News Analysis

‘Wrong’ to assume that progress on ESG is waning

by Dan Byrne on Jul 5, 2022


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The idea that efforts in environmental, social, and corporate governance (ESG) have slumped should not be taken too seriously, suggests one expert writing in the Financial Times.

Work in this area is, in fact, continuing to see big wins at national and international levels, despite notable public setbacks. Because of this, assuming that ESG is faltering or even on the verge of winding down completely is premature, according to corporate governance and securities regulations journalist Patrick Temple-West.

In an FT opinion piece, Temple-West referred to a recent legal battle in the US, pitting financier and former advisor to the Trump administration Carl Icahn against McDonald’s over the latter’s alleged inhuman pork-sourcing practices.

Ichan lost that case, but, “it would be wrong to assume that the defeat heralded much of a waning of ESG-style activism,” he cautioned, “despite a mounting pushback on ‘woke capitalism’.”

In general, ESG has seen an increase in criticism – or at least a decrease in enthusiasm – in 2022. Alongside accusations that the concept is merely a box-ticking exercise pursued for ‘good PR’, events such as the Russian invasion of Ukraine and the global supply crisis have pushed ESG away from the spotlight.

But victories continue to occur, Temple-West said. He noted major milestones such as Apple, IBM and Twitter’s shareholders voting for proposals banning non-disclosure agreements from employment contracts, as well as activist investment initiative Tulipshare’s success at Amazon, and investment management firm BlackRock’s support or a racial equity audit at Google.

This last example, demonstrated the rise in popularity of petitions for audits as an avenue for addressing ESG issues, he added – a trend that would likely continue in the short term.

The next big board issue in the US is abortion rights

“One issue poised to be a hot one for board members next year is abortion,” Temple-West went on to explain.

His comment comes in the aftermath of one of the US Supreme Court’s most influential rulings in more than 200 years of operation: the overturning of Roe v Wade, which de-centralised legislative authority over this matter in America, and may spell the end of abortion rights in several of the country’s fifty states.

“Already, shareholders pushed a handful of companies to say more about costs and risks to their business from greater restrictions on abortions,” Temple-West said.

“Shareholder proposals demanding more such information won 30 per cent shareholder support at TJ Maxx, a retailer, and Lowe’s, a home improvement chain.”

Leading up to June’s landmark ruling, corporate boards had already faced pressure from shareholders to adopt more robust policies amid a changing political landscape, especially after a draft ruling on the issue was leaked in May.

Now, this pressure will likely continue as the divisive political issue takes centre stage once again – not just in the US, but around the world.

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