Former Goldman Sachs investment banker and current Bloomberg Opinion writer, Matt Levine, said environmental, social, and governance implementation could become more discreet over time.
Levine held a fireside chat with the David Krell Chair of Finance, Lin Peng, on Feb. 27, discussing several financial topics he regularly covers in his column.
Peng opened the discussion by highlighting recent financial and economic developments, including several companies’ decisions to scale back on DEI and ESG initiatives.
With the Securities and Exchange Commission announcing new guidelines on ESG discussions between companies and asset managers, Levine anticipates a “more quiet” implementation.
ESG refers to a set of standards that measures a company’s ecological impact. Levine noted that these standards matter to investors who recognize climate change’s effects on a company’s financial interests, but he also said they have been — and may continue to be — a challenge for companies to implement and follow.
“There’s a lot of people trying green hushing, where you don’t use words like ESG, and you try to avoid saying things like, ‘we’re considering the climate impacts of our company’s activities,’” Levine said. “But you quietly consider them not because you’re a crusading activist, but because you think it’s financially true.”
Levine used BlackRock Inc. as an example that faced scrutiny for abandoning its planned ESG initiatives. The investment firm met only 4% of its proposals related to environmental and social issues from July 2023 to June 2024.
At the time, BlackRock’s global head of investment stewardship, Joud Abdel Majeid, stated that most policy proposals were “overly prescriptive” and “lacking economic merit.”
Levine noted that ESG managers present goals aiming to build capital and get a marketing benefit out of these initiatives as well. However, it became a “negative marketing tool” as a result of politicization, with the left wing encouraging ESG investing and the right-wing labeling such investment campaigns as “woke.”
“Governance doesn’t fit into political balances of environmental and social investing,” Levine said. “I think a lot of investors would say, having a CEO answerable to the board or answerable to shareholders is just good for shareholder value in a very straightforward way that has nothing to do with any sort of political and social theory. But even that is coming under attack.”
Levine added that regulatory bodies like the SEC have begun curtailing discussions on ESG issues. On Feb. 11, the SEC issued new guidelines advising asset managers not to pressure companies’ ESG adoption. While the scope of what constitutes pressure remains unclear, the move is widely viewed as an effort to limit influence over corporate decisions.
The move would also prompt frequent reporting and filings on meetings.
According to the Financial Times, companies like BlackRock have canceled “stewardship” meetings to assess what the SEC seeks to do.
“Essentially, BlackRock and many in the industry are now more restrictive in conversation,” Levine said. “Regardless of how you’re thinking about climate change, you’re now less able to have explicit conversations.”
