NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tim Nash is the founder of Good Investing.

It feels almost fashionable to bash responsible investing these days.

Most of the criticism targets the acronym “ESG,” which stands for “environmental, social and governance.” ESG is used alongside traditional financial analysis to account for previously ignored “externalities” such as carbon emissions, boardroom diversity and employee satisfaction. Unfortunately, some circles erroneously refer to ESG as some sort of “woke” form of investing that pushes a “socialist agenda” into capital markets.

These misguided attacks are increasingly coming from people in high places. Elon Musk recently tweeted that “ESG is a scam” after Tesla got removed from a major ESG index for a lack of disclosure around key environmental and social issues and allegations of racism on the factory floor. Noted venture capitalist and PayPal founder Peter Thiel said in an April speech that “ESG is a hate factory” and equated it to the Chinese Communist Party. Even former U.S. vice-president Mike Pence joined the attack, saying “liberal activist investors are forcing private companies to abide by ESG investing principles, elevating left-wing environmental, social, and corporate governance goals over the interests of the business.”

Most of these hit jobs seem intended to score political points with a specific audience. Musk’s comments align closely with his recent embrace of right-wing politics. Thiel’s speech was made at a Bitcoin conference where attendees must have been upset about cryptocurrencies coming under fire for their heavy carbon footprint. Pence was speaking at an oil and gas conference where executives are being asked tough questions by investors looking to decarbonize their portfolios. Investors in unsustainable assets are feeling the heat, so we shouldn’t be surprised that they would fight back with anger against a movement that makes them accountable for the pollution they are generating.

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