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ESG goes to war

American Greatness: 'Support for the modish “environmental, social, and governance” movement is mainly empty sloganeering—as multinational corporations have shown with their response to Russia’s invasion of Ukraine.

'The reality is that the invocation of ESG by market participants is situational and illustrates an age-old agency problem in corporate governance. ESG advocacy better suits the interests and objectives of such agents (management teams, their boards of directors, and institutional investors) than the shareholder beneficiaries to whom they collectively owe fiduciary obligations. The current fashion for mandating ESG requirements on private enterprise advocated by the World Economic Forum, asset management firms, and the commentariat represents the boutique objectives of a managerial-class echo chamber, seeking to will certain policies into existence (including “decarbonization” and the inevitability of an energy transition away from fossil fuels) over the heads of accountable, democratically elected representatives and the citizens to whom they are beholden. Moreover, these fiduciaries fail to honor the financial interests of the shareholders over whose capital they exercise stewardship.

'The flaws and inconsistencies of the ESG movement have been pointed out on these pages and elsewhere, yet the ESG ecosystem continues its inexorable expansion for the benefit of countless high-profile government and private-sector enthusiasts. What the Russian invasion of Ukraine exposes is what many critics have long argued: Support for ESG is in many cases empty sloganeering, and is sustained more by the economic rents inured to its cheerleaders than by its own merits as a serious rival to the long-established fiduciary objective of maximizing shareholder value.'

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