ESG: Can it survive the backlash?

Environmental, Social and Governance (ESG)

ESG (Environmental, Social and Governance) is a topic that seems to be everywhere, on every channel, all the time. If you’re new to ESG, here’s a good beginner’s guide.

From global corporations adapting to changing social attitudes and becoming more sustainable, to investment firms launching ESG-focused products, it’s an issue that affects all aspects of business across all sectors.

At MMC we’re proud to work with businesses and organisations that share our commitment to the principles behind ESG, especially regarding sustainability which is a sector that we’re heavily involved in. Every week we hear about progress in renewable energy technology, or innovative processes that can reduce waste or improve recycling.

But, sadly, it’s not all one-way traffic. ESG faces some big challenges, some obvious, some not.

The ESG ‘backlash’

“ESG is the devil,” said Elon Musk, or at least he did according to widely reported comments last autumn. Whether you connect this with the fact that Tesla was removed from S&P’s 500 ESG Index a few months earlier, well, we’ll leave you to be the judge!

But regardless of the motives behind it, his typical headline-grabbing soundbite does highlight a more widespread mood of hostility in certain quarters towards ESG – especially, but not exclusively, in the USA.

In March 2023 the Financial Times reported that leading Wall Street asset managers, private equity businesses and brokers were warning of a ‘backlash against sustainable investing’ because of what it described as a ‘material risk’  it poses to profit margins. There’s also a growing political dimension that has been voiced most strongly in the US by Florida Governor Ron DeSantis who is leading a 19-State ‘anti-ESG’ alliance.

Whether you define it in terms of morals versus profits, ethics versus free market economics or (to take it to the extreme) short term profit versus the prospect of a global climate catastrophe, it’s clear that there are battle lines being drawn. By and large those lines are between climate change sceptics and deniers on the one side, versus those who are convinced by climate change science and recognise the potential risks that global warming and pollution pose to the future of the world as we know it.


This is a less obvious challenge, but equally important. If we accept the concept of there being a Pro-ESG versus Anti-ESG battle, then businesses and organisations which resort to greenwashing would be those Anti-ESG forces which carry out covert operations.

The term ‘greenwashing’ is nothing new. It dates back at least to the 1980s with US environmentalist Jay Westerveld generally being acknowledged as the first to popularise the phrase, although there is a case to say it goes back to the 1960s and the US nuclear power industry.

In the world of ESG investments greenwashing has resurfaced in the context of unsustainable investments being deliberately disguised to look as though they are ESG compliant. This isn’t just a phenomenon being highlighted by environmental campaigners, it’s prompting action by regulators too (one example being the UK FCA’s proposals to ‘clamp down on greenwashing’ by introducing measures such as investment product ‘sustainability labels’ and restrictions on how terms like ‘ESG’, ‘green’ or ‘sustainable’ can be used). Similar trends can be seen in index providers – earlier this year there was news that MCSI was going to remove the ESG rating from hundreds of funds, and even more were going to be downgraded. For those who believe in encouraging businesses to make a genuine commitment to become more sustainable, stronger regulation in this context is a necessary and positive move as a means of protecting genuine ESG compliant firms and products.

Looking ahead, despite the challenges posed by the anti-ESG lobby and businesses that resort to greenwashing, many experts feel that ESG is now an unstoppable force which will ultimately overcome these bumps in the road. That view is backed-up by statistical and anecdotal evidence which shows that the generally more progressive social attitudes of millennials and Gen Z will continue to drive a pro-ESG agenda.

ESG is here to stay.

MMC has a wealth of experience and expertise in helping corporate clients to get the word out about their ESG programmes – whether that’s to promote their brand, or to support recruitment in a jobs market where many employees want to work for businesses which share their moral and ethical values.

If you run or work for a smaller business we can even help you to create an ESG programme which follows best practice in your sector.

To stay ahead of the ESG curve call us on 01624 678001, or drop us a line at [email protected]

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