As we enter the middle of a new earnings season, executive mentions of environmental, social and governance (ESG) strategic initiatives have plummeted and appear poised to fall to a new low.
Among hundreds of earnings calls in recent weeks, just nine S&P 500 companies directly mentioned the politically controversial term, according to data released by Friday afternoon by financial data firm FactSet.
That’s a far cry from the 156 mentions among S&P 500 companies in the fourth quarter of 2021, when use of the term peaked, according to the firm.
According to a Yahoo Finance analysis, quotes this year have been very short or reflect a more tense political climate.
“Clients are taking a more measured approach to how they integrate ESG,” Andy Wiechman, chief financial officer at financial services firm MSCI Inc., said on the company’s earnings conference call. And that’s just one example.
The term has popped up in a few other places, including recent calls from index operator Nasdaq (NDAQ), pharmaceutical wholesaler Sencora (COR) and elevator maker Otis Worldwide (OTIS), but nearly all the big names have dropped the term entirely.
This doesn’t mean there haven’t been conversations about the underlying issues of ESG: the topic appears to be thriving, whether through the use of various buzzwords or open discussions about how companies factor climate change into their business decisions.
New terms such as “green economy” and “energy transition”
The recent performance of Wall Street’s top companies is perhaps the best example of this conflicting trend.
While no major banks have directly addressed ESG, climate and other issues remain a major focus, according to FactSet.
JPMorgan Chase (JPM) CEO Jamie Dimon Make sure investors know “There is a continuing need for increased green economy spending,” he said, adding that climate change is one “significant and unprecedented force.” [that] We should continue to be cautious.”
JPMorgan Chase CEO Jamie Dimon appears with other bank CEOs in Washington last December. (Win McNamee/Getty Images) (Win McNamee via Getty Images)
Another example occurred during an earnings conference call for BlackRock (BLK), the world’s largest asset manager.
CEO Larry Fink has become the face of the ESG movement in recent years through his annual letters urging companies and long-term investors to better prepare for climate change, but he recently grew disillusioned with the term and announced last June that he would stop using it altogether.
Fink stayed true to that promise on BlackRock’s Jan. 12 earnings call, when the company announced its plans to acquire private equity firm Global Infrastructure Partners, but without even using the term ESG, made it clear that climate change and the “energy transition” were the main drivers of the $12.5 billion deal.
The story continues
BlackRock CEO Larry Fink. (Sean Gallup/Getty Images) (Sean Gallup via Getty Images)
“If we are to decarbonize the world, there is a critical need for capital and infrastructure,” Fink told investors, adding that “imbalances between supply and demand create attractive investment opportunities for our clients.”
The same trend was seen last week, with big tech companies in the spotlight, with barely any mention of ESG, but plenty of discussion of climate etc.
“We’ve made great environmental progress in recent months,” Apple (AAPL) CEO Tim Cook said on a conference call.
Apple CEO Tim Cook speaks at the launch of the Apple Vision Pro headset on Friday in New York City. (Michael M. Santiago/Getty Images) (Michael M. Santiago via Getty Images)
Moreover, in recent months, terms such as “sustainable investing”, “responsible business” and “transition investing” have also been suggested by business leaders and corporate advisors as alternative ways of talking about the issues raised by ESG without using the term itself.
“Awakened Capitalism”
A recent poll by the Global Strategy Group showed overwhelming bipartisan support when Americans were asked whether they supported companies that “try to make a positive impact in their communities.” Support among Republicans drops dramatically when the term ESG is introduced.
ESG opponents claim the term’s declining importance is a victory for them as they strive to thwart “woke capitalism” that puts political agendas above maximizing investor profits.
The anti-ESG movement has scored some high-profile victories in recent years, such as asset manager Vanguard withdrawing from the climate-focused consortium Net Zero Asset Managers Initiative. Some ESG funds have also been shuttered as investors have shifted their attention elsewhere.
But ESG advocates say there may be a silver lining for them if the controversial term is largely removed from the discussion.
“ESG is definitely a polarizing term,” Randel Leach, CEO of Beneficial State Bank, a community bank that focuses on social responsibility, said in a recent interview.
But he said he had no problem with the change, saying he saw it as a way to stop companies from promoting ESG as a cover for “greenwashing” and instead force them to speak more directly about their underlying principles.
“The market is evolving,” he added.
Leach said Dimon’s recent comments show the world’s most influential banker can now make the case more directly that taking climate into account is “just smart business”.
Ben Werschkul is Yahoo Finance’s Washington correspondent.
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