Anti-ESG lawmakers have no problem accepting ESG money
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Rush Limbaugh used to say that if you want to understand a political issue, "follow the money." CNBC recently reported that in the 2022 election cycle, 10 of the 29 Republicans on the Financial Services Committee, including House Financial Services Chairman Patrick McHenry, took a combined $140,000 in campaign donations from BlackRock, Vanguard, and State Street.
On February 3rd, McHenry said, "Progressives are trying to do with American businesses what they already did to our public education system — using our institutions to force their far-left ideology on the American people. Environmental, social, and governance proposals are their latest tool in these efforts."
For a minute, let us put aside the hypocrisy of politicians railing against ESG investment firms while soliciting campaign donations from them. Instead, let us deconstruct the erroneous connection between the public school system and free-market capitalism.
First, does McHenry understand that the public school system is funded by taxpayers, just like his salary? Second, BlackRock, Vanguard, and State Street earn revenue by competing for consumers' business. Unlike the government, companies cannot compel people to fund their businesses; they must earn it by providing a product or service. Progressives are not "trying to do with businesses what they already did to our public education system." Capitalists have recognized and responded to the next economic revolution, which I call the Responsibility Revolution.
Like its predecessors, the Industrial and Tech Revolution, the Responsibility Revolution has transformed commerce. In my previous op-ed, ESG is not "woke" capitalism; it is just capitalism; I quoted two recent studies by NielsenIQ and McKinsey. NielsenIQ reported that 78% of U.S. consumers say, "A sustainable lifestyle is important to them." The 2020 McKinsey survey found that more than 60% of respondents said they would pay more for sustainable packaging products.
The Responsibility Revolution is not "woke" capitalism; it is just capitalism. Unlike the government, businesses need to compete and adapt to the market. The market has changed; the traditional business model of selling a product or service at a competitive price is losing market share to companies that have added sustainability and social responsibility to their value proposition. Furthermore, companies employing ESG principles in their business model have better brand loyalty and employee retention.
In 2023, using business as a force for good is good business. The market has decided, not the government. There are now over 6,000 B Corps. A B Corp is a company that meets specific social and environmental standards set by the non-profit B Lab. According to a study by B Lab, B Corps grew 14 times faster than the national average for U.S. companies between 2016 and 2018.
Millennials are now the largest consumer group in the world, and Gen Z is on the rise. According to Nielsen, 75% of millennials are eco-conscious and seek environmentally-friendly products, services, vacations, and transportation. Politicians can try to fight the Responsibility Revolution, but by doing so, they are waging war on capitalism, not ESG.
Dr. Mark McNees is a professor at FSU's Jim Moran College of Entrepreneurship, Founder of RedEye Coffee, a keynote speaker, and an evangelist for using business as a force for good. Please feel free to connect with Mark on LinkedIn and/or follow his consulting firm McNees Group LLC.
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This article originally appeared on Tallahassee Democrat: Anti-ESG lawmakers have no problem accepting ESG money
