on IG @markmcneesgroup or send him a connection request on LinkedIn.
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