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The liturgy of ESG

Against the depoliticisation of contested values

Artillery Row

“This was not a political decision, but one centred around inclusivity and purpose,” Coutts Bank said after the publication of 40 pages of intensely political reasoning for parting ways with its customer, Nigel Farage. This nonsense statement was largely discarded, even by the progressive media. People generally know politics when we see it.

For a long time, though, this type of Orwellian double-speak has held water in business settings. Ultra-progressive “ESG” (Environment, Social and Governance) policies have become ubiquitous. They are the only sanctioned political view in some companies, written into policy, and many staff (including the ones writing that statement) earnestly believe such issues are now depoliticised, supremely righteous, and beyond reproach.

In truth, the ESG movement (and associated policies) that Farage fell victim to cover some of the most politically contested and important issues of our time, including energy policy, positive discrimination, and gender and biology. They seek to alter the economy and regulate our family, social and sexual lives. The claim they are just “inclusive” and should be removed from politics (and, therefore, democratic choice) is authoritarian and utterly dangerous.

As backlash grows, businesses will act in a rational self-interested way

Since at least 2008, after taxpayers bailed out the banks and the “Occupy Wall Street” movement demanded finance take moral stances, ESG has seemingly only gotten more and more pervasive, powerful and impervious. Some of us who work with businesses as they deal with these issues have warned that for every political position a business pushes, there is a real risk someone will push back. There is a chance, in other words, that they will be held accountable for how they used their power as a political actor. In a democracy, after all, all political actors, especially those with power, should be accountable.

The point has often seemed like an abstract one — until recently, perhaps. Stonewall, Bud Light, Coutts and now Costa Coffee have all felt the force of public accountability. Stonewall is not a business, of course, but rather a type of third-party ESG outsourcer, brought in by businesses (and many government departments and public bodies) to define and enforce a part of the “S” in ESG.

Why shouldn’t companies strive to be good employers, trusted business partners and good corporate citizens? So-called “work capitalism” is one thing. Everyone who defends capitalism, as I do, and wants to see less state regulation, should be in favour of ethical, responsible businesses. Businesses make ethical and political decisions all the time. It’s unavoidable. They did so long before ESG, and they will do so long after. The Co-Op, for example, was founded in the 19th century on political principles. The great Victoria industrialists and tycoons who transformed the UK with their philanthropy are remembered well by many, precisely because they used their business-derived power for political purposes.

What is unique about the ESG era, therefore, is that the policies push in just one progressive direction. They do not result in the wealthy giving away huge amounts of wealth like Victorian industrialists did. They often promote just one, rather new ideology to emerge from our universities, which voters have largely rejected at the ballot box. As companies compete to outdo each other, as they naturally do, the positions pushed often become more and more extreme and at odds with the majority opinion.

The other insidious feature of some ESG is the self-enforcing system of compulsion that has arisen to propel and spread it. Many businesses have, rightly in my view, calculated that it is less risky for them to be politically active than it is for them to stay quiet. It has become a tyranny of the most vocal. We live in an era of compelled speech, and this is the corporate equivalent. One of the catchphrases of the BLM movement was “silence is violence”. To remain a part of the mainstream, and away from the privacy of the ballot box, many of us act out progressive fantasies. We use new words and correct language and hesitate before speaking our minds. Sometimes we even claim to believe things we do not.

I feel a lot of sympathy for businesses that took the rational path of least resistance, in such circumstances. Put individual, activist staff members aside. The leaders of most businesses with ESG policies, I believe, are largely not ideologues. Transforming society was not a priority for them; they were simply going along with what they thought to be best practice and doing the right thing. As the backlash grows, they will continue to act in a rational self-interested way, winding back their ESG policies to avoid any backlash hitting them and their bottom line.

Will ESG bankers want to be seen as useful idiots for foreign foes?

The other form of ESG compulsion that has arisen is blunter and more authoritarian. Some ESG policies, notably adopted by businesses that can afford it, aggressively exclude and penalise other businesses that are not in total alignment. Some smaller firms, therefore, have been forced to adopt ESG policies because they cannot continue to do business with suppliers, or secure funds from banks, without them. Like Celtic and Scandinavian mediaeval pagan tribes adopting Christianity so they could continue to trade with their wealthier, more powerful Christian neighbours, some modern businesses have had to verse themselves in the gospel of ESG to avoid being labelled heathens and excluded.

Some Wall Street Investment Firms, with notably hash ESG policies, have Assets Under Management equivalent to half the GDP of the USA. When they decide all the firms they deal with, and all the assets they control, must adopt and enforce a certain policy, they can rapidly change society in a way many politicians can only envy.

It is entirely right that such transformative power is scrutinised. It is also right that, in some cases, individuals and companies are feeling consequences for pushing harmful policies. Political issues are seldom simple, clear-cut or “settled”, as ESG practitioners claim, and there are always winners and losers.

Take climate, as an example. Many financial institutions have been “divesting” investment away from hydrocarbons and essential transition fuels like gas for years. When Russia unexpectedly invaded Ukraine and a gas crisis swept the continent, which directly led to an increase in poverty in the UK, these financial institutions must answer questions alongside the politicians who brought about policies that mean we did not drill or store our own gas. There are good answers they can give — including the argument that the risk from climate change was greater than this risk of power shortages. They cannot simply say they will not defend their political stance, however, after so forcefully imposing it on society.

Similarly, Stonewall (and all the businesses that follow it) enforced a set of policies that prioritised medically transitioning youngsters and allowing trans women into female spaces. When the courts decided gender-critical views and sex-based rights were covered by the Equalities Act, and the public debate began to shift on this issue, they had questions to answer. Some of them are very difficult questions, as Costa is finding out now.

The next frontier in the ESG pushback, it seems, is the “defunding” of the defence industry, as the City Minister observed this week. Public support for defence has hardened since the invasion of Ukraine — will ESG bankers and fund managers want to be seen as useful idiots for foreign foes?

They can deny their politics is indeed political, but the fact they are now caught up in political debates won’t change. If companies don’t want to answer such difficult political questions, they can choose to try and stay out of politics. Increasingly, I think many will.

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