Your feedback ensures we stay focused on the facts that matter to you most—take our survey.

Arguments about environmental, social, and corporate governance (ESG)

From Ballotpedia
Jump to: navigation, search



ESG - Teal - D2.jpg
What is ESG?

ESG investing is an asset management approach that considers the environment, social issues, and corporate governance practices. It's a type of stakeholder investing, which argues shareholder returns should not be the only goal. Stakeholder investing contrasts with traditional approaches that exclusively consider financial factors like balance sheets, income statements, and valuations to maximize risk-adjusted returns (also known as shareholder investing).

Environmental, social, and corporate governance
ESG Icon 200x200.png
• What is ESG?
• Enacted ESG legislation
• Arguments for and against ESG
• Opposition to ESG
• Federal ESG rules
• ESG legislation tracker
• Economy and Society: Ballotpedia's weekly ESG newsletter


See also: Reform proposals related to environmental, social, and corporate governance (ESG)

This page presents the main arguments related to environmental, social, and corporate governance (ESG). Click on a question below to see specific arguments and claims from policy white papers, academic journals, op-eds, and other sources.

  • What are the arguments opposing ESG?
    Read more
  • What are the arguments supporting ESG?
    Read more
  • What are current ESG conflicts?
    Read more


How should I use this page?

This page tracks broad arguments for and against ESG. It also covers practical arguments about current ESG policy conflicts. You can read this article from top to bottom, but our staff recommends reviewing the main arguments on both sides and using the in-page links to navigate to the arguments of greatest interest.

To learn about the arguments for and against ESG:

  • Start in the section below titled "What are the main arguments for and against ESG."
  • Find the main topic you're most interested in. The main topics cover ESG's impact on business and investments, political and economic structures, and society and the environment.
  • Review the main arguments for and against ESG side-by-side.
  • Click an argument or claim on either side of the debate to learn more and see sourced examples of each view from academics, policymakers, journalists and others.
  • Return to "What are the main arguments for and against ESG" to continue your research.

To learn about practical arguments about ESG policy conflicts:

  • Click here to view the debates covered on this page.
  • Select a policy conflict from the options.
  • Review the background and the claims (supporting a policy), counterclaims (opposing the policy), and responses to counterclaims.
  • Click any claims, counterclaims, and responses to counterclaims that interest you for more information and examples of the arguments from judges, policy makers, and others.

What are the main arguments for and against ESG?

The debate over ESG can be broken up into the following three areas of disagreement:

  1. Arguments about ESG's impact on businesses and investments
  2. Arguments about ESG's impact on political and economic structures
  3. Arguments about ESG's impact on society and the environment

Arguments about ESG's impact on businesses and investments

This section lists arguments about whether ESG is good or bad for businesses and investments.



Arguments about ESG's impact on political and economic structures

This section lists arguments about whether ESG is good or bad for political and economic structures.

Thesis: ESG threatens political and economic structures



Arguments about ESG's impact on society and the environment

This section lists arguments about whether ESG is good or bad for society and the environment.

Thesis: ESG is ineffective for advancing environmental and social goals



ESG reforms and legislative approaches
• Reform proposals
• Legislative approaches supporting ESG
• Legislative approaches opposing ESG
• Enacted state ESG legislation by trifecta status
• Ballotpedia's ESG legislation tracker
• Areas of inquiry and disagreement

Thesis: ESG undermines business and investment goals

This thesis argues that ESG policies detract from the primary objectives of businesses and investment firms by compromising financial performance, increasing risks, and creating inefficiencies.

Argument: ESG hurts investment outcomes

This argument claims that ESG strategies underperform compared to traditional investment approaches, reduce diversification, and introduce inefficiencies that hurt investors.

Claim: ESG stocks cannot and do not match or outperform the market

The following statements posit that ESG investments fail to generate returns comparable to traditional investments, leading to weaker financial outcomes for investors.

  • Two ESG opponents—William Hild (the executive director of Consumers’ Research) and Eric Bledsoe (a senior fellow at the Foundation for Government Accountability)—gave testimonies before the Texas Senate on October 17, 2024. They argued the state’s anti-ESG laws produced positive results and said non-ESG investment funds tended to outperform investments that considered other factors.[1]
  • Terrence Keeley—an ESG critic and former Blackrock senior adviser—argued that ESG investments were self-defeating in an interview at RealClear’s 2024 Energy Future Forum. Keeley said, "So, you really need to look at the extent to which you've taken a decision with portions of your portfolio to be ethically invested or you're willing to take lower returns. That’s all well and good. But one would think that taking lower returns in your portfolio should be accompanied by some type of advancement of a social or environmental cause. And that is simply not the case with ESG. I'll quote Bill Gates, he of much fame, saying that so far ESG investment—that multitrillion-dollar market I've spoken about—has not taken one ton of carbon out of the air."[2]
  • A study by Canada’s Fraser Institute examined the performance of ESG-related investments and argued that ESG supporters’ claim that the strategy improved returns was wrong.[3]
  • Fortune released on November 9, 2023, the results of an examination of 235 companies conducted by Christos Makridis and Majeed Simaan. The study argued that “the explicit targeting of ESG metrics leads to a portfolio allocation that is economically and environmentally worse than the market allocation” and that “[i]nvestors should be wary of overemphasizing ESG at the expense of established measures that have stood the test of time.”[4]
  • New Hampshire Governor Chris Sununu (R) said, "The most important responsibility we have is getting the best return for our retirees. And this ESG stuff doesn’t get the returns. It hurts returns, it increases risk, and it doesn’t fulfill the mission."[5]
  • Policy analyst Rupert Darwall wrote, "Insofar as material ESG factors boost corporate profits, ESG investment strategies must assume that the market fails to incorporate this into higher valuations because once the market has priced in those factors, investors must be satisfied with lower expected returns. As Eugene Fama, a founder of modern portfolio theory, puts it, 'virtue is its own reward since investors get lower expected returns from the shares of virtuous firms.'"[6]
  • Darwall also wrote, "In contrast to the older ethical investment movement, which accepted that morally constrained investment strategies incur costs, ESG proponents claim that investors following ESG precepts earn higher risk-adjusted returns because companies with high ESG scores are lower-risk. Thus, their stock prices will outperform, whereas those firms with low ESG scores are higher-risk, leading them to underperform. ... This supposition conflicts with finance theory. Once lower risk is incorporated into a higher stock price, the stock will be more highly valued, but investors will have to be satisfied with lower expected returns. Unsurprisingly, claims of ESG outperformance are contradicted by studies."[7]
  • Darwall also wrote, "Claims that ESG-favored stocks outperformed during the Covid-19 market meltdown disappear once other determinants of stock performance are controlled for. ESG factors were negatively associated with stock performance during the market recovery phase in the second quarter of 2020."[7]

Claim: ESG investing strategies reduce diversification and are thus riskier

The following statements posit that ESG strategies narrow the pool of potential investments, increasing portfolio risk and reducing opportunities for diversification.

