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At the Aspen Ideas Festival, Blackrock CEO Larry Fink surprised many when he said that he will no longer use the term ‘ESG’ because it had been misappropriated by the far left and the far right. Of course, Blackrock and Fink have been one of the leading proponents of the movement and used their station as one of the world’s largest asset managers to push corporations to consider these factors when making decisions. 

Now, many conservatives are pushing back and want to end the consideration of ESG factors when making investment decisions. At the state level, legislation has already been passed in many red states to ban ESG investing by state funds. Florida actually pulled $2 billion out of Blackrock funds to protest its ESG stance. 

Fink’s verbal retreat is an acknowledgement of these forces, but it’s uncertain whether this is simply a rhetorical change or a change in behavior. Previously, Fink has spoken passionately about the risks that climate change poses to companies and the importance of governance and diversity at the highest levels. He believes that long-term financial results are enhanced by considering these factors in decision-making by executives. 

Finsum: Blackrock CEO Larry Fink is one of the original and most passionate believers in ESG investing. However due to recent political blowback, he has said that he will stop using the term.

In an article for Reuters, Ross Kerber reported on Tesla being added back to the S&P 500 ESG index following the EV maker adding environmental disclosures regarding its material sourcing and hiring practices.

Tesla was removed from the index last year following a series of controversies including a racial discrimination lawsuit and reports of crashes due to its autopilot program. At the time, CEO Elon Musk had been dismissive of the movement, labeling it a ‘scam’. S&P attributed the change to the company providing more information about climate risks and information about its supply chain management strategy.

The move is seen as symbolic given that only about $8 billion in assets is linked to the S&P 500 ESG index. However, it could start other ESG funds adding the EV leader to its holdings. 

Currently, the S&P ESG Index is going through this annual rebalancing with 39 companies being added, while 23 were removed. Notably, some of these moves have drawn scrutiny from people on both sides of the aisle given the additions of Chevron and Fox, while Exxon Mobil had previously been a member of the index, while Tesla was excluded. 

Finsum: Tesla has been added back to the S&P ESG Index after providing disclosures about its hiring practices, climate risks, and supply chain strategy.

Amid the growing backlash to ESG investing, several anti-ESG funds were launched. Yet, these haven’t seen a significant surge in terms of inflows or returns that would indicate that the category will have long-term success.

According to Morningstar, inflows into these funds peaked in the third quarter of 2022 at $377 million but have dropped by more than 50% to $183 million in the first quarter of the year. 

Currently, there are 5 types of anti-ESG funds. Some are political and favor companies that are penalized by ESG factors. Another type are vice funds which invest in ‘sin’ stocks related to alcohol, tobacco, and firearms. There are also voter funds which look to vote against any ESG initiatives. Finally, the largest category are funds that previously used ESG factors for investment decisions but no longer do so. 

The biggest player in the anti-ESG market is Strive Asset Management, which was founded by Republican presidential candidate Vivek Ramaswamy and aims to compete with Blackrock and Vanguard. Its first fund saw strong demand but later funds have seen minimal enthusiasm with an average of $5 million of inflows. 

Finsum: Anti-ESG is an investing theme that launched last year, and many believed had potential. So far, there are limited signs that it's showing significant traction. 

Nickel and diming it? Not the global ESG Reporting Software Market. Uh uh. The bottom line tells the story: from burgeoning 0.7 billion last year, it’s expected to jump 1.5 billion by 2027, according to a new report by MarketsandMarkets, reported esgnews.com.

Among other factors, a leapfrog in the adoption of cloud-based solutions and services across verticals, as well as a spike in corporate data volume, are the most significant aspects fueling the acceleration of the ESG Reporting Software Market.

Meantime, not quite hitting the mark, you say?

While sorely needed transparency will emerge from a proposed European Union shake up of the ESSG ratings, it will fail to address the standardization indispensable in eliminating the scores causing confusion among investors and companies, according to some in the market, reported reuters.com.

The market for evaluating the ESG performance of companies? Its exploded. That’s because of the money socked into products marketed as sustainable by investors.

"By opting for transparency over standardisation, the EU's proposals are a promising blueprint, but they must go all the way," said Daniel Klier, CEO of data provider ESG Book.

On Twitter, Tesla CEO Elon Musk made critical comments as he shared an article which showed that tobacco companies like Philip Morris had higher ESG scores than the electric vehicle pioneer. Tesla was given an ESG score of 37 out of 100, while Philip Morris was scored an 84.

This isn’t the first time that Musk has spoken out against ESG. In addition to tobacco companies, Tesla also scored lower than fossil fuel companies like Shell and Exxon. Given the growth in ESG funds and influence of asset managers like Blackrock, stocks with higher ESG scores are the recipient of increased inflows.

However, this has also led to opposition as many see ESG rating as faulty and politically motivated. Additionally, companies are accused of ‘greenwashing’ or other behavior to game the ratings system to artificially boost ESG scores. 

For many, this is an indication that ESG investing is misguided as tobacco causes millions of deaths around the globe every year, and companies with a record of contributing to climate change are given better scores than Tesla which is leading the charge in making EVs more popular and cheaper.   

ESG proponents counter that Tesla scores well on environmental factors but falls short in terms of social and governance factors, leading to a poor overall score. 

Finsum: Elon Musk made critical comments about ESG investing following reports of tobacco companies and oil companies with higher ESG scores than Tesla.