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According to filings with experts and asset managers, moves against environmental, social, and governance investing generally have negative consequences for ESG investment strategies, if not in fact. However, the results are mixed.
One of the most notable success stories of the anti-ESG movement has been related to BlackRock’s consideration of ESG in its investments, leading several states to withdraw from BlackRock as the manager of their state retirement assets. That is what we are doing. More broadly, multiple congressional committees and at least 19 state attorneys general have sent letters to other asset managers and proxy advisory firms warning that their strategies to steer investments away from the fossil fuel industry constitute anticompetitive practices. claims to be sexual.
Some asset managers, such as State Street, have stated in their 2022 10-K annual disclosure that “increased political and regulatory scrutiny of ESG investment practices will adversely impact our business.” There is a possibility,” he admitted. Most recently, BlackRock identified “increased stakeholder attention to ESG issues” as a risk factor for its 8-K disclosure starting January 12th.
“We’re definitely seeing demand for ESG strategies weaken,” said Alyssa Stankiewicz, associate director of sustainability research at Morningstar. ”.
But she warns that much of this exodus is due to performance rather than political considerations.
“Many strategies are grouped together under the ESG umbrella,” Stankiewicz added, and as with all investments, these strategies, especially those based on “specialized thematic strategies,” may yield different results. He added that it would produce.
What’s your name?
From May 2022 to December 2023, 16 exchange-traded funds (ETFs) removed their ESG obligations, slowing the launch and reuse of new ESG funds. Half of those 16 funds were managed by his single asset management company, Inspire Investing, which changed its name and mandate while maintaining the same key investment allocations.
According to an August 2022 Inspire statement, the company first adopted the term “faith-based ESG” in 2019 to describe its approach to investing and how it applies a biblical worldview to its ESG criteria. did. More recently, ESG advocacy has seen the term receive backlash from conservatives and become widely recognized as an environmental approach that promotes the use of fossil fuels over value-based investment schemes. To reflect this evolution in public perception, Inspire publicly abandoned his ESG label in 2022.
Nevertheless, according to Inspire, “the investment objective and methodology behind the fund will not be affected by this change.”
Stankiewicz notes that these eight funds still prioritized environmental factors, and that “the term ESG was the problem” rather than the actual investments.
voter influence
Andrew Behar, CEO of As You So, a nonprofit organization that advocates for corporate responsibility, said the ESG backlash hasn’t had a serious impact on investor decision-making, but funds We believe that there is a possibility that the shareholder voting strategy may change regarding the identification and naming of the company. strategy.
Both Vanguard and BlackRock have reported sharp declines in support for ESG-related shareholder proposals. BlackRock supported 7% of ESG-related proposals from July 2022 to June 2023, down from 22% last time and 47% the year before that. Similarly, Vanguard supported 2% of ESG proposals from July 2022 to June 2023, compared to 12% a year earlier.
However, BlackRock noted that it supports only 9% of all proposals, with or without ESG, from July 2022 to June 2023. “Overall, we observed an increase in the number of shareholder proposals that did not justify BIS support. They wanted a simple outcome that ignored the competing priorities they had and the complexity and interconnectedness of the problem.”
Vanguard attributed this trend to loosening SEC rules that make it easier for shareholders to propose corporate resolutions, and said the decline in support for ESG proposals was due in part to “changes in the November 2021 SEC guidance on such proposals.” “It’s having a significant impact,” he said.
Whatever the driving force, CEO Baher doesn’t think the investment strategy will change, just the naming convention. After all, he said, “ESG is a framework for assessing and addressing risk,” and even with some changes in naming, investors will continue to use this framework. He says he has no intention of abandoning it.
Tags: blackrock, esg, state street, vanguard
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