  • Policy analyst Rupert Darwall wrote, "Modern investment theory emphasizes the importance of portfolio diversification. The MSCI KLD 400 Social Index, used by BlackRock’s iShares MSCI KLD 400 Social Index, comprises less than one-fifth of the MSCI USA IMI Index. No investment theory says that shrinking the universe of potential investment options by 80% is conducive to producing higher returns. The 2000 decision by CalPERS, the nation’s largest state pension fund, to divest itself of tobacco stocks is reckoned to have cost it $3 billion in lost returns."[6]
  • New Hampshire Governor Chris Sununu (R) said, "The most important responsibility we have is getting the best return for our retirees. And this ESG stuff doesn’t get the returns. It hurts returns, it increases risk, and it doesn’t fulfill the mission."[8]

Claim: ESG is less efficient than alternative investment strategies

The following statements posit that free-market approaches produce better economic outcomes, while ESG strategies create inefficiencies that hinder growth and innovation.

  • Andrew Stuttaford wrote, "Underpinning the notion of 'stakeholder capitalism,' a concept that has taken the C-suites of some of America’s largest companies by storm, is the idea that a company should be run for the benefit of all its 'stakeholders,' a conveniently hazy term that can be defined to include (among others) workers, customers, and 'the community,' as well as the shareholders who, you know, own the business. It’s a form of expropriation based on the myth that a corporation that puts its shareholders first must necessarily put everyone else last. In reality, an enterprise that, to a greater or lesser extent, fails to consider the needs of various — to use that word — stakeholders in mind, customers, most obviously (but certainly not only) is unlikely to flourish, and nor, therefore, will its owners."[9]

Claim: ESG considerations distract from the interests of beneficiaries

This claim posits that ESG considerations distract from beneficiaries' financial interests (such as those of public or private pensioners) and therefore violate the fiduciary responsibilities of those who manage assets on behalf of other people and institutions.

  • In a ruling against the ESG considerations in American Airlines' retirement plan, U.S. District Judge Reed O’Connor argued the approach was self-interested and violated the fiduciary standard of loyalty to retirees. O'Connor said, "The Court concludes that Defendants acted disloyally by failing to keep American’s own corporate interests separate from their fiduciary responsibilities, resulting in impermissible cross-pollination of interests and influence on the management of the Plan. The most obvious manifestation of this is found in American’s relationship with BlackRock. Because of American’s corporate goals and as a complement to them, Defendants did not sufficiently monitor, evaluate, and address the potential impact of BlackRock’s non-pecuniary ESG investing. Together, the influences of these non-Plan interests constituted a breach of loyalty, allowing BlackRock to engage in ESG-oriented proxy voting and investment strategies using Plan assets."[10]

Claim: ESG investing creates conflicts of interest

This claim posits that ESG investing sets up conflicts of interest between corporations and institutional investors like BlackRock.

  • In a ruling against the ESG considerations in American Airlines' retirement plan, U.S. District Judge Reed O’Connor argued the relationship between the company and BlackRock created a conflict of interest that harmed investors. O'Connor said, "Start with BlackRock’s influence. Defendants acted disloyally by allowing their various ties to BlackRock to influence management of the Plan. To begin, Defendants knew that the Plan’s largest investment manager, BlackRock, was also one of American’s largest shareholders. BlackRock managed billions of dollars in Plan assets at the same time it owned 5% of American stock. BlackRock also financed approximately $400 million of American’s corporate debt at a time when American was experiencing financing difficulties. Defendants’ own personnel put it best when describing this “significant relationship [with] BlackRock” and “this whole ESG thing” as “circular.” It is no wonder Defendants repeatedly attempted to signal alignment with BlackRock."[10]


Argument: ESG harms core business functions

This argument claims that ESG policies distract companies from sound business practices, harm internal relations, and misinterpret the fundamental role of corporations.

Claim: ESG distracts from sound business decision-making

The following statements posit that ESG diverts attention from customer needs, market trends, and profitability, undermining business effectiveness.

  • Policy analyst Rupert Darwall wrote, "The cost, on the other hand, can be viewed in terms of loss of focus; in the first instance, loss of focus on the essentials of business and of investing. For business, it is the focus on customers, anticipating market trends and innovating to create them and doing so profitably for shareholders. For investors, it is the hard search for risk-adjusted returns. Going green can lead business and investors to take their eye off the ball—or worse. Edmans reminds us that all that is green isn’t necessarily good: shortly before its collapse in 2001, Enron was lauded for its corporate social responsibility, winning six awards in a single year from the US Environmental Protection Agency and a corporate conscience award from the US Council on Economic Priorities."[7]
  • Wall Street Journal columnist James Mackintosh argued, "There are obvious benefits of diverse corporate leadership for society, both in providing role models and in showing a commitment to promoting the best people, irrespective of skin color or gender. But doing it because it is the right thing is not the same as doing it because it makes more money. Since 2015, the approach has been tested in the fire of the marketplace and failed. Academics have tried to repeat McKinsey’s findings and failed, concluding that there is in fact no link between profitability and executive diversity. And the methodology of McKinsey’s early studies, which helped create the widespread belief that diversity is good for profits, is being questioned."[11]

Claim: ESG creates unnecessary tension between management and employees

The following statements posit that ESG initiatives can introduce conflicts within organizations, harming employee morale and productivity.

  • F. Vincent Vernuccio—the president of the Institute for the American Worker—and Sam Adolphsen—the policy director for the Foundation for Government Accountability—argued in an op-ed for The New York Post that unions used ESG pressure to create tension between employers and employees, even where no such tension existed before.[12]

Claim: ESG strategies fail to recognize the only responsibility of corporations is to generate profits

The following statements posit that ESG undermines the primary role of corporations, which is to maximize shareholder returns while adhering to ethical standards.

