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The ESG Review: Did ESG just get cancelled?

If you ever wanted a clear example of how ESG has become a polarised and weaponised term, look no further than the headlines it has generated this week.

The proclamation from the so-called godfather of ESG, BlackRock CEO Larry Fink, that he will no longer use the term ESG because of how politicised it has become, was clickbait-on-a-plate for many business journalists.

Some held it up in lights as a clear illustration of how the political right has soiled the acronym forever, while right-leaning media used it to point to the ESG ‘movement’ being fundamentally broken.

As the Daily Telegraph outlined in its commentary piece, “If the ‘godfather of ethical investing’ is confused, ESG must be past its peak”.

The Times offered its typical, more balanced, view, with an article setting out why Fink felt the term had been weaponised, but making it clear that he and his company have not changed their view nor their investment stance.

“Fink said the expression ESG had been misused “by the far left and . . . by the far right” and that he had never intended for his closely scrutinised annual letters to be political,” it said.

Which begs the question of what has really just happened then?

Were these some off-the-cuff remarks by ESG’s figurehead, or a smoke signal that ESG as we knew it has been cancelled?

Likely neither. In absolute terms, this was little more than an acknowledgement that the acronym has become toxic in certain circles, but also an affirmation of the commitments of the world’s largest fund manager with most at stake through ESG investment.

Forbes outlined its take on what Fink said, but also said that the “The pivot from ESG to “conscientious capitalism” is worth watching.”

In a separate, UK piece, the magazine detailed why investors at conference would still want to see ESG priorities as part of a business plan, and if not would devalue the business’s prospects.

And in one of those stories that only quotes a source, SKY News claimed that the UK Government is apparently raising questions about the low enthusiasm that the country’s fund managers have for its defence stocks because of ESG investing overtones. BAE Systems and Babcock had been called to meetings. "The government does not support campaigns of disinvestment of those helping to defend peace and rule-based order," the source is quoted as saying.

With another reminder that regardless of the stigma surrounding the acronym, ESG has a way to go to standardise, define and determine stakeholder value with a blanket approach. Bloomberg reported that Louis Vuitton had become a fund manager’s favourite because of its ESG credentials, despite the contention that “luxury’s status as ESG coincides with rising income inequality”.

The acronym may look like it has been cancelled, or at least fallen out of favour. The premise remains a work in progress.

The ESG News Review is written by Steve Earl, a Partner at BOLDT.

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