Coline Pavot

ESG bashing: a polarised world

As the adoption of ESG criteria becomes more widespread in Europe, a heated debate is mounting across the Atlantic: despite the increasingly tangible effects of climate change, sustainable finance has never before been the brunt of such virulence. The epicentre is in the southern United States, where – against the backdrop of a nascent election campaign – the debate on progressive ideas, blending minority rights and energy transition issues, is raging. Let’s look at the reasons behind an “anti-ESG” crusade that is now firmly in the headlines.


Sustainable finance: a political debate

The debate is above all political, and highlights the difficulty for the private sector – and the world of finance in particular – to move forward faster than broader society on sustainability issues. It pits desirable and sometimes conflicting outcomes against the reality of people’s lives. “Our mission is to give citizens back their voice […] in the U.S. economy by pushing businesses to focus on excellence rather than politics,” is in essence the message of the camp opposing the inclusion of ESG criteria. The Republican governor of Florida has slammed the “corporate elite [using] their economic power to impose policies on the country that they could not achieve at the ballot box”. It all goes to show just how difficult it is for financial players to play their part in financing the transition without the support of clear public policies.


From words to deeds

The opposition is taking legal avenues first of all. Florida, leading an alliance of 18 states, has just adopted a law aimed at prohibiting the use of ESG criteria in public investment, bond issuance, and national and local purchasing policies. The financial sector is the main focus, with boycotts of major institutions including BlackRock and JPMorgan, accused of being overly concerned with the climate or the fight against firearms. Some, like Vanguard, the world’s second-largest asset manager, which has withdrawn from the Net Zero Alliance climate finance coalition, are cracking under the pressure. The ideological tug-of-war also extends to company general meetings. The number of shareholder resolutions condemning companies’ social or environmental ambitions has never been higher than in 2023.


A clash of two worldviews

The debate pits two visions of the economy and the role of business against each other. On the one hand, there are the advocates of a Friedmanian2 vision, for whom corporate social responsibility is about increasing profits, and on the other those of a Freemanian vision, for whom all stakeholders must be taken into account. This age-old debate dovetails perfectly with today’s arguments opposing financial materiality and double materiality, and consequently raises questions about the concept of fiduciary duty: for ESG detractors, savers shouldn’t have to “pay to save the world”; for others, in the words of the emblematic Paul Polman, “businesses cannot succeed in societies that fail”.


What the (just) transition overlooks

But the roots of the problem may go even deeper. Emboldened by the growing recognition of ESG criteria, progressive ideas are challenging a fossil fuel-driven productivist model. So it’s no coincidence that the fiercest opposition is in the southern states, whose prosperity and jobs are dependent on fossil fuels. Boycotting fossil fuels amounts to putting those states and their populations under a sword of Damocles, something that (just) transition policies seem to have overlooked. However, the success of transition policies depends on the acceptability of measures adopted by governments, which need to anticipate the knock-on effects of potentially radical decisions, particularly on employment. And that doesn’t appear to be the case here.

Seen from Europe, at a time when the U.S. federal government has just ushered in very generous measures to support investment in low-carbon technologies through the IRA,[1]  the movement seems ominously radical. It should open our eyes to the potential impact of transition policies that are out of touch with local issues and concerns. As responsible investors, we are particularly vigilant, and we strive through our commitment to raise the awareness of the companies in which we invest.


Coline Pavot, Head of Responsible Investment Research, La Financière de l’Echiquier (LFDE) 


The opinions expressed in this document are the author’s own. LFDE shall not be held liable for these opinions in any way.


[1] Inflation Reduction Act