Major corporations are stepping back from their commitments to Environmental, Social, and Governance (ESG) and Diversity, Equity, and Inclusion (DEI) initiatives as political pressure surrounding these issues intensifies in an election year. The shift is evident in companies reducing their involvement in prominent climate groups, toning down discussions on ESG concerns during earnings calls, and scaling back the hiring of roles dedicated to DEI efforts.
Financial giants JPMorgan Chase, State Street, Pimco, and BlackRock recently withdrew from Climate Action 100+, a coalition formed in 2017 to encourage emissions reduction. JPMorgan justified its decision by highlighting the development of its climate risk engagement framework. The withdrawals were influenced by political pressure, including a subpoena issued by House Judiciary Committee Chair Jim Jordan. The GOP is actively opposing ESG actions, with former President Trump pledging to banish ESG and Republican-led states challenging DEI policies.
Companies are shifting their discourse on earnings calls, with mentions of ESG on S&P 500 calls expected to reach new lows in 2023, according to FactSet. References to DEI are even scarcer. The hiring trend also reflects a slowdown in recruiting individuals with DEI titles, as seen in a 2023 report from LinkedIn indicating a 4.5% decline in such roles. The decrease follows a surge in DEI-related hiring between 2019 and 2022 in response to global protests against racism and police brutality.
Political and legal challenges, such as the Supreme Court ruling against considering race in school admissions, contribute to the downward pressure on DEI efforts. Companies like PwC have adjusted diversity targets due to legal uncertainties. The corporate retreat aligns with a broader trend observed in recent months, with companies navigating the complex political landscape surrounding ESG and DEI.
Despite the political battles, companies are finding alternative ways to address climate and social concerns. BlackRock, for instance, has shifted away from explicit discussions on ESG, with CEO Larry Fink describing the term as “weaponized.” However, the company recently orchestrated a $12.5 billion deal to acquire Global Infrastructure Partners, positioning itself to tap into clean energy trends while collaborating with governments supporting traditional energy sources.
As the political fight over ESG and DEI initiatives continues, a recent poll suggests that while American voters may be unfamiliar with ESG terminology, they respond positively to terms like “responsible companies” and “sustainable business practices.” Proponents of ESG are urged to leverage public sentiment to counter ongoing Republican efforts against these initiatives. However, evidence suggests that companies are increasingly navigating these challenges by sidestepping explicit terms while maintaining a focus on broader sustainability trends.