  • A group of Republican state treasurers sent a letter on August 28, 2024, asking the Business Roundtable to change its 2019 statement defining the purpose of corporations. The treasurers argued the definition deprioritized shareholder interests in profit and risk management and promoted ESG investing. They said, "American companies must focus on maximizing returns ... That process necessarily includes taking care of stakeholders along the way."[13]
  • Milton Friedman wrote, "But the doctrine of 'social responsibility' taken seriously would extend the scope of the political mechanism to every human activity. It does not differ in philosophy from the most explicitly collectivist doctrine. It differs only by professing to believe that collectivist ends can be attained without collectivist means. That is why, in my book 'Capitalism and Freedom,' I have called it a 'fundamentally subversive doctrine' in a free society, and have said that in such a society, 'there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception fraud.'"[14]
  • Friedman also wrote, "In a free‐enterprise, private‐property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom. Of course, in some cases his employers may have a different objective. A group of persons might establish a corporation for an eleemosynary purpose—for example, a hospital or school. The manager of such a corporation will not have money profit as his objective but the rendering of certain services."[14]

Thesis: ESG threatens political and economic structures

This thesis argues that ESG policies undermine democratic governance, centralize power in unelected entities, and disrupt economies dependent on traditional industries.

Argument: ESG detracts from the democratic process and consolidates power

This argument claims that ESG allows private institutions to exercise undue influence over public policy, bypassing democratic accountability.

Claim: ESG turns companies into political instruments

The following statements posit that ESG transforms businesses into tools for advancing ideological agendas, undermining democratic deliberation.

  • Columnist George Will argued, "Regarding ESG, last year, $13 billion was withdrawn from asset managers making investment decisions based on “environmental, social and governance” considerations. Unpacked, those categories mean the woke agenda: decarbonizing the economy, social engineering based on identity politics, gender equality, union power and more."[15]
  • Louisiana Attorney General Jeff Landry (R) said, "ESG investing puts politics over people and raises significant concerns that companies guided by these green-energy fantasies may be engaging in unfair and deceptive practices."[16]
  • A joint statement of 19 states opposing federal ESG policies said, "The proliferation of ESG throughout America is a direct threat to the American economy, individual economic freedom, and our way of life, putting investment decisions in the hands of the woke mob to bypass the ballot box and inject political ideology into investment decisions, corporate governance, and the everyday economy."[17]
  • U.S. House Financial Services Committee Chairman Patrick McHenry (R) said, "Progressives are trying to do with American businesses what they already did to our public education system—using our institutions to force their far-left ideology on the American people. Their latest tool in these efforts is environmental, social, and governance proposals."[18]
  • Ralph Ginorio wrote, "In other words, instead of an enterprise being judged by their objective business practices they are increasingly being judged by subjective standards of ideological conformity. It is no longer sufficient for an entrepreneur to provide a useful product or service at a fair price and with good customer service. Nor is it enough for an owner to build an effective organization staffed by dynamic and skilled professionals who are dedicated to earning a profit. Today, business leaders are being manipulated into warping their enterprises so they serve a decidedly Left-wing agenda. This is a great reason why, in the face of intensifying consumer backlash, so many companies are stubbornly implementing increasingly divisive ideological policies."[19]
  • Ginorio also wrote, "It is this system that the international Left has brought to bear on private businesses in the West. And, if companies betraying their customers to curry favor with ideologues is any indication, it seems to be working! ESG is the 'Critical Race Theory' of today's business climate, a political power grab designed to bypass democratic deliberation by politicizing commerce."[19]
  • Policy analyst Rupert Darwall wrote, "ESG is supposedly about the objective assessment of investment risk. The stated purpose of the Sustainability Accounting Standards Board (SASB), a body supported and funded by Michael Bloomberg, is to provide a disclosure regime that better enables investors to assess risk, climate risk being a major one. ... At the same time, the SASB aims to harness the power of capital markets for political ends. Just as the Covid pandemic was sweeping the globe, Bloomberg declared climate change the biggest threat to America and the world. 'How do you replace dirty energy?' he asks. 'Stop rewarding companies from making it.' ESG thus becomes politics pursued by other means."[7]
  • Ginorio also wrote, "Yet, from a corporate viewpoint, making some effort to implement ESG's has just become part of the cost of doing business. This is not by any means the first time that contemporary companies have bowed the knee to political imperatives. Any business who wants to function in the People's Republic of China must be silent about the Communist's genocide against the Uighurs of Xinjiang, their efforts to eliminate Tibetans within Tibet, their crushing of a free people in Hong Kong, and their threats to do the same after conquering Taiwan. In fact, ESG is based on the Chinese Communist Party's Social Credit Score. Every single person under Communist control is stringently assessed in their every utterance and observable action. Abetted by U.S. tech companies, cameras everywhere with face-recognition software enable the CCP to discern more about individual conduct than George Orwell's telescreens from his dystopian novel '1984.'"[19]
  • Milton Friedman wrote, "The businessmen believe that they are defending free enterprise when they declaim that business is not concerned 'merely' with profit but also with promoting desirable 'social' ends; that business has a 'social conscience' and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they are—or would be if they or any one else took them seriously— preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades."[14]
  • Friedman wrote, "The whole justification for permitting the corporate executive to be selected by the stockholders is that the executive is an agent serving the interests of his principal. This justification disappears when the corporate executive imposes taxes and spends the proceeds for 'social' purposes. He becomes in effect a public employe, a civil servant, even though he remains in name an employe of private enterprise. On grounds of political principle, it is intolerable that such civil servants—insofar as their actions in the name of social responsibility are real and not just window‐dressing—should be selected as they are now. If they are to be civil servants, then they must be selected through a political process. If they are to impose taxes and make expenditures to foster 'social' objectives, then political machinery must be set up to guide the assessment of taxes and to determine through a political process the objectives to be served. This is the basic reason why the doctrine of 'social responsibility' involves the acceptance of the socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation of scarce resources to alternative uses."[14]

Claim: ESG consolidates power in large investment funds

The following statements posit that ESG centralizes decision-making in financial institutions, limiting diversity and competition in markets.

