Is ESG Losing Its Momentum?
Protests are rising outside major financial firms like BlackRock, demanding more accountability on ESG issues.
- Corporate commitments to ESG have slowed significantly.
- Major asset managers are cutting back support for environmental and social proposals.
- Shareholders may need more direct influence over corporate decisions.
The influence of ESG on corporate America has visibly diminished in recent years. Once supported by significant pressure from investors, including large asset managers, many companies pledged to address social inequality, manage carbon emissions, and reduce waste. In fact, by 2021, over 46% of environmental and social proposals received backing from BlackRock and Vanguard.
This shift is crucial because these large firms once held considerable sway over corporate actions, encouraging accountability on social and environmental issues. However, with concerns about rising costs, energy security, and backlash against “woke capitalism,” firms are now retreating from such proposals. ESG-specific investment funds are also seeing consistent outflows, reflecting growing skepticism among investors.
According to recent data, BlackRock and Vanguard have drastically reduced their support, voting for just 4% of environmental and social proposals in 2024. This has left many activists frustrated, feeling that the opportunity to combat climate change is fading.
To navigate this challenge, companies like BlackRock are exploring new strategies, including splitting proxy votes between ESG and non-ESG funds. The idea is to give more power to the actual shareholders, allowing them to decide how their votes should influence corporate governance. This shift could pave the way for more nuanced approaches to ESG but also complicates future efforts.
