Bankers, money managers and other financial market participants are starting to loathe the label “ESG” — but they’re also sticking with the strategy, according to a Bloomberg survey.
About two-thirds of respondents in a survey of roughly 300 Bloomberg terminal users said the
When it comes to “the three-letter acronym ‘ESG’ — people don’t want to talk about it as much because of the news flow from the US,” said
The finance industry is now grappling with a second year of attacks on ESG by key members of the Republican Party, including threats of litigation from state attorneys general, as well as outright bans on the strategy in some US states.
As recently as May, Florida Governor and presidential hopeful
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While political attacks may end up shaping the nomenclature, they’re unlikely to change the finance industry’s approach in tackling some key components of ESG such as
For ESG investors, 2023 has been filled with “big swings,”
And while “Republican-led efforts to roll back sustainable investment practices through legislation have been dominating the public perception of ESG in the United States,”
The term ESG has only existed for about two decades after being created through a United Nations-led initiative. The goal was to come up with a framework that would persuade profit oriented financial firms to pay attention to the environment, to societal risks and issues of governance. The construct was supposed to drive home the point that ignoring such risks and opportunities would ultimately lead to losses.
But since then, ESG has had a bumpy ride. After a pandemic-fanned boom, the acronym collided with an energy crisis, leading to huge losses among
Sustainable investing purists have also voiced dismay at the way in which the ESG label is often used, warning that its application has become so broad as to be rendered largely meaningless. That’s as
In the European Union, regulators and legislators have moved much faster than their peers in other jurisdictions, carving out frameworks that are intended to reinvent capitalism. In an interview last month, the EU’s commissioner for financial markets and services,
“Profit is important but we’re now saying it’s not the only thing that matters,” she said.
That view is deeply at odds with responses in the Bloomberg survey, however. Some 85% of respondents who identified themselves as being engaged with ESG said financial performance is the most important factor to consider when investing. Only 39% said the same of ESG, which was the lowest reading in the survey.
The survey also showed that an overwhelming majority of finance industry professionals don’t want the government to interfere in how private investors allocate their money. Of financial market participants who use ESG in their daily work, 89% of respondents said governments should stay away from such decisions, while 98% of respondents who don’t use ESG said the same.
It’s a sentiment that’s playing out on Wall Street. As recently as Aug. 10, the Securities Industry and Financial Markets Association, whose members include BlackRock,
The Bloomberg survey was based on responses from 304 terminal users, of which 69% said they use ESG in their jobs. Some 62% of respondents were based in North America, while 26% were based in Europe, the Middle East and Africa. The rest were spread across Asia Pacific and Latin America.
(Adds Commerzbank analyst comment in eighth paragraph.)
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