Joeri de Wilde: Anti-woke is a threat to sustainable investing
This column was originally written in Dutch. This is an English translation.
By Joeri de Wilde, Investment Strategist at Triodos Investment Management
In the United States, the movement against progressive change – sometimes referred to as the anti-woke movement – is on an effective crusade against sustainable investing. This hinders sustainable investors worldwide and the problem could become worse if such sentiment gains a foothold here as well.
The 'anti-woke movement' is nowadays concerned with much more than gender-neutral toilets and (in the Netherlands) Sinterklaas. The term 'woke' has become a catchall term for all progressive initiatives that the left, 'the elite' or a minority would impose on the 'ordinary citizen'. Especially in the US, conservative interest groups are cleverly responding to this by labeling everything they don't like with the woke label. Sustainable investing has also been included for some time now.
The US financial sector has traditionally lagged behind Europe in terms of sustainability. Nevertheless, until recently, ESG criteria and stakeholder thinking were also increasingly embraced in the US, even by large asset managers such as BlackRock. This was a thorn in the side of some conservative interest groups. Sustainable investing was therefore renamed woke investing by these groups, and this frame proved effective: it gained the support of many Republicans. This led to smear campaigns, political pressure and sometimes even explicit anti-ESG legislation.
Such legislation forbids public pension from including sustainability criteria in their investment decisions in a number of Republican states. This is said to be at the expense of the financial return of the participants and would lead to the unjustified cancellation of certain companies. The fact that sustainable investing does not lead to a lower return at all is conveniently ignored.
Similar pressure has led to ten major insurers leaving an international alliance with the aim of greening insurance portfolios. This alliance would lead to higher prices for consumers. The threat of possible competition cases and the label woke insurer became too much for these insurers.
Remarkably, many of the insurers who left were European, albeit with activities in the US. Thus, the influence of a small group of radical conservatives from the US extends far beyond the national borders. This international influence is also noticeable through other channels.
One of these is the ongoing battle against plans for mandatory sustainability reporting for large US companies. The US financial regulator Securities and Exchange Commission (SEC) wants to follow the example of the EU in introducing such rules, but due to the great commotion, the SEC has recently postponed the introduction of this law yet again, and it may be watered down. Conservatives now call the SEC the Securities and Environment Commission. It is not unthinkable that the slow process in the US has contributed to the EU's weakening of its reporting obligations this month. The independent international body International Sustainability Standards Board (ISSB) is committed to harmonization, which in practice often means that the forerunners have to adapt their plans to those who lag behind. The weakening of international reporting obligations certainly does not benefit the depth and quality of sustainability analyses.
The leading American rating agencies are also being targeted. The US credit rating agency S&P Global, which investors worldwide rely on for their sustainability analyses, has succumbed to the pressure this month and has stopped providies companies with an ESG score. S&P made this decision after a conservative US prosecutor had started a research into S&P's ESG analyses, because 'too many consumers and investors have been hurt (financially) by the woke ESG movement’s obsession with radical social change.'
Don't stir up European anti-woke sentiment
That a small group of radical American conservatives can wield so much global influence is creepy enough. It is therefore important to ensure that their influence does not become even greater. European politicians can play an important role in this by not fueling anti-woke sentiment any further. So get rid of the woke label on topics and discuss the contents. Then sustainable investing has little to fear. Research shows that people are in favor of progressive plans much more often than previously thought. Will the Dutch politician who warned last year about the dangers of ‘wokism’ succeed in staying away from this frame during this election campaign?