ESG Means Socially Responsible Investing, Not "Woke Capitalism"

It’s been labeled as woke capitalism, a scam, and a radical agenda. A $35 trillion global industry for ESG – doing well by doing good – is increasingly under attack.

It’s not clear how ESG became politicized, but it’s likely rooted in myriad causes: Criticism from corporate leaders who labeled ESG an “outrageous scam,” the political push to eliminate ESG from 401(k) plans, as well as the reality of greenwashing – misleading investors into thinking corporate products are planet-positive when, in fact, they are doing more harm than good.

The steady drumbeat of doubts about ESG’s value in recent years has certainly hurt the integrity of this framework. But does it mean the framework is entirely flawed?

At RFK Compass Investors, we firmly support investments aligned with environmental, social, and governance principles. That approach certainly has demonstrated ESG’s value as a competitive financial return. More importantly, though, when properly executed it forces us to seek out products, services, and business practices that change our institutional governance systems for the better, alter the way we treat our planet, and uplift the most vulnerable people in our economies.

The ESG framework currently is the only way to strategically drive financial investments and corporate spending that’s also sustainable and refinable in the long-term in order to create a more equitable world for generations to come. Making that vision a reality is at the core of the RFK Compass Investors program.

And the numbers don’t lie. Investors – including the many who attended our summer conference – understand that ESG investments provide a sustainable path to long-term returns. More than half of ESG funds outperformed the S&P 500 index in the first several months of 2021, according to data provider S&P Global. That trend has continued into this year, even as global markets slump. Compounded over time, it adds up significantly to help pension plan fiduciaries reach their long-term investment goals.

Planning for the long-term can be challenging for investors, especially those who oversee municipal- and state-level pension funds, when ESG is weaponized in the political theater. While that approach is, at best, short-sighted, the bigger concern is it eroding the fiduciary’s decision power to effectively manage employees’ retirement funds.

This is precisely why the world’s largest asset manager, BlackRock, is embracing ESG as a long-term trend. BlackRock, which manages $10 trillion in assets, has noted that there’s a globa