Each year, the global climate crisis becomes more severe. The year 2023 was the hottest on record, and 2024 is on track to claim that title by year end. Despite growing awareness of the scale of the crisis, politicians are no closer to finding a way out of it. Fortunately, the world of capitalist finance has a solution: an eco-chic, corporate buzzword called “ESG” – short for “Environmental, Social, and Governance.” Through ESG, asset managers and hedge funds promise that we can invest our way out of the climate crisis.
However, ESG hasn’t been having the easiest time. It’s come under criticism, not only from the left, but from investors themselves, as a glorified form of greenwashing. Meanwhile, right-wing culture warriors have gone after ESG as “woke investing.” Pro-ESG investors may have to wait for their next windfall. ESG funds had their worst quarter at the end of 2023, recording a net $5 billion lost. One JPMorgan Chase executive says that ESG funds’ underperformance has “been a challenge.”
So, what is ESG anyway? Is investing our way out of the climate crisis even viable? And, if the right hates ESG investors so much, does that make them reliable allies to the environmental movement?
What Does ESG Mean, Anyway?
Environmental, social, and governance, ESG for short, is a corporate philosophy that involves a “set of considerations” that can be used while investing. Firms are encouraged to account for the impact that environmental issues, social issues, and corporate governance may have on the market, and invest accordingly. The term was coined in a 2004 report by the United Nations. It was endorsed under a coalition called “Who Cares Wins,” made up of 20 financial institutions. The coalition pushed to develop guidelines and recommendations on “how to better integrate environmental, social and corporate governance issues” in asset management and securities brokerage services. The subtitle of the report was “Financial Markets in a Changing World.” The likes of Goldman Sachs and Deutsche Bank were essentially admitting that what happens on an environmental and social level can leave marks on capitalism – so they want to get ahead of it and do what they can to protect their profits.
In that same report, DuPont’s then-CFO confessed that corporations are under pressure to create ever-increasing shareholder value. “Enhancing environmental and social performance are enormous business opportunities to do just that.” So it’s not that DuPont, a multinational chemicals company that has lobbied against addressing climate change and has a horrific history of releasing toxic chemicals into American waterways, suddenly had a change of heart and cared about the environment. If DuPont’s ongoing lobbying efforts on behalf of toxic PFAS chemicals is anything to go by, they still don’t care. Rather, shareholders were paying attention to the impact environmental movements were having on climate change awareness, and DuPont wanted to leverage changing attitudes as a new way to make money by presenting the appearance of caring.
Since then, ESG has continued to serve as an investment opportunity with groups like Climate Action 100+, a set of companies focused on “driving the global net zero emissions transition” by 2050. The group includes some of the biggest polluters on the planet like BP and Chevron. What has this coalition of mega polluters accomplished for the betterment of the planet thus far? According to Carbon Tracker: not much. Most of the companies “are not moving fast enough to align with the goals of the Paris Agreement.” (It’s hard when the coalition’s deadline for net zero emissions is set for 26 years from now.) ESG, by all accounts, is glorified greenwashing.
Greenwashing the Financial Sector
The former chief investment officer of Sustainable Investing at BlackRock wrote an op-ed challenging ESG’s premise that “pursuing social good was also good for the bottom line.” “Sadly,” he writes, it was just a “hopeful idea.” In reality, it’s “little more than a marketing hype, PR spin, and disingenuous promises from the investment community.” In the op-ed, he exposes how asset management companies will fudge the numbers to appear more sustainable than they really are. For instance, ESG investment products will include big polluters, like oil companies and fast fashion manufacturers, to boost the fund’s performance.
For portfolio managers, their job is to avoid doing anything that will compromise profits. Their goal is to make as much money as possible – anything else, like doing what they can to keep global temperatures from rising 1.5 degrees Celsius and save humankind from mass starvation, catastrophe, and death – is secondary. This is why, for all the ESG hubbub, Goldman Sachs predicts that investment in liquid natural gas will rise by 50% in the next five years, a massive problem for climate change. This confirms what socialists, environmental activists, and young people have been saying for decades: green capitalism cannot deliver on the kind of fundamental changes needed to effectively combat the climate crisis.
Right-wing Backlash
As little progress is actually made on climate through ESG policy, it’s still the latest target in the right wing’s culture wars. Attacks on ESG have fueled Trump’s campaign. The Heritage Foundation, a conservative think tank, claims ESG is promoting “nearly every left-wing policy issue” corporations care about. As if corporations care about anything other than the opportunity to make a profit!