  • Utah State Treasurer Marlo Oaks wrote, "ESG shifts the political process from our democratic institutions to those managing money. Whoever has the most money wins. And they are driving their political agendas using other people’s money, including Americans’ retirement funds. BlackRock uses the trillions of dollars it manages as leverage to compel companies to implement certain policies and argues 'forcing behaviors' is necessary to achieve its goals."[20]
  • Policy analyst Rupert Darwall wrote, "ESG investing thus turns out to be politics continued by other means. Far from a vision of inclusive capitalism, it is the culmination of a trend away from democratically accountable law-making. In 2009, despite large Democratic majorities in both houses of Congress, cap-and-trade was passed only narrowly by the House and died in the Senate. After the 2010 midterm elections, such efforts became the purview of the administrative state and the Obama administration’s Clean Power Plan – until the Supreme Court ordered a stay on its implementation. Now, society is apparently to be regulated by the top executives of multitrillion-dollar index funds and a handful of activist shareholders."[6]
  • Darwall also wrote, "Inclusive it is not. Americans’ savings are to be deployed for wider societal ends, ones determined not by them or by elected politicians but by Wall Street oligarchs. The end point is the socialization of American capital. Rather than being inclusive, ESG is pure insider capitalism: it excludes the many from power exercised by the few."[6]
  • Darwall also wrote, "The weaponization of finance by billionaire climate activists, foundations, and NGOs threatens to end capitalism as we know it by degrading its ability to function as an economic system that generates higher living standards. This usurpation of the political prerogatives of democratic government invites a populist backlash."[7]

Claim: ESG is corporatist

These statements posit that ESG fosters corporatist collaboration between business executives, fund managers, and governments, which destroys market competition and ensures the government only does business with companies that align with its political agenda.

  • Professors Allen Mendenhall and Daniel Sutter argued, "In a level playing field, ESG-weighted portfolios struggle against market-tracking index funds, which provide better diversification and risk reduction. Government regulations mandating climate-related disclosures benefit ESG funds by reducing investor options, making securities in ESG portfolios more attractive than they would be under (more) perfect competition."[21]
  • Andrew Stuttaford wrote, "The wider vision underlying stakeholder capitalism is one in which different interest groups such as employers, employees, and consumers collaborate in pursuit of mutually (if sometimes mysteriously) agreed objectives under the supervision of the state. It would never be quite post-democratic, not quite, in any likely American form, but what it would be is a variety of corporatism. Corporatism takes many, many forms. It can range from the relatively (relatively) benign — it runs through European Christian Democracy, and it can be detected in early-20th-century American Progressivism — to the infinitely more heavy-handed. It has been an important element in the theory, if not the practice, of some variants of fascism, most notably in Mussolini’s Italy, but not only there."[22]
  • Ralph Ginorio wrote, "We should inquire of our elected officials about the feasibility of eliminating the use of ESG scores in the regulation of banking and in the awarding of government contracts. ESG scores corrupt free enterprise and compromise our citizenship rights. We should each endeavor to bring such practices to light and root them out as an insidious danger to our liberty."[19]

Claim: ESG establishes an unelected tax on businesses and consumers

The following statements posit that ESG imposes hidden costs on businesses and consumers to fund social and environmental objectives without public consent.

  • Milton Friedman wrote, "The executive is exercising a distinct 'social responsibility,' rather than serving as an agent of the stockholders or the customers or the employes, only if he spends the money in a different way than they would have spent it. But if he does this, he is in effect imposing taxes, on the one hand, and deciding how the tax proceeds shall be spent, on the other. This process raises political questions on two levels: principle and consequences. On the level of political principle, the imposition of taxes and the expenditure of tax proceeds are governmental functions. We have established elaborate constitutional, parliamentary and judicial provisions to control these functions, to assure that taxes are imposed so far as possible in accordance with the preferences and desires of the public— after all, 'taxation without representation' was one of the battle cries of the American Revolution. We have a system of checks and balances to separate the legislative function of imposing taxes and enacting expenditures from the executive function of collecting taxes and administering expenditure programs and from the judicial function of mediating disputes and interpreting the law. Here the businessman—self‐selected or appointed directly or indirectly by stockholders—is to be simultaneously legislator, executive and jurist. He is to decide whom to tax by how much and for what purpose, and he is to spend the proceeds—all this guided only by general exhortations from on high to restrain inflation, improve the environment, fight poverty and so on and on."[14]

Claim: ESG pursues governmental goals without the checks and balances of normal politics

The following statements posit that ESG circumvents traditional legislative and regulatory processes, eroding transparency and accountability.

  • Utah State Treasurer Marlo Oaks wrote, "Given the intense feelings about the environment, it is easy to misconstrue my opposition to ESG as 'fighting against climate change.' However, that is simply not the case. I support developing solutions to address climate concerns. What I am against is the use of economic force to drive political agendas."[20]
  • Milton Friedman wrote, "Aside from the question of fact—I share Adam Smith's skepticism about the benefits that can be expected from 'those who affected to trade for the public good'—this argument must be rejected on grounds of principle. What it amounts to is an assertion that those who favor the taxes and expenditures in question have failed to persuade a majority of their fellow citizens to be of like mind and that they are seeking to attain by undemocratic procedures what they cannot attain by democratic procedures. In a free society, it is hard for 'good' people to do 'good, 'but that is a small price to pay for making it hard for 'evil' people to do 'evil,' especially since one man's good is anther's evil."[14]
  • Joel Kotkin wrote, "This powerful front consists of a new alliance between large corporate powers, Wall Street, and the progressive clerisy in government and media. Its agenda consists of several goals. On the corporate front we have the emergence of 'stakeholder' capitalism, which embraces the state’s priorities implicitly and those of the progressives generally, as a way to please regulators, the woke among their employers, and, to some extent, their own consciences. In this they resemble companies in authoritarian states—like Mussolini’s Italy, Hitler’s Germany, and today’s China—where private capital accumulation is permitted but dissent from the agreed norms of the media-government-academy, once the privilege of individuals and corporations, is now largely verboten."[23]

Argument: ESG harms local and national economies

This argument claims that ESG policies harm industries critical to economic stability and national security while increasing consumer costs.

Claim: ESG weakens state economies reliant on coal, oil, and gas

The following statements posit that ESG divestment from fossil fuels reduces state tax revenues, damaging regional economies.

