Two surveys of corporate executives signal that the era of unquestioning corporate obedience to ESG goals may be over. The 2022 KPMG CEO Outlook survey found that 59% of CEOs plan to “pause or reconsider their organization’s ESG efforts in the next six months.” Paul Bergeron reports for Globest.com:
As CEOs in the US prepare for a recession that a majority believe will not be mild and short, the newly-released 2022 KPMG CEO Outlook found that in an uncertain economic environment, they are adjusting their business strategies around ESG.
They are committed to investing in transformational opportunities that will position their organizations for future growth, it found. But in the case of ESG goals, while they said they are “important,” 59% said they plan to pause or reconsider their organization’s ESG efforts in the next six months as they adjust their strategy to prepare for a recession.
This pause comes as ESG undergoes more scrutiny from various stakeholders for such reasons as frustration with the lack of standards, overhyped claims and political pushback from certain states. Still, though, the overarching business case for ESG remains positive; the same KPMG study also found that 70% of the global CEOs said their company’s ESG programs improved their financial performance — up from 37% last year. Also, these CEOs identified access to capital as the top risk pertaining to failing to meet stakeholder expectations around ESG.
Another survey, the CNBC CFO Council Survey asked CFOs their feelings on recent actions by states like Texas, West Virginia, Utah, and Louisiana to push back on ESG. Of the CFOs surveyed, only 25% opposed the states’ while 45% supported the states. Another 30% were neutral. CNBC’s Eric Rosenbaum reports:
CFOs, though, were more broadly in favor of the ESG pushback from states, according to the CNBC survey, with 45% of CFOs saying they supported the moves by states to ban investment managers that use ESG factors from state pension fund business. While 30% of CFOs said they were neutral on the issue, only 25% of CFOs said they opposed the state moves, and only 5% expressed “strong” opposition.
“I think the criticism is deserved,” Wolfe said at Delivering Alpha. “When you have so much capital flowing into one space without, you know, in some ways, almost a wild wild west of things. We have trillions of dollars of capital that were allocated over the past couple of years to quote, unquote ESG strategies. … you’re narrowing your universe of investment opportunities, which makes you narrow your return opportunities,” Wolfe said. But she rejected the idea it will be “concessionary” when it comes to investment returns and achieving improved ESG performance.
“When the pendulum swings any one way … It’s going to swing back and there’s going to be criticism. And so I think right now we’re just weeding out between some of the more … some of the less attractive strategies,” Wolfe said.
Action Line: Don’t leave your investments in the hands of companies or money managers more focused on reaching ESG goals than on returning value to you, the owner. If you need help building a portfolio that supports you with a Prudent Man approach, let’s talk. In the meantime, click here to subscribe to my free monthly Survive & Thrive letter to get to know me better.
