ESG, the Corporate World, and Politics

Environmental, social, and corporate governance, or  commonly known as ESG to the general public, is a set of investment considerations regarding the aforementioned three issues, pertaining to environmental, social, and matters of corporate governance. From its start as a UN initiative, it has grown into a market of some 30 trillion USD totalling all assets. However, despite this success, the criticisms against the ESG industry has been growing-to the point that these criticisms may as well be the start of the end for the industry.

Although the purported environmental and social benefits and well-being tied into commercial considerations and success have attracted millions in investment, things have been changing for the ESG. Notably, in a groundbreaking moment, on March 1st, 2023, the American Senate overturned the Labor Department rule which allows “retirement plans to consider environmental, social and governance factors when making investment decisions.” Although the groundbreaking decision, which followed the similar vote of the House Republicans on February 28th, was vetoed by President Biden on March 20th, its future isn't secure. From prominent politicians like the incumbent governor of Florida and one of the Republican candidates for the 2024 Republican presidential nomination, Ron Desantis, who has called the ESG as a

“ financial scam.”, to lawmakers of Idaho pushing for legislations, to limit the factor of ESG in state investments, and even some Democrat politicians have called for the ‘death’ for the ESG, like Senator Joe Manchin of West Virginia, who announced that he will be joining the Republicans regarding the ESG measure, calling it a “ liberal policy agenda” over financial safety and security. Furthermore, similar criticisms from all layers of the economy have lashed out against ESG, criticizing such investment considerations  as unfair, as the very rating agencies of the said ESG, which try to boil complex issues down to simple ESG scores, as well as an  allocation of money based on political agendas, instead of economic ones. As the CEO of Tesla, Elon Musk, said, 

it has been “weaponized by phony social justice warriors,” out of such political considerations, instead of real considerations, which certainly would've never caused Tesla to be kicked from the ESG index, if such factors were indeed considered.

Overall, although the ESG mountain does still remain strong outwardly, the cracks and the fractures have been already appearing, and it may be only a matter of time until it all goes crashing down.