BlackRock’s Larry Fink isn’t the only CEO to stop using the now-controversial ESG acronym.
According to data collected by FactSet, ESG – which stands for a focus on environmental, social and corporate governance principles – was mentioned by only 74 S&P 500 companies at corporate conferences held during the first-quarter earnings season.
That was the lowest in nearly three years and down from a peak of 156 in Q4 2021. Executives are now more likely to mention artificial intelligence (AI), which saw 110 mentions in phone calls from March 15 to June 9.
ESG mentions could drop again as companies start reporting second-quarter results in the coming weeks.
“Something drastic has happened in the last year or so,” said Erick Mokaya, lead author of The Transcript, a newsletter devoted to trends in earnings announcements.
Don’t expect to hear the term at all when BlackRock (BLK) reports on July 14th. BlackRock boss Fink recently stated that he now refuses to mention ESG because the term has been “weaponized by the far left” and “misused” on the far right.
BlackRock CEO Larry Fink. (AP Photo/Mark Lennihan)
The promise was notable because Fink had become an entrepreneurial 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 valuing companies.
These comments earned him critics from both sides of the ideological spectrum. Some on the right accused him of “waking up capitalism”. Some on the left said Fink’s own company hadn’t gone far enough to reduce its own exposure to climate problems by withdrawing from oil and gas investments.
BlackRock has also been the target of high-profile efforts by state officials, including Florida Gov. Ron DeSantis, to siphon off BlackRock’s public pension funds. Florida has stripped the company of $2 billion as punishment for its ESG stance.
The political focus on the issue is increasing. House Republicans want to make July “ESG Month” on Capitol Hill as they make efforts to reverse the trend toward philanthropic investing. The once dry investing period has also become a key issue in the Republican 2024 campaign.
The story goes on
“We’re not doing it right”
Mokaya pointed to a moment last September as a pivotal turning point in the way ESG is handled by senior management.
Back then, JPMorgan Chase (JPM) CEO Jamie Dimon appeared before Congress and challenged much of the ESG orthodoxy, saying, “We’re not doing this right.”
Dimon argued that a more nuanced approach to things like climate practices was needed.
“Since then, a lot more CEOs have become bolder” in questioning previous ESG strategies and downplaying the term, Mokaya said.
Some investors have also withdrawn. Inflows into US sustainable funds hit their lowest level in seven years in 2022 amid mounting backlash, according to a Morningstar report. Outflows continued in the first half of 2023, according to Refinitiv.
Jamie Dimon, CEO of JPMorgan Chase. (SAUL LOEB/AFP via Getty Images)
July is “ESG Month”
The outflows and declining mentions on CEO calls coincide with rising tension in the political arena, which is expected to continue in the coming months.
DeSantis has signed sweeping legislation banning state officials from investing public money in ESG efforts. DeSantis has also brought the issue into his presidential campaign, where he likes to brag that his bill has “brought ESG to its knees.”
Even Florida is not alone. According to a recent study by Morgan Lewis, 26 states are currently proposing anti-ESG investment legislation.
House Speaker Kevin McCarthy (R-CA) speaks to reporters on June 20. (Anna Moneymaker/Getty Images)
The campaign activity comes at a time when the House of Representatives is planning its own focus on the issue for the month of July.
U.S. lawmakers are expected to make proposals to change the rules for wealth managers as House Republicans seek to further curb the trend.
Shareholder activism will also come under scrutiny, as will the Biden administration’s handling of the issue. A hearing on investor protection is scheduled before the House Financial Services Committee on July 12.
ESG “is clearly politicized in the US and it’s something that asset managers and lenders just have to deal with,” said John Miller, managing director of TD Cowen, recently.
Ben Vershkul is the Washington correspondent for Yahoo Finance.
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