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ESG backlash in the US: what implications for corporations and investors?

June 11, 2023

Tima Bansal is a professor and Diane-Laure Arjaliès an associate professor at Ivey Business School

Action to block asset managers’ use of “green” filters in a growing number of US states reflects an escalating political backlash against mission-driven investment, with great relevance to students of business.

According to deal data provider PitchBook, 61 per cent of North American investors applied environmental, social and governance (ESG) criteria to at least part of their portfolio in 2022, up from 58 per cent in 2021.

But while many investors and fund managers want to use ESG frameworks to identify promising investments that also advance societal goals, some Republican lawmakers have argued they impose unnecessary constraints on corporations and undermine financial returns. At least 49 anti-ESG bills have been introduced across the US this year, according to the law firm Ropes & Gray. Twenty-two were introduced in 2022.

Politicians have accused asset managers including BlackRock, Vanguard and State Street of failing to honour their fiduciary duty. They argued that applying ESG to business decisions compromised financial returns, although the evidence is less clear-cut.

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