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Big companies continue to distance themselves from “ESG” and “DEI” as political heat around these buzzwords heats up in an election year.
Companies are reducing their involvement with high-profile climate organizations. They don’t often talk about environmental, social, and governance (ESG) concerns during earnings calls. and reduce new hires dedicated to diversity, equity, and inclusion (DEI) in the workplace.
The latest layoffs came last week, when financial giants JPMorgan Chase & Co. (JPM), State Street (STT) and Pimco joined the Climate Change Coalition, a coalition formed in 2017 to encourage companies to cut emissions. This was done when he withdrew from “Action 100+”.
BlackRock (BLK), the world’s largest asset manager, also ended its U.S. involvement in the group.
A spokesperson for JPMorgan Asset Management explained that the decision was partly a result of the firm “developing its own climate risk engagement framework over the past few years,” adding: “Climate change continues to be a material economic concern for us. “We believe that the global economy continues to pose significant risks and opportunities,” he added. client. ”
Doug Holtz-Eakin, chairman of the American Action Forum, wrote in a recent column that asset managers are “giving customers what they want.”
The move follows a wave of political pressure on the climate coalition, with House Judiciary Committee Chairman Jim Jordan (R-Ohio) even issuing a subpoena.
Jordan said in a statement that the withdrawal is “a major victory for freedom and the American economy, and we hope more financial institutions will follow suit and abandon collusive ESG behavior.”
Republicans are also applying pressure in other areas. Former President Trump promised to banish ESG “forever,” but his allies called DEI “bigotry.” Republican-led states are also actively encouraging companies to review their DEI policies, suggesting they may be illegal.
Changes on multiple fronts
Companies are shying away from ESG and DEI in other ways. One is what to discuss at quarterly results briefings with analysts.
According to a recent analysis by FactSet, mentions of ESG in S&P 500 earnings calls this year are on track to reach a new low compared to the beginning of the past decade. Direct mention of DEI was even less frequent.
The number of mentions is down significantly compared to recent highs, including 2021, when ESG was mentioned more than 100 times per quarter.
Another change companies have made is to delay hiring people with DEI in their titles.
LinkedIn’s 2023 report found that executive hiring for DEI-related roles, such as chief diversity and inclusion officer, skyrocketed from 2019 to 2022. The growth is largely seen as a response to global protests against racism and police brutality following the killing of George Floyd by a white police officer in Minneapolis.
However, the study also found that the tide has recently receded, with the number of these roles expected to decline by 4.5% by 2023.
Live Data Technologies, an employment data provider, recently looked into this issue and found that chief diversity officers are more susceptible to layoffs and have experienced higher turnover rates in recent years.
The downward pressure on DEI in offices and boardrooms has increased in recent months following the Supreme Court’s ruling last June that schools cannot explicitly consider race in admissions procedures.
To name just one example, major accounting firm PwC rescinded some of its diversity targets in the United States, citing legal uncertainty following a high court ruling.
A recent report from consulting firm Paradigm added that “momentum promoting DEI has slowed.”
Political battles may only intensify
A step back for American companies is expected as political battles over these topics are expected to intensify.
A new poll released Thursday by the left-leaning group Unlocking America’s Future finds that American voters are largely unfamiliar with terms like “ESG,” but they are less familiar with terms like “responsible business” (78% favorability rating) and ” It was found that respondents responded very positively to terms such as “sustainable business practices” (73% favorability rating). %).
The group’s Kyle Herrig said the point is that anti-ESG forces “misread the American public with their attacks.” He added that pro-ESG forces should use the new data to counter ongoing Republican efforts on the other side.
But there is growing evidence of benefits for companies that can effectively avoid the term while focusing on larger trends, and companies may not have to rush to follow suit.
BlackRock may be a good example.
CEO Larry Fink has become the little-known face of ESG in recent years, frequently discussing the concept in his annual letters to investors. But it has now changed to the point where it refuses to say the word at all and says it has been “weaponized.”
But he recently engineered a $12.5 billion deal to buy private equity firm Global Infrastructure Partners. He told investors that part of the move is a way to capitalize on the clean energy trend. “If we’re going to decarbonize the world… we’re going to need a lot of capital and infrastructure,” he said.
But he also noted that the deal is a way to work with state and global governments keen on traditional energy sources.
The effort already appears to be paying off, with Fink recently found himself being courted by a former fierce critic of the state of Texas, who is seeking to strengthen the state’s power grid.
Texas Lieutenant Governor Dan Patrick, after years of criticizing Fink, called Fink the “King of Wall Street,” according to a Bloomberg article about a recent rally in Houston.
“We need more dispatchable power as soon as possible,” he told CEOs.
Ben Werschkul is Yahoo Finance’s Washington correspondent.
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