11 August 2023

Is Anti-ESG here to stay?

The US arguably pioneered Responsible Investment and its anti-ESG movement will prove temporary, writes Christopher Wigley

There is quite a debate going on, particularly in the US, about the nature of ESG. To see through all the smoke, it is helpful to look at the historical