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The ESG Review: Silly season heralds serious ESG clampdown

We’re coming to the end of silly season. That peak summer holiday period when politicians are all off, companies have less to say, sharks are allegedly spotted off the Cornish coast, German holidaymakers will apparently be allowed to pre-book sunloungers and suspected killer vegetables threaten to overrun greenhouses.

That kind of thing.

Consequently, major media have had few ESG stories to feast on, and the past week has seen many regurgitate existing issues along similar lines, with heated rhetoric.

The Daily Telegraph, ever-keen to milk a theme with a series of stories, went in hard with Corporate wokeness is becoming a deeply sinister threat to our freedom.

The Daily Mail reported, again acerbically, that finance heads of 15 Republican US sites are calling for BlackRock to reveal more about investments in China, coal and to counter climate change.

Politico outlined the current tensions as walking the woke tightrope, saying that “the politicisation of the issue has blunted companies’ willingness to publicly promote environmental and social initiatives”.

Yet while the froth continued to be whipped around the ESG backlash, which emanates primarily from the US, in the meantime measures to improve ESG investing and reporting transparency have continued - and this week saw one very big move.

The enforcement division of the Securities and Exchange Commission has just hit several investment firms with subpoenas and other formal requests over their advertising of sustainable investing.

Listen to this Financial Times News Briefing podcast and you get the clear sense that regulators are moving beyond tough talk on greenwashing and ESG blurriness to taking action that stands to have lasting impact on how companies communicate ESG topics, and report on their achievements and opportunities.

The FT podcast concludes that the SEC is likely lining up an enforcement case that, if successful, would draw a new line in the sand - and potentially take the steam out of arguments from the political right.

There’s perhaps no more telling a headline about the current state of affairs - and in several corners, exasperation - than Bloomberg’s Bankers Hate Saying ‘ESG’ But Are Hardwiring It Into Finance. Covering a survey of bankers, it outlines why they think ESG as a ‘movement’ has become tarred, why its principles and formalisation remain a top priority, and why they would like politicians to “stop interfering”.

The head of Norway’s sovereign wealth fund, one of the most important voices in sustainable investing, has also criticised the UK Government’s and opposition’s apparent cooling on green measures “on the back of that one Uxbridge vote”. Nicolai Tangen said climate change was an increasing financial risk and should not get snared by politics.

The corporate world may even make efforts to stand up to that interference, with other news this week that a trade group for financial firms has launched a legal challenge against the state of Missouri over how it is regulating investment in the wake of the ESG backlash.

We may be on the cusp of an ESG clampdown that puts the most criticised aspects of sustainable investing and stakeholder capitalism on the straight and narrow.

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

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