European Union

ESG and the influence of the radical green agenda

June 17, 2024

The Croatian economic policy portal Economic Lab (Ekonomski Lab) hereunder outlines a summary of the analysis “Ideological risks as the other side of ESG” published by the Croatian think tank Centre for Public Policy and Economic Analysis. CEA analyzes and advocates conservative and classical liberal policies based on natural rights, individual liberty, religious and economic freedom, democratic political culture, controlled immigration, law and order, strengthening defense, and strong transatlantic institutions based on the EU and NATO.

Focus on the side effects

The focus of the analysis is on the ideological risks or side effects that may arise from the application of ESG (environmental, social, and governance). At the same time, the benefits of ESG for business and society through the reduction of emissions and the encouragement of diversity in management are not in question.

The analysis shows the current criticisms that are increasingly loud among US think tanks and in certain states, given the strong ideological struggles around the radical progressive agenda.

In the end, the analysis provides policy recommendations for keeping ESG as one of the voluntary standards for business decisions. Namely, it is important to build a free and open society of individual responsibility for the environmental and social benefits that ESG can bring. Thus, the influence of radical forms of progressive green and gender ideology on the application of ESG could be prevented. On the other hand, ESG can bring many benefits in a reasonably defined framework, without extreme ideological influences.

The EU has just become the first major jurisdiction to make corporate climate transition plans mandatory. This is an important step-change from 'ESG' being predominantly about disclosures to requiring substantial changes to business models and operations. https://t.co/GamsH969J2

— Wolfgang Blau (@wblau) May 24, 2024

Ideological risks of ESG

In terms of risk, the ideologically charged application of ESG can lead to societal pressure on companies through expectations for addressing various global environmental and social issues that should reasonably be a matter of public policy rather than the private sector. The influence of the radical green agenda can especially negatively affect business in oil, gas, livestock, food, aviation, and other industries where CO2 emissions are inevitable.

Before presenting the discussions in the US, it is important to mention that the EU prescribes standards for detailed corporate reporting on sustainability, determines environmentally sustainable economic activities, prefers green bonds, authorizes ESG rating assessors, requires in-depth analysis of business and supply chains, etc.

Also, the US legal framework is moving towards more and more regulation. For example, there is an obligation to assess, report, and mitigate climate risks in various sectors. Furthermore, ESG factors are evaluated when deciding on pension fund investments. Moreover, in the US, Nasdaq-listed companies must publicly disclose annual statistics on the diversity of their boards.

The EU just passed a law that will force ESG standards on large AMERICAN companies doing business in the EU. But it's not just them: If your business is in these companies' "chain of activities" — design, sourcing, transport, storage, distribution, etc — YOU also have to comply. pic.twitter.com/hKaC7cCk1y

— Glenn Beck (@glennbeck) June 13, 2024

A possible influence of radical activists

In any case, among the ESG factors are issues of pollution and diversity, where there is also the risk of excessive demands and expectations.

Regarding the “environmental” component of ESG, the strong influence of radical environmental activists could lead to social pressure on companies through expectations of a more radical and faster reduction and complete abandonment of CO2 emissions. Such policies detract from profit generation as a business goal.

There is also a dilemma related to the “social” component of ESG: encouraging diversity is already implemented in many companies. Such companies can be an example to others on the market. Therefore, what new does this social segment of ESG bring? While the principles of diversity and equality are undisputable, the problem is the scope of diversity.

Namely, who will determine when the scope of diversity is large enough? Consequently, what happens if the company does not achieve the expected scope, and hires based on individual and not identity criteria? Also, should the company enable the equality of men and women (which, in terms of encouraging greater equality, is already being worked on more and more anyway), or is it necessary to count on ideologically inspired narratives that there are many genders, that go beyond the “binary” male-female categories? Moreover, it cannot be the same if diversity is encouraged by suppressing discrimination or encouraging positive discrimination in favor of some groups and identities. In the second case, the background is the influence of the ideologies of Intersectionality and Identity Socialism.

Therefore, the theory of intersectionality starts from overlapping systems of privilege and oppression, that is, different levels of discrimination. [1] The concept refers to intersections (intersections) of inequality based on gender, race, gender identity, sexual orientation, ethnicity, and class. [2]

In contrast to such an identity approach, classical liberal principles, and nowadays conservative principles, are based on equality of opportunity and merit. Thus, there is individual responsibility instead of creating a new form of collectivism as an exaggerated and generalized response to social injustices taken out of the context of the distant past.

This is another bureaucratic, costly mess from @ESMAComms and @EBA_News. Doubling down on cumbersome, ambiguous #ESG disclosure regulation will not attract capital nor will it protect investors https://t.co/FLZmCEw7NF

— Desiree Fixler (@desireefixler) June 18, 2024

Criticism of ESG

Below are some reviews and discussions on this topic in Canada and the US.

Fraser Institute: Companies pursue profit maximization

Canada’s Fraser Institute asks why companies would not voluntarily disclose their ESG information if ESG contributes to lower costs of capital and adds that companies could avoid or delay mandatory disclosures. [3]

Heritage Foundation: ESG vs. freedom of choice in the fight for social justice

The US Heritage Foundation believes that ESG serves the advocates of progressivism to promote a left-wing ideology that threatens freedom of choice as the American cultural fabric while using attempts to radically transform corporations into fighters for so-called social justice and so-called Critical race theory. Climate alarmism especially leads to the punishment of gas and oil energy [4] and those who do not want to submit to one-sided narratives that do not allow for diversity in the consideration of proportionate responses to climate change.

