BlackRock’s Larry Fink is no longer the only CEO who no longer uses the now-controversial acronym ESG.
ESG — which stands for Emphasis on Environmental, Social and Corporate Governance Principles — was mentioned by just 74 S&P 500 companies in corporate conference calls held during the first-quarter earnings season, according to Data collected by FactSet.
That was the lowest number in nearly three years, and is down from a peak of 156 in the fourth quarter of 2021. Executives are now likely to mention artificial intelligence (AI)which got 110 mentions in calls held from March 15 through June 9.
ESG signals may dip again when companies start reporting their results for the second quarter in the coming weeks.
“Something drastic has happened in the last year or so,” said Eric Mukaya, lead author of the book. Releasea newsletter dedicated to earnings call trends.
Don’t expect to hear that term at all when BlackRock (BLK) reports. On July 14th. Its chairman, Fink, recently stated that he now refuses to say ESG because the term has become a “weapon” and is “misused by the far left and far right.”
The pledge was noteworthy because Fink has become a corporate 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 evaluating companies.
These comments It earned him criticism from both sides of the ideological spectrum. Some on the right accused him of “wake up capitalism”. Some on the left said Fink itself had not gone far enough to reduce its exposure to climate issues by divesting from oil and gas.
BlackRock has also become the target of high-profile efforts by state officials, including Florida Governor Ron DeSantis, to siphon public pension funds from BlackRock. Florida withdrew $2 billion from the company as punishment for its stance on environmental, social and corporate governance.
The political focus around this issue continues to mount. House Republicans aim to turn July into “ESG month” on Capitol Hill as they make efforts to reverse the trend toward sound investing. The once dry investment period has also become a central issue in the course of the 2024 Republican presidential campaign.
“We don’t get it right.”
Mukaya pointed to one moment last September as a major turning point in how ESG was handled by the C-suite.
At the time, Jamie Dimon, CEO of JPMorgan Chase (JPM), appeared before Congress and questioned a lot of the traditional ESG principles, saying “we just don’t get this right.”
Dimon argued that a more nuanced approach is needed for things like climate practices.
“Since then, a lot of CEOs have become more aggressive” about questioning past ESG strategies and downplaying the term, Mukaya said.
Some investors also pulled out. Flows into US sustainable funds hit a seven-year low last year in 2022 amid the growing backlash, according to a report by Morningstar. The outflows continued through the first half of 2023, according to Refinitiv.
July is Environmental, Social and Corporate Governance Month
The outflows and diminishing signals on CEO calls coincide with the high temperatures in the political arena that are expected to continue in the coming months.
DeSantis has I signed a comprehensive act To prevent state officials from investing public money in ESG efforts. DeSantis has also taken the issue to his presidential campaign where he likes to brag that his bill is “hindered” by ESG.
Florida is not alone. There are currently 26 states proposing anti-ESG investment bills According to a recent study by Morgan Lewis.
The campaign trail activity comes as the House plans to focus on the issue in July.
US lawmakers are set to introduce proposals to change the rules governing asset managers as House Republicans look to further reverse the trend.
Shareholder activity will also be under scrutiny, as will the Biden administration’s handling of the issue. A hearing on “protecting investors” is scheduled before the House Financial Services Committee on July 12.
John Miller, managing director of TD Cowen, said recently that ESG is “clearly politicized in the US and this is something that asset managers and lending institutions have to deal with.”
Ben Werschkull is Yahoo Finance’s Washington correspondent.
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