GOP lawmakers proposed over 150 anti-ESG bills in the House in 2023. There is a case against BlackRock’s ESG policy in Tennessee and another proposed bill against the use of ESG criteria for state funds in New Hampshire. For what it’s worth, BlackRock’s ESG criteria seems non-existent: despite being a signatory to Climate Action 100+, they’d only voted for 2 out of their 20 climate shareholder resolutions in 2023. Florida governor Ron DeSantis passed into law a ban on state officials investing public money to promote ESG goals. Vivek Ramaswamy, another failed Republican presidential candidate, even cofounded an asset management company promoting fossil fuel investment, with an exchange-traded fund titled $DRLL – as in, “drill.”
This is no real challenge to the status quo: both Democratic and Republican politicians are still intimately tied to Wall Street. They are all bills that attack greenwashing corporations, but on the premise that there should be no green anything: even “woke” lip service is too much. Wall Street’s sole responsibility, they argue, is to the super-rich shareholders. These bills do nothing to address the multiple crises facing working people right now. But they could be giving companies an excuse to duck and cover: in light of the attacks, “greenhushing” is beginning to trend.
Greenhushing
The firms that took up ESG did so primarily to profit off of the growing popular concern about the environment. But the right-wing anti-woke backlash has changed what is and isn’t profitable to pander to.
In February 2024, major players in Climate Action 100+ decided to quit the group, including JPMorgan Chase and State Street. These institutions took $14 trillion in assets with them. After all, joining the group was a business opportunity. If the anti-ESG sentiment is loud enough, masquerading as a company that cares about sustainability is bad for business. “Greenhushing,” or discreetly reporting on those less-than-stellar sustainability numbers, is the result of the right wing silencing “woke” Wall Street into submission.
But for some CEOs – like Exxon’s Darren Woods – the mask is completely off. They won’t be loudly or quietly reporting on their climate goal progress. They’ll simply come out and be their big, bad, zero-accountability selves. Woods said in March that it’s not Big Oil’s fault there’s a dangerous amount of carbon emissions in Earth’s atmosphere. “The people who are generating those emissions need to be aware of and pay the price for generating those emissions.” In other words, Exxon’s CEO blames climate change on ordinary people, not the mega polluters and the capitalist political establishment that props them up and keeps them in business. CEOs like Woods put the burden on the working class, and will continue to refuse to take responsibility for their destruction.
Investment Companies Won’t Save the Planet
The response to this, however, should not be “woke” or “green” capitalism. It shouldn’t be capitalism at all. Green capitalism’s solutions for this crisis only seem to work for, well, wealthy liberals. Solar panels on your home that you own. An electric car that costs $60k. Investing in green energy companies. And for the rest of us: reusable-bag-and-compostable-straw your way out of this. Learn to sew your own clothes after working 60 hours a week at two jobs. Figure out how to commute on a public transit system that is severely underfunded, if your area even has one. Investment companies, no matter how green or pro-ESG they vow to be, cannot deliver the change working people and the planet desperately need.
The bottomline always comes first – the environment never will. That’s the way capitalism operates. When Exxon posted historic losses in the early pandemic years, what boosted their earnings? The inter-imperialist war in Russia and Ukraine and the fear it’s generated around energy stability. Why should BlackRock invest in solving the climate crisis? They’ve seen better results when they invest in military contractors and weapons manufacturers that are directly aiding and abetting the genocidal war in Gaza. In December 2023, Socialist Alternative members, students, and workers in Madison held a walkout, rally, and march calling for UW Madison to divest from BlackRock for this very reason.
If Not ESG, Then What?
Capitalism runs on destruction, waste, and conflict. ESG cannot save us; it’s merely protection for corporations that operate on the same system that’s killing us. It’s going to take challenging that capitalist system altogether to save the planet. In fact, any serious attempt to fundamentally change our environment will enrage both the right wing and “woke,” ESG-friendly corporations. At the end of the day, they’re on the same side. So if we can’t count on them, what can we do? We need to organize and mobilize as workers, students, and socialists. We need a massive green jobs program with high-paying union jobs. We need to tax the rich to fund public transportation and public housing. We need to take big energy companies, agribusiness, and polluting industries into public ownership under democratic workers’ control. When we run a democratically-planned economy on people’s needs, free from the profit motive, only then will we be able to genuinely tackle the climate crisis.