Heartland Institute: ESG makes subjective judgments about social groups

The US Heartland Institute warns that ESG poses a risk to free markets and individual liberty, promoting subjective judgments about social groups rather than individual merit. [5]

As a result, there is a risk that the existing liberal principles are more and more consigned to history, and conservatives, or those who have become conservatives in the meantime, start to defend them more and more.

Is there any way to stop the EU’s plan to force ESG standards on American companies? @JustinTHaskins tells me what must happen: "We need to have a president and Congress who are willing to go to the EU and say, "NO. You're not going to rope American companies into this." pic.twitter.com/KT203lsrmT

— Glenn Beck (@glennbeck) June 13, 2024

Texas: boycott by those who boycott oil and gas

Texas ordered divestment from financial companies participating in the boycott of oil and gas companies. [6] The Texas law, supported by the think tank Texas Public Policy Foundation, prevents insurers from applying ESG criteria. It is the answer to the so-called Sunrise Movement, which promotes the complete abandonment of fossil fuel investments. [7] At the same time, Texas sees ESG in the service of the ideological goals of gender and racial identity politics and a radical approach to the environment. [8]

BlackRock has had to admit that ESG activism carries risks for their business, as ESG policies insist on compliance with race, gender, and climate agendas, thereby excluding certain companies. Especially after the Texas withdrawal of more than 8.5 billion dollars of investments from BlackRock [9], and the Texas ban on the largest pension fund from investing in any of the 350 funds managed by BlackRock and other major financial companies [10], this world’s largest asset manager recognizes ESG as a risk. Namely, Texas made the aforementioned decisions because it does not want its state funds to invest in companies that boycott the oil and gas industry due to the application of ESG.

Also, shareholders of major oil companies Chevron and Exxon Mobil have rejected calls for stronger climate change mitigation measures, although activists have pushed for their implementation. [11] Exxon Mobil even filed a lawsuit against climate activists, seeking to remove them from shareholder meetings. [12]

Moreover, in a March 2023 letter to President Biden, Texas Governor Greg Abbott points out that ESG requirements threaten millions of jobs in the US, forcing investors with trillions of dollars in pension funds to choke American energy, whose capital is Texas. In this regard, Abbott warns of “climate radicals”. [13]

Regarding the social aspect of ESG, Texas has suspended tax financing of mandatory programs related to so-called DEI (diversity, equity, inclusion) in its public institutions of higher education. Thus, job candidates are released from the obligation to sign a DEI statement. [14] Therefore, university employees no longer have an obligation to ask job candidates questions about understanding diversity, nor can they require education about ethnicity, race, sexual orientation, or gender identity. Supporters of such a law believe that DEI officials force students and faculty to accept political beliefs about social justice concerning the values of achievement, merit, and freedom of speech. [15]

Oklahoma: Excluding ESG from investing

Oklahoma has decided to prevent investments in state funds by those entities that boycott oil and gas with ESG policies [16] that secure Oklahoma’s state finances. [17] The Oklahoma Council of Public Affairs think tank points out that ESG pressures companies to take positions on non-economic issues such as gender redefinition and Critical Race Theory.[18]

Florida: Protecting Individuals from Risks to Economic Freedom

Florida has banned state and local governments from using ESG as a criterion when investing public money or selling public debt. Back in 2023, Governor Ron DeSantis gathered several states (Alabama, Alaska, Arkansas, Georgia, Idaho, Iowa, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Oklahoma, South Dakota, Tennessee, Utah, West Virginia, Virginia, and Wyoming) in opposition to the policy of the federal Department of Labor. [19] Several states have enacted laws against the application of ESG. [20] A total of 19 governors joined together to emphasize the importance of protecting individuals from movements that pose a risk to economic freedoms [21] and to oppose the introduction of political ideology into corporate governance and investment decisions. [22]

A climate cartel is engaging in collusion to impose radical environmental, social, and governance (ESG) goals on the American people.

Today, the Antitrust Subcommittee investigated this cartel whose goal is to diminish our standard of living. pic.twitter.com/GpxmciF8hD

— Thomas Massie (@RepThomasMassie) June 12, 2024

Conclusions

In this analysis, ESG is presented through the American experience. However, American trends, both positive and negative, sometimes come to Europe, including Croatia. Therefore, what is probably not current today does not mean eternal insurance that will not become so. Time will probably call for wisdom and a willingness to apply a reasonable measure concerning very present radical woke ideas and risks associated with ESG. In the meantime, it is useful to work on preventing and mitigating risks while taking advantage of opportunities.

Just as medicine only makes sense in the right dose, ESG can reasonably help to address some development issues such as environmental sustainability and social diversity. However, the question is why medicine should be prescribed as an obligation if the private sector already has developed policies for environmental and social benefits.

In other words, do we need medicine even if we are healthy? What happens if the medicine is overdosed? In addition, does this medicine aspire to the utopia of perfection in achieving the globalist goals by which we are supposed to solve the eternal problem of imperfect human nature?

The question of a reasonable policy measure is crucial because many companies cannot abandon or minimize fossil fuels and CO2 emissions even more and faster. Also, it is not entirely clear what level of diversity in management and staffing is satisfactory to cover (almost) all social groups and identities, including perhaps many genders.

All of this would be simpler if the starting point were the principles of individual responsibility and merit, i.e., equality of opportunity, respect for the moral dignity of each person, and diversity among individuals. Or such a liberal approach is too conservative nowadays?

Originally published at Ekonomski Lab (Croatia) on May 23, 2024. This translated version contains some minor additions.

Disclaimer: www.BrusselsReport.eu will under no circumstance be held legally responsible or liable for the content of any article appearing on the website, as only the author of an article is legally responsible for that, also in accordance with the terms of use.