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May 2024
AAM Magazine
May 2024
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Anti-ESG versus reality

  • Asia
  • Global

The ironies around the much-vaunted anti-ESG backlash just pile up. Texas and Florida, two stridently right-wing states, are among the top three solar power producers in the US in terms of installed capacity.

Meanwhile, corporate America continues to follow pro-sustainability policies regardless of right-wing rhetoric. Even Walmart, the epitome of Main Street, has trumpeted the success of its Project Gigaton, reducing one billion metric tonnes of greenhouse gas emissions with its suppliers six years early.

This aligns with findings that most Americans just don’t care that much about investment positions on ESG, or environmental, social and governance. The so-called “war on woke” that the anti-ESG push was yoked to appears to have run into the sand along with Florida Governor Ron DeSantis’s presidential ambitions.

Out in the real economy, the hard economic arguments that anti-ESG pundits often base their arguments on are turning against them. There is less and less economic case to build or invest in fossil fuel power production. Solar and wind are now far cheaper power sources in the US than coal, at an average US$24 per megawatt hour versus $36 for coal.

Meanwhile US natural gas producers are being hammered by relentlessly falling prices with liquefied natural gas or LNG prices hitting a 30-year low in February amid failure to control production, as well as restrictions on new approvals under the Biden administration.

In solidly Republican Tennessee, the Tennessee Valley Authority’s Bull Run Fossil Plant, decommissioned in December 2023, is being resurrected as the site for the Infinity One fusion energy prototype, in line with Republican Governor Bill Lee’s vision to “position the state as a national leader in clean energy”.

The marked absence of consensus among the business and conservative establishment around ESG and sustainability points up another weakness of the whole approach. In the broadbrush gesture politics increasingly in vogue in the US amid culture wars, the anti-ESG movement is now hostage to other policies that it has nothing to do with on practical grounds. If progress or failure in rolling back stakeholder versus shareholder capitalism depends on voter attitudes towards IVF or the Mexican border, then it is stark evidence of the logic of the anti-ESG thesis in the first place.

Still, those who choose to live by politics are destined to die by politics. Signs are that right-wingers in the US are simply moving on to more hot-button issues, leaving the whole anti-ESG wave high and dry. After all, it takes a lot less time, thought and effort to produce a soundbite than to produce an investment strategy. And then it will be up to the investment managers and asset owners who fell into line with anti-ESG rhetoric to explain why they reversed course on their fact-based long-term fiduciary obligations.