The Crusade to Ban ESG Makes No Sense
Efforts to prohibit financial institutions from considering environmental, social, and governance criteria reflect a fundamental misunderstanding of free-market capitalism on the part of its self-proclaimed defenders. If private investors and companies want to pursue ESG goals, it is not politicians' place to interfere.
CAMBRIDGE – When it burst into the mainstream several years ago, the sustainable investment movement met relatively little resistance as it sought to persuade managers and shareholders to shift their focus from short-term profits toward environmental, social, and governance (ESG) goals. Lately, however, a counter-movement seeking to prohibit financial institutions from following ESG guidelines has been gaining steam in the United States.
To be sure, ESG warrants more than a little skepticism. Several studies highlight the risk that companies will use it as a public-relations exercise. Often, green pledges turn out to be insincere greenwashing. But the Republican-led effort to ban private investors from pursuing ESG goals is deeply misguided.
Florida Governor Ron DeSantis, who is reportedly laying the groundwork for a presidential bid in 2024, is the unofficial leader of the conservative war against ESG. “From Wall Street banks to massive asset managers and Big Tech companies,” he said in a speech in July, “we have seen the corporate elite use their economic power to impose policies on the country that they could not achieve at the ballot box.” In the same speech, DeSantis announced a series of legislative proposals and administrative actions meant to “protect Floridians” from the ESG movement, which “threatens the vitality of the American economy and Americans’ economic freedom.”