Companies are laying low on ESG as backlash intensifies

Companies don't want to talk about their environmental, social and governance goals anymore, experts in ESG and communications tell Axios.

Why it matters: Promoting ESG policies was once an easy layup to score good press — and theoretically move toward bettering society — but now it's a way to court controversy, the ire of politicians, and attention from well-funded anti-ESG groups.

  • A dozen financial companies, including BlackRock, Blackstone and KKR, now list anti-ESG efforts as a risk in their annual reports, the Financial Times recently reported.

State of play: Anti-ESG forces are in full swing this proxy season — the time of year when public companies host their annual meetings, and shareholders vote on a slate of investor proposals.

  • Investors have filed 68 anti-ESG proposals this year to date — compared to 45 in all of 2022, per data from the Sustainable Investments Institute, a nonprofit.
  • About one-third of the anti-ESG proposals this year are focused on diversity — asking companies, including Apple, JPMorgan, Coca-Cola and McDonald's, to report on the "risks" that their anti-discrimination or racial justice efforts pose to their business.
  • Two proposals ask companies to avoid public policy positions unless there's a business justification. And a handful are asking public companies to report the risks posed by attempting to achieve net zero or decarbonization goals.

What they're saying: "Companies should be prepared to deal with ESG backlash," the Conference Board warned in its recent proxy season preview.

The big picture: Historically, anti-ESG proposals like these have failed. "There's a lot of attention and noise but nobody supports this stuff," said Heidi Welsh, executive director of the Sustainable Investments Institute.

Zoom in: Financial services companies, in particular, are in retreat. "I think all of them are a lot more careful since the Republicans are so vocal about this," a source who is close to the financial industry tells Axios.

  • "Whenever there is a possible conflict coming, the shutters go down," the source said.
  • For example, BlackRock CEO Larry Fink didn't mention the term ESG anywhere in his most recent investor letter, a departure from those of the past several years, as Axios' Andrew Freedman reported.
  • Vanguard dropped out of a global climate initiative at the end of 2022.
  • BP earlier this year backed off some of its more ambitious climate goals, the Washington Post reported.

Between the lines: Companies are soldiering on with diversity or climate initiatives they think are important — or good for business — but they're just less willing to talk about it.

  • Worth noting: The retreat isn't simply about anti-ESG efforts. Businesses are also more inclined to stay mum as regulators like the SEC start paying more attention to companies' ESG-related claims.

The bottom line: ESG efforts aren't going away, but you might see fewer press releases and puff pieces about the issue.

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