  • West Virginia State Treasurer Riley Moore (R) argued, "This ESG movement, in its current form, is really an existential threat to our jobs, our economy, and our tax revenue. We generate hundreds of millions of dollars in tax revenue from coal and gas specifically."[24]

Claim: ESG drives up consumer prices

The following statements posit that ESG initiatives increase the cost of goods and services, placing a financial burden on consumers.

  • The Buckeye Institute—a Columbus, Ohio-based think tank—published a report February 7, 2024, arguing that ESG hurts farmers and agriculture and drives up the prices of food and other consumer goods.[25]
  • Agriculture commissioners from 12 states sent a letter on January 29, 2024, to the heads of six banks, arguing that ESG efforts to promote net-zero carbon policies would hurt farmers and inflate consumer food prices.[26]
  • Florida Governor Ron DeSantis (R) said, "But I think I’m concerned about this ESG, I’m concerned about them trying to say climate change and everything because that’s going to make some of these things very, very expensive if they’re pricing in all these things that very well may not happen. And that’s new from where we were 20 or 30 years ago."[27]

Claim: ESG hurts farmers

This claim argues ESG policies hurt farmers and threaten agricultural industries.

  • Alabama State Auditor Andrew Sorrell (R) argued in an op-ed published October 13, 2024, that ESG threatened farmers—especially those in his state. Sorrell said environmental regulations and corporate policies would increase farming costs and damage large agricultural industries.[28]
  • The Buckeye Institute—a Columbus, Ohio-based think tank—published a report February 7, 2024, arguing that ESG hurts farmers and agriculture and drives up the prices of food and other consumer goods.[29]

Claim: ESG weakens America's national security and increases dependence on foreign countries for energy

The following statements posit that ESG compromises energy independence, increasing reliance on foreign resources and weakening national security.

  • Congressmen Andy Barr (R-Ky.) and Bryan Steil (R-Wis.) wrote a letter concerning the sale of Institutional Shareholder Services (ISS), the world’s largest proxy advisory service, to a German financial services firm. They argued ISS proxy votes supporting ESG had a significant impact on corporate decisions that reduced American energy independence and harmed national security.[30]
  • Florida Governor Ron DeSantis (R) argued that "[ESG] affects our national security. When you have to go to foreign countries that are hostile to us to try to get energy, that is not a good place to be in. ... What ESG wants to do is put a premium against that type of business. It’s also bad for our national security, when you’re doing this stuff with ESG, you are increasing the costs that businesses have to comply with in the United States."[31]

Claim: ESG regulations make businesses less competitive globally

This claim argues ESG regulations make corporations less competitive with businesses under less restrictive rules.

  • The European Banking Federation argued that proposed E.U. climate regulations would make it harder to compete with U.S. banks, according to Bloomberg. The pushback came as the U.S. slowed its regulatory activity while E.U. regulators like the European Central Bank promoted more ESG considerations in the financial sector.

Claim: ESG is anti-competitive and monopolistic

This claim argues ESG practices often result in anti-competitive collusion between companies to discriminate against certain industries or promote unprofitable policies in violation of antitrust laws.

  • An 11-state, Texas-led lawsuit alleged in 2024 that BlackRock, State Street, and Vanguard colluded to suppress coal production, violating antitrust laws.

Thesis: ESG is ineffective for advancing environmental and social goals

This thesis argues that ESG policies fail to achieve their stated environmental and social objectives, often serving as superficial gestures that mislead stakeholders and preserve the status quo.

Argument: ESG does not deliver on environmental promises

This argument claims that ESG policies fall short of achieving significant environmental benefits and may even hinder necessary regulatory reforms.

Claim: ESG investing does not prevent climate change but rather seeks to mitigate portfolio damage

The following statements posit that ESG strategies focus on financial risk mitigation rather than actively addressing environmental challenges.

  • Tariq Fancy, BlackRock's first global chief investment officer for sustainable investing, wrote, "I suspected that every time people read the latest such headline about guarding against climate change-related risks in the financial system, they mistakenly believed that these efforts were helpful in the fight against climate change itself. In fact, the survey found that not only was that true, but that most people think that this kind of work is just as helpful as any other pledge, such as large-scale organizational commitments to become net zero carbon emitters. Unfortunately, protecting an investment portfolio from the disastrous effects of climate change is not the same thing as preventing those disastrous effects from occurring in the first place."[32]

Claim: ESG talk allows businesses to deflect responsibility for climate change, avoiding real solutions

The following statements posit that ESG discussions create the illusion of action while enabling companies to avoid substantive environmental commitments.

