Can BlackRock save the planet? Credit: Beekash Roopun/L'Express Maurice/AFP/Getty Images

January 24, 2023   6 mins

This year at Davos, three letters were on the tip of every person’s tongue, perhaps the only acronym uttered with equal joy by Greta Thunberg and billionaire and BlackRock CEO, Larry Fink. They are ESG, or “Environment, Social and Governance”. While last year, the world was gripped by diktat of Covid-related public health policy, today ESG has eclipsed virtually all other policy frameworks, stirring enormous contention in its wake.

As with many such super-policies — including the now-moribund “globalisation” for whom Davos 2023 served as a five-day, open-casket wake — answers regarding ESG have been handed down from on high before those most affected by it ever asked the questions. These are the basics: what is ESG? What does it mean for us? And, guided as it is by the very visible hand of the Davos elite, where is it taking us?

The Environment, Social and Governance movement grew out of a late 20th-century approach that used capital as a means of fighting for social and moral causes. The boycott of Apartheid South Africa is frequently cited as a landmark case, with businesses pulling out of the country in response to the regime’s brutal and racist policies — a progenitor of today’s approach to Russia. But the watershed moment for ESG came in 2004, when a UN initiative called the Global Compact released a report called “Who Cares Wins”. Issued by some of the world’s biggest (and most financially aggressive) banks, the report laid the groundwork for how the financial world can “integrate environmental, social and governance issues in analysis, asset management and securities brokerage”.

Since then, the global capitalist ecosystem has been able to “integrate” ESG issues to an extent the movement’s founders could have only dreamed of. Today, ESG is more a pledge of corporate legitimacy than it is a framework of ethical guideposts, with some of the world’s most corrupting, polluting, and abusive firms taking up the green standard of the movement with an alacrity that’s at times unnerving.

Today, companies from tobacco giant Philip Morris to BP — whose Deepwater Horizon platform dumped 200 million gallons of oil into the Gulf of Mexico — don’t just tout their ESG bona fides but have devoted millions in crucial resources to the endeavour, building entire corporate departments to purpose. Even Gazprom, the Russian oil giant that feeds Putin’s coffers with petro-dollars, puts out an impressive “Sustainability Report” that notes the company’s commitment to ESG. “As a globally significant energy company, Gazprom always conducts business in a considered and responsible way,” Gazprom chairman Alexey Miller writes in the report’s introductory message.

This is nowhere more apparent than at the World Economic Forum’s annual confab at Davos, which I attended this year not as a member of the WEF, but as the guest of a New York-based think tank. At Davos, even small fry like me could hear the watery murmurings of ESG coursing through the currents of power. It was everywhere — in every break-out meeting, every wine-drunk dinner, and each trudge through the snow-lined streets towards the next event.

Like many global ideologies, ESG bears a kernel of truth. After witnessing the predations of successive financial scandals, the exploitation of vulnerable people in sweatshops and mines, and the wholesale destruction of natural environments, it’s hard to argue that capitalism does not need a broader system of checks and balances to reign in humanity’s perennial tendency towards excess. This idea became excruciatingly apparent during the early 2000s, when neoliberalism gallivanted around the world, exploiting labour, sucking up resources, and generally sowing economic chaos, including in Russia whose economy was “privatised” by WEF headliners and darlings of the global ESG fan club, such as former US Treasury secretary Larry Summers. Out of the ashes of neoliberalism’s “naughty Noughties” came a new impetus for capitalism to clean up its act.

But the core question swirling around ESG is who, exactly, is supposed to do the scrubbing? The “Who Cares Wins” report was published in 2004, just months after the “Oil-For-Food” scandal struck the UN, which saw billions in humanitarian funding to Iraq siphoned off, using the UN as the (very much reusable) financial straw. The scandal was so gargantuan it drew in the UN Secretary General, founder of the UN Global Compact, the founding bureaucracy of the ESG movement. On the social front, the UN also saw horrific allegations that some of its peacekeepers were running child sex and sex trafficking rings in the very places they were supposed to protect.

