Addressing the anti-ESG sentiment in the US

This week, we would like to briefly discuss how companies should address the anti-ESG sentiment in the United States.

49 anti-ESG bills have been introduced in the US in 2023 alone, according to a report from law firm Ropes & Gray. Driven primarily by Republican-led states, these initiatives threaten the progress made towards incorporating ESG factors into investment decisions and public policies.

At the forefront is Texas, which has proposed prohibiting ESG investing in its public retirement investment system. Similar things are brewing in Kansas, Wyoming, Florida, and West Virginia. Kentucky has passed a law requiring divestment from asset managers that ‘boycott’ energy firms, a move that mirrors a Texas law targeting large financial institutions. As a response, some corporations have resorted to “greenhushing,” or deliberately reducing communication about their ESG initiatives, to evade potential backlash.

Despite this rising opposition in the US, ESG investing remains strong in other parts of the world. Many people still believe sustainability strategies are critical to driving stakeholder value, particularly as the threats posed by climate change become increasingly evident. The next few years might be tricky for top management teams in the US trying to balance advancing their sustainability commitments and ESG strategies without alienating lawmakers or investors who agree with the anti-ESG movement.

Here are some recommendations to help you and your company strike this delicate balance:

1. Prioritize transparency. Though it might be tempting to shy away from sharing ESG initiatives, businesses should uphold transparency in their commitment to sustainability. A clear communication strategy can help debunk misconceptions about ESG investing and underscore its long-term value proposition.
2. Support ESG with data. By presenting case studies and data-driven evidence, companies can showcase the financial and societal benefits derived from ESG initiatives. This can be a catalyst in driving policy conversations towards a more balanced understanding of ESG investing.
3. Focus on your core business. While ambitious sustainability goals are ideal, do not deviate from your core strategy just for the sake of sustainability. The best in class sustainability strategies integrate into the day to day operations of any organization. They make the organization stronger by using its existing know how and strengths.
4. Collaboration helps spread the message. Joining forces with like-minded companies, industry groups, and non-governmental organizations can amplify the voice of the business community in policy debates and contribute to creating a more favorable environment for ESG.

Companies are in the process of redefining their roles in society. Many have seen the benefits of advancing both their business interests and a sustainability agenda. Through such efforts, the business community can prove that ESG investing is not merely a passing fad, but a critical pillar of business success in the 21^st century.

I hope you found this interesting. As usual, if there is anything we can help you with, or if there is an ESG topic you would like to know more about, please let us know.

Best,

Marimar

CEO, Miranda ESG