  • Tariq Fancy, BlackRock's first global chief investment officer for sustainable investing, wrote, "Unfortunately, it gets even worse: the deadly distraction is real. For half the respondents we removed the headlines entirely, and then compared the views of both groups — those who had seen the headlines and those who hadn’t — on who should lead the way in building a sustainable society. In Canada, it didn’t make that much difference: people generally trust their elected representatives to lead the way regardless. But there was a large and statistically significant difference in the US. Exposure to the headlines made people 17% more likely to say that business, not government, will lead the way in building a more sustainable economy."[32]
  • Fancy wrote, "Today, given the short-term financial incentives of many business leaders, they profit most from maintaining a status quo in which they can delay tax increases and overdue regulation in order to squeeze out as much in share price appreciation and bonuses as possible. And all of this creates a long-term mess that someone else — meaning the public and future generations — will have to pay the bill for later on. Pennies in shareholder value today, steamroller for someone else tomorrow."[32]
  • Fancy wrote, "Every year, companies invest more and more in sustainability initiatives. The tools, such as ESG data and reporting standards, can be useful since they help us to start measuring the side effects we need to manage better, and the people, who bring sustainability expertise, are also critically needed. But the overarching narrative that these alone will matter without rule changes risks rendering all of these efforts meaningless or even counterproductive. Having coaches who teach clean play doesn’t do much if cheating and dirty play still wins games. Should we wait for profits and purpose to magically overlap on their own, or does an outside and rather visible hand need to enforce new rules of the game to make it happen faster?"[32]
  • Fancy wrote, "Second, these leaders must know that there is no way the set of ideas they’ve proposed are even close to being up to the challenge of solving the runaway long-term problems that we desperately need solved. A hodgepodge of voluntary commitments and non-binding words about caring more for all stakeholders in society will not give us what we need to solve the massive systemic problems we face. Inessa Liskovich, who was careful and measured on every thought she offered, was clear on this point: 'There’s absolutely no reason to believe that societal demands, whether from consumers or employees, would ever get to exactly the right level that we’d want for ourselves from a policy perspective.' Yet at a time that we need leadership to make necessary changes before it’s too late, we get bland words intended to preserve the status quo."[32]
  • Fancy also wrote, "For years now we’ve been buying a cheap knockoff placebo and calling it the ‘prevention’ — and all that’s really happening is that the eventual bill we’ll need to pay for an actual ‘cure’ is silently rising. And when that bill comes, we’ll have no money left because everything has been milked dry. This is not limited to business leaders only. Politicians, who tend to face reelection every few years, don’t have an incentive to tell people that Santa Claus doesn’t exist if they can point to a vaguely plausible (but ultimately ineffective) way to maintain our current way of life. Greenwashing a product is one thing, but this amounts to something far worse: this is greenwashing our entire economic system."[32]
  • Analysts Kenneth P. Pucker and Andrew King wrote, "Most importantly, the boom in ESG investing helps to create the impression that the trillions of dollars needed to finance the transformation to a low carbon economy are on the way. This misconception likely relieves pressure on necessary regulatory reforms and the massive public private partnerships that are required to avert building threats to environmental and social welfare. If so, this deferral would represent the latest installment of a 50-year trope positing that market based voluntary action can supplant the need for public regulation of private externalities. As but one illustration of the limits of voluntary action, consider Coke’s voluntary efforts to reduce one of its most material ESG risk factors: water usage. After years of effort and NGO partnerships in close to 100 countries to save and replenish local watersheds, Coke declared itself 'water neutral' in 2015 — five years ahead of its self-selected target. In part as a result, Coke’s ESG rating via MSCI is 'AA,' or market leader. However, Coke’s chosen boundary for water neutrality is the water used in manufacturing, distribution, and cooling, not the more than 90 percent of water it estimates that it uses in its agricultural supply chain, primarily in the fields to irrigate farmed sugar."[33]

Argument: ESG causes social harm

This argument claims that ESG policies harm (not help) social structures and human rights.

Claim: ESG funds are favor Chinese companies with slave labor ties

This claim argues ESG funds favor Chinese companies while unfairly holding American and European corporations to higher standards:

  • An Ignites Asia study argued several ESG funds, including funds operated by BlackRock, were exposed to electric vehicle and solar companies with possible slave labor ties in China’s Xinjiang province.[34]

Claim: ESG approaches boycotting Israel harm Israeli children

This claim argues ESG investing approaches opposing the sales of weapons and other goods or services to Israel would harm innocent Israeli children.

  • Isaac Willour, a corporate relations analyst at Bowyer Research, argued against shareholder resolutions that proposed ceasing business relations with Israel, saying, "Divesting from Israel, despite what groups ranging from ESG activists to the virulently pro-Hamas protestors currently taking over Columbia University seem to think, means innocent children die—there’s no getting around that."[35]

Argument: ESG misleads stakeholders

This argument claims that ESG frameworks often present misleading information to stakeholders, overstating their contributions to social and environmental progress.

Claim: ESG commitments mislead regulators and customers by overstating corporate responsibility

The following statements posit that ESG ratings and commitments exaggerate environmental and social achievements, misleading both regulators and the public.

  • Gianpaolo Parise and Mirco Rubin, professors from the EDHEC Business School in France, examined the portfolios of investment funds that claimed to consider ESG factors in their investments. The authors argued that many such funds were misleading regulators and clients about their holdings. The paper called the practice of overstating, in their view, ESG investment commitments “Green Window Dressing.”[36]

Claim: ESG scores favor high-performing companies and fail to account for real environmental or social progress

The following statements posit that ESG scoring systems prioritize financial success over genuine environmental or social outcomes.

  • A research paper from Columbia Business School argued that "[I]ndex construction incentives affect the production of ESG ratings, highlighting the need for greater transparency in the production of ESG ratings. ... [W]e find that ESG ratings from a rater with high index incentives are systematically higher (lower) than those of a rater with low index incentives for firms added (dropped) from the ESG indexes, even after controlling for rating methodology differences."[37]

Claim: ESG is a superficial marketing tactic rather than a substantive strategy for change

The following statements posit that ESG initiatives are often designed as public relations efforts to enhance corporate reputations rather than address meaningful issues. This claim suggests ESG is a marketing scheme that allows companies to sell overpriced products that they say are environmentally friendly to boost profits.

  • Tariq Fancy, BlackRock's first global chief investment officer for sustainable investing, wrote, "This would be less irresponsible were it not so obviously clear that business leaders must know that what they’re peddling won’t work over the long term. Most of them absolutely must know by now that the incentives of the system do not, in the aggregate, lean toward the outcomes they claim to want and need from that system. As it stands, the system is so focused on squeezing out profits as fast as possible that the private sector, which has aggressively lobbied for less rules and referees, is now reacting to society’s growing angst about our direction by selling a host of overpriced ‘green’ products with little to no real-world impact into the resulting void: good for profits in the near term but terrible for society in the long run. And faced with growing public doubts about the wisdom of self-regulation, especially after their pursuit of self-interest has damaged society for decades, business leaders are now arguing that, in this wonderful new world, profits and purpose now magically overlap all by themselves."[32]
  • Analysts Kenneth P. Pucker and Andrew King wrote, "One of Wall Street’s motivation for the frenzy of ESG product creation and overselling of planetary impact is the fees associated with ESG products. According to BCG, as passive funds have continued to grow in popularity, asset management revenues as a percentage of AUM have fallen by 4.6 basis points over the past five years. ESG funds typically charge fees 40 percent higher than traditional funds making them a timely answer to asset management margin compression. All too often these higher fees are unwarranted given that ESG funds often closely mirror 'vanilla' funds. Vanguard’s largest and longest standing ESG fund, its ESG U.S. Stock ETF, was .9974 correlated with the S&P 500."[33]

See also

Footnotes

  1. ↑ The Dallas Express, "Texas’s Bold ESG Law is Delivering Real Results," accessed October 22, 2024
  2. ↑ RealClear Energy, "Terrence Keeley: Why ESG Investments Are Self-Defeating," accessed July 30, 2024
  3. ↑ Fraser Institute, "No reliable evidence that ESG investing produces above-average returns," accessed July 14, 2024
  4. ↑ Fortune, "We studied 235 stocks–and found that ESG metrics don’t just make a portfolio less profitable, but also less likely to achieve its stated ESG aims," accessed November 16, 2023
  5. ↑ NH Journal , "Sununu Steps Up Anti-ESG Fight With Executive Order," accessed April 20, 2023
  6. ↑ 6.0 6.1 6.2 6.3 RealClearWire via Center Square, "Op-Ed: ESG investing – politics by other means," May 13, 2021
  7. ↑ 7.0 7.1 7.2 7.3 7.4 RealClearPolitics, "Capitalism, Socialism and ESG," May 2021
  8. ↑ NH Journal , "Sununu Steps Up Anti-ESG Fight With Executive Order," accessed April 20, 2023
  9. ↑ National Review, "Stakeholder Capitalism: Corporatism by Another Name," June 25, 2021
  10. ↑ 10.0 10.1 [https://storage.courtlistener.com/recap/gov.uscourts.txnd.377577/gov.uscourts.txnd.377577.157.0.pdf Court Listener, "BRYAN P. SPENCE v. AMERICAN AIRLINES, INC., and AMERICAN AIRLINES EMPLOYEE BENEFITS COMMITTEE," accessed January 13, 2025]
  11. ↑ The Wall Street Journal, "Diversity Was Supposed to Make Us Rich. Not So Much." accessed July 4, 2024
  12. ↑ New York Post, "Unions using ESG to control workers — and drain Americans’ retirement savings," accessed March 27, 2024
  13. ↑ Bloomberg, "GOP State Treasurers Urge Business Group to Put Shareholders First," accessed September 3, 2024
  14. ↑ 14.0 14.1 14.2 14.3 14.4 14.5 New York Times, "A Friedman doctrine‐- The Social Responsibility of Business Is to Increase Its Profits," accessed January 7, 2025
  15. ↑ Washington Post, "Opinion: Those beloved progressive initials, DEI and ESG, have lost their gleam," accessed September 25, 2024
  16. ↑ Washington Examiner, "Louisiana announces ESG investigation into major climate fund," accessed May 4, 2023
  17. ↑ The Hill, "DeSantis, 18 states to push back against Biden ESG agenda," accessed April 3, 2023
  18. ↑ Fox News, "House GOP announces aggressive, first-of-its-kind effort to combat ESG movement," accessed February 6, 2023
  19. ↑ 19.0 19.1 19.2 19.3 Cour d'Alene/Post Falls Press, "Op-Ed: ESG vs. USA," February 4, 2022
  20. ↑ 20.0 20.1 Fox Business, "Why I oppose ESG: Use politics, free markets to decide policy, not coercion," August 22, 2022
  21. ↑ American Institute for Economic Research, "Governments, Not Markets, Impel ESG," accessed June 10, 2024
  22. ↑ National Review, "‘Stakeholder capitalism’ is corporatism in disguise," July 9, 2020
  23. ↑ Claremont Institute, "The Rise of Corporate-State Tyranny," May 17, 2021
  24. ↑ The Intelligencer, "West Virginia Treasurer Riley Moore Joins Other Financial Officers Opposing ESG," June 9, 2022
  25. ↑ Buckeye Institute, "NET-ZERO CLIMATE-CONTROL POLICIES WILL FAIL THE FARM," February 7, 2024
  26. ↑ Fox Business, "Dozen state GOP agriculture commissioners launch probe of US banks over ESG investing: 'It must be stopped,"' accessed February 1, 2024
  27. ↑ Florida Politics, "Ron DeSantis blames high insurance costs on ‘ESG’, accessed December 19, 2023
  28. ↑ 1819 News, "State Auditor Sorrell: ESG and the death of Alabama agriculture," accessed October 14, 2024
  29. ↑ Buckeye Institute, "NET-ZERO CLIMATE-CONTROL POLICIES WILL FAIL THE FARM," February 7, 2024
  30. ↑ Fox Business, "'National security concerns' raised as German group purchases influential US advisory firm," accessed May 17, 2024
  31. ↑ WFLA 8, "DeSantis announces new legislation to ban ESG, ‘woke’ banking in Florida," accessed February 16, 2023
  32. ↑ 32.0 32.1 32.2 32.3 32.4 32.5 32.6 Medium, "The Secret Diary of a ‘Sustainable Investor’ — Part 3," August 20, 2021
  33. ↑ 33.0 33.1 Harvard Business Review, "ESG Investing Isn’t Designed to Save the Planet," August 1, 2022
  34. ↑ Financial Times, "ESG funds found to have $1.4bn exposure to Xinjiang labour camps," accessed January 8, 2025
  35. ↑ RealClear Markets, "The ESG Anti-Israel Push Isn't Taking Sides, It's Choosing Lives," accessed May 2, 2024
  36. ↑ VOXEU, "Smoke and mirrors: A look inside ESG fund portfolios," accessed October 20, 2023
  37. ↑ SSRN, "ESG Ratings of ESG Index Providers, accessed November 30, 2023
  38. ↑ 38.0 38.1 The Motley Fool via Yahoo News, "Does ESG Investing Produce Better Stock Returns?" May 22, 2019
  39. ↑ Fortune, "Doing Well By Doing Good: 5 Stocks to Buy for 2019," December 5, 2018
  40. ↑ Morgan Stanley, "Sustainable Value: Communicating ESG to the 21st Century Investor," accessed September 22, 2022
  41. ↑ 41.0 41.1 41.2 41.3 41.4 41.5 The Impact Investor, "8 Reasons Why ESG Investing is Important," accessed September 24, 2022
  42. ↑ Chief Investment Officer, "Op-Ed: Europe’s New ESG Rules Create an Opportunity for US Investors," March 31, 2021
  43. ↑ PitchBook, "The State of Private Market ESG and Impact Investing in 2024," accessed April 4, 2024
  44. ↑ Institutional Investor, "More Fiduciaries Fight Back Against ‘Politically Motivated’ Anti-ESG Movement," accessed March 5, 2025