In this sense, ESG might appear to be more of a feint; public relations wrought to its utmost. But even when not tied to reputation-tainting financial scandal, it’s precisely the involvement of supra-democratic global organisations such as the UN and WEF — which are accountable to no electoral constituency — that puts people on edge. For those who don’t get to spend $250,000 on a five-day-long conference, ESG can seem like a network of interlocking policies that are never put to a democratic vote.

And the corporate and governmental advocates of ESG appear to be optimising it to startling effect. Much the same way that organised global power was able to sidestep Apartheid South Africa’s electorate by degrading the country through economic might until the government became untenable, the same international elite is learning to do the same on the level of the individual. Thus, when Canada’s truckers protested in response to vaccine mandates, it didn’t take legal action to break up the protest, but concerted economic action that simply made the lives of the truckers untenable.

While the trucker protests seemed to align on the axis of nationalism vs globalism, the response — including shutting down some of their bank accounts — was a play from the ESG handbook. As the issue of vaccine mandates arose in the US, the gaze of enforcement turned from government to corporate actors. Michael Peregrine, a corporate lawyer who focuses on governance wrote in Forbes that: “if the government, including state and local leadership, is unable or unwilling to adopt such measures [as vaccine mandates], the burden may fall on private enterprise to step in, as a matter of social responsibility.”

While there is a heavy critique of market capitalism associated with ESG, there is also a faint echo of its core tenet: that capital should reign supreme. The difference is that while for neoliberalism, capital was the ends to achieve at the cost of (almost) any means, for ESG, capital is the means that’s justified by a moralistic end. In this sense, it’s the later term of the moniker, “governance”, that is the most salient. In the ESG setting, governance is about how companies are run. The notion here is simple: Enron — an American energy company that practiced only a thinly-veiled cronyism as it committed fraud and ultimately failed — is the definition of bad; BlackRock — driving profit as it pledges to invest only in causes accredited by ESG — is good.

Such a Manichaean division, however, obscures the fact that, however exquisite the window dressing, corporations cannot play the role of ethicist, priest or prophet, and the more they try the more we risk corrupting those essential roles. Not just that, but it also calls into question the judgment of companies entrusted with a fiduciary responsibility to their stakeholders, including employees. “The contradictions and apparent hypocrisy of BlackRock’s actions have… politicised the ESG debate,” wrote Bluebell Capital Partners, a BlackRock activist investor, in a scathing letter. “The reputational damage of being dragged into this politically charged debate, in our view, is very significant because it calls into question the independence of BlackRock as an asset manager.” Bluebell noted that despite its rhetorical largesse, BlackRock still makes lots of money from fossil fuels, raising legitimate questions about the “G”, governance, at work in the world’s most vocal corporate supporter of ESG.

On a global scale, the term speaks much more to what many feel ESG has as its true objective. As the WEF helpfully puts it: “Global governance is a means to manage issues that cut across national borders — whether it is a war, a pandemic, a financial crisis, climate change, or a geo-economic dispute.” In this sense, ESG has rapidly filled the void left by the death of globalisation. If the latter was an imperative to spread capitalism laterally around the world, ESG can be seen as an effort to vertically consolidate the power accumulated by globalism, which is now available — for a price, that is — to weigh in on our most pressing ethical, moral, and epistemological concerns. It’s capitalism not in your life, but as your life: Ask not what your global governance movement can do for you, but what you can do for your global governance movement.

There is little doubt that ESG is a tool of the elite. It’s nominally aimed at constraining the excesses of globalised capitalism, but in effect it’s just as much a means of entrenching those excesses, codifying them in a moralistic power structure. After all, who gets to decide what makes for good environment, social and governance practices?

What’s certain is that ESG is here to stay. At Davos this year, perhaps the second-most discussed subject was the great wealth transfer taking place around the world — that is, money moving from the previous generation of families whose slogan was “preserve the capital” to the current generation of the ultra-wealthy whose priority is “preserve the planet”. For this new generation of wealth, as well as for the decision-makers whose careers and policies they fund, and the activists whose messages they carry, ESG is not a passing trend but very much the moral engine driving the rise of a new approach to power and economics. What it means for the rest of us, however, is decidedly less certain.