It’s not just Larry Fink. C-suite ESG mentions fall as political heat rises.
BlackRock’s Larry Fink isn’t the only CEO to no longer use the now-controversial acronym ESG.
ESG — which stands for focus on environmental, social and corporate governance principles — was mentioned by just 74 S&P 500 companies at corporate conferences held during the first quarter earnings season, according to data compiled by FactSet.
That was the lowest number in nearly three years and down from a peak of 156 in the fourth quarter of 2021. Executives are now more likely to mention artificial intelligence (AI), which received 110 mentions in conversations held from March 1[ads1]5 to June 9.
ESG mentions may fall again as companies begin to publish their second quarter results in the coming weeks.
“Something drastic happened in the last year or so,” said Erick Mokaya, lead author of The Transcript, a newsletter devoted to trends in earnings calls.
Don’t expect to hear the term at all when BlackRock (BLK) reports on July 14. The boss, Fink, recently stated that he now refuses to say ESG because the term has been “weaponized” and “abused by the far left and far right.”
The pledge was notable because Fink had become a corporate face of this trend over the past decade thanks to years of annual letters to investors urging long-term investors to consider responsible ESG practices when evaluating companies.
These comments earned him critics from both sides of the ideological spectrum. Some on the right accused him of “woke capitalism”. Some on the left said Fink’s own firm did not go far enough to reduce its own exposure to climate issues by divesting itself of oil and gas investments.
BlackRock also became the target of high-profile efforts by state officials, including Florida Governor Ron DeSantis, to pull public pension money from BlackRock. Florida pulled $2 billion from the firm as punishment for its ESG stance.
The political focus around the case is steadily increasing. House Republicans are aiming to make July “ESG Month” on Capitol Hill as they try to reverse the trend toward sound investments. The once dry investment period has also become a major issue in the 2024 GOP presidential campaign.
“We don’t get this right”
Mokaya pointed to a moment last September as a major turning point in how ESG is treated by the c-suite.
That’s when JPMorgan Chase ( JPM ) CEO Jamie Dimon appeared before Congress and questioned much of the ESG orthodoxy, saying “we’re not getting this right.”
Dimon argued that a more nuanced approach to things like climate practices was necessary.
“Since then, many more CEOs have become bolder” about questioning previous ESG strategies and downplaying the term, Mokaya said.
Some investors have also withdrawn. Inflows into US sustainable funds hit a seven-year low last year in 2022 amid the growing backlash, according to a Morningstar report. The outflows continued through the first half of 2023, according to Refinitiv.
July is “ESG month”
The outflows and declining mentions of CEO talks coincide with increasing heat in the political arena that is expected to continue in the coming months.
DeSantis has signed a sweeping bill to prevent state officials from investing public money in ESG efforts. DeSantis has also taken the issue to his presidential campaign, where he likes to boast that his bill “kneefed” ESG.
Florida is not alone either. There are currently 26 states proposing anti-ESG investment bills according to a recent study by Morgan Lewis.
The activity on the campaign trail comes as the House of Representatives plans its own focus on the issue in the month of July.
US lawmakers are set to come up with proposals to change the rules governing asset managers as House Republicans look to further roll back the trend.
Shareholder activism will also be under scrutiny, as will the Biden administration’s handling of the matter. A hearing on “protecting investors” is scheduled for the House Financial Services Committee on July 12.
ESG “is clearly politicized in the US and that’s something that asset managers and lending institutions just have to deal with,” TD Cowen CEO John Miller said recently.
Ben Werschkul is a Washington correspondent for Yahoo Finance.
Click here for policy news related to business and money
Read the latest financial and business news from Yahoo Finance