  45. ↑ The Straits Times, "Europe’s banks warn of hidden credit risk in sudden ESG retreat," accessed March 5, 2025
  46. ↑ MSCI, "ESG and the cost of capital," February 25, 2020
  47. ↑ 47.0 47.1 47.2 47.3 Velocity EHS, "Five Amazing Benefits of ESG for Companies of Any Size," March 21, 2022
  48. ↑ Perillon, "Why is ESG Important? 5 Benefits of ESG," May 11, 2021
  49. ↑ 49.0 49.1 49.2 Quantive, "What is ESG and Why Does it Matter to your Business?" accessed September 7, 2023
  50. ↑ 50.0 50.1 50.2 ESG the Report, "What is Stakeholder Capitalism," accessed September 24, 2022
  51. ↑ 51.0 51.1 51.2 51.3 Redshift by Autodesk, "What Is ESG, and Why Is ESG Investing Good for the Planet and for Business?" August 11, 2022
  52. ↑ 52.0 52.1 Oklahoman, "Despite legal challenges and exemptions, GOP lawmakers remain committed to anti-ESG law," accessed December 3, 2024
  53. ↑ 53.0 53.1 53.2 53.3 53.4 53.5 RealClearEnergy, "Oklahoma’s Anti-ESG Law Is Not Hurting Sooner State Taxpayers or Retirees," accessed December 3, 2024
  54. ↑ Oklahoma Rural Association, "Unintended Consequences of the Energy Discrimination Elimination Act in Oklahoma," accessed December 3, 2024
  55. ↑ 55.0 55.1 55.2 55.3 Adobe Acrobat, "DON KEENAN v. THE STATE OF OKLAHOMA and TODD RUSS, in his capacity as the TREASURER OF THE STATE OF OKLAHOMA," accessed December 4, 2024
  56. ↑ Oklahoma Voice, "State retiree files legal challenge over Oklahoma’s bank boycott law," accessed December 4, 2024
  57. ↑ 57.0 57.1 57.2 57.3 57.4 57.5 57.6 National Review, "Kinsey statement about TPSF divestment from Blackrock," March 19, 2024
  58. ↑ 58.0 58.1 Twitter.com, "Will Hild's tweet about Blackrock, March 19, 2024
  59. ↑ 59.0 59.1 59.2 59.3 59.4 59.5 Blackrock.com, "McCombe response to Kinsey," March 21, 2024
  60. ↑ 60.0 60.1 60.2 60.3 SFOF.com, "Rebutting BlackRock’s allegations against the Texas Permanent School Fund," accessed December 10, 2024
  61. ↑ California Legislative Information, "SB-253 Climate Corporate Data Accountability Act." Accessed December 17, 2024
  62. ↑ 62.0 62.1 62.2 Vinson and Elkins, "California’s Bold Move on Climate Disclosures," accessed December 17, 2024
  63. ↑ Office of the Governor of California, "To the Members of the California State Senate," accessed December 17, 2024
  64. ↑ Office of the Governor of California, "To the Members of the California Senate," accessed December 17, 2024
  65. ↑ Climate Case Chart, "Chamber of Commerce of the United States of America v. California Air Resources Board," accessed December 17, 2024
  66. ↑ Climate Case Chart, "Memorandum of Points and Authorities in Support of Defendents' Motion to Dismiss Plaintiffs' Amended Complaint for Declaratory and Injunctive Relief," accessed December 16, 2024
  67. ↑ Public Citizen, "California Lawmakers Approve Groundbreaking Climate Disclosure Bill," accessed December 10, 2024
  68. ↑ Corporate Compliance Insights, "After Hurricane Helene: Companies Can’t Afford to Wait on Climate Disclosures," accessed December 13, 2024
  69. ↑ Green Central Banking, "Why California’s climate disclosure laws change the game for the SEC," accessed December 16, 2024
  70. ↑ Green Central Banking, "Why California’s climate disclosure laws change the game for the SEC," accessed December 16, 2024
  71. ↑ EarthJustice, "SEC Climate Disclosure Rule Represents Important Progress, But Falls Short on Key Metrics of Financial Risk," accessed December 16, 2024
  72. ↑ Vinson and Elkins Law, "Business Groups Sue California to Block Climate Disclosure Laws," accessed December 17, 2024
  73. ↑ 73.0 73.1 73.2 73.3 73.4 Climate case chart - Climate Change Litigation Databases, "Complaint for Declaratory and Injuctive Relief," accessed December 10, 2024
  74. ↑ Harvard Law School Forum on Corporate Governance, "California enacts major climate-related disclosure laws," accessed December 13, 2024
  75. ↑ 75.0 75.1 75.2 75.3 75.4 75.5 75.6 Climate Case Chart, "Memorandum of Points and Authorities in Support of Defendents' Motion to Dismiss Plaintiffs' Amended Complaint for Declaratory and Injunctive Relief," accessed December 16, 2024 Cite error: Invalid <ref> tag; name "motiontodismiss" defined multiple times with different content
  76. ↑ 76.0 76.1 76.2 Comptroller.nyc.gov, "NYC Comptroller Lander & Pension Trustees Celebrate Dismissal of Lawsuit Challenging Fossil Fuel Divestment by New York City Pension Funds," December 23, 2024
  77. ↑ 77.0 77.1 77.2 climate.cityofnewyork.us, "Divest-Invest," January 24, 2025
  78. ↑ 78.0 78.1 78.2 78.3 78.4 Comptoller.nyc.gov, "NYC Pension Funds: Lawsuit Challenging Fossil Fuel Divestment is a 'Waste of Time' and Courts Should End this 'Drain on Public Resources,'" December 23, 2024
  79. ↑ 79.0 79.1 Comptroller.nyc.gov, "Comptroller Stringer and Trustees Announce Successful $3 Billion Divestment from Fossil Fuels," January 24, 2025
  80. ↑ 80.0 80.1 80.2 80.3 New York County Clerk, "Decision and order on motion for Wong et al v. NYCERS," December 23, 2024
v • e
Environmental, social, and corporate governance (ESG)
Index
Overviews
Legislation
Terms
Influencers
Public pensions
Newsletter
Retrieved from "https://ballotpedia.org/wiki/index.php?title=Arguments_about_environmental,_social,_and_corporate_governance_(ESG)&oldid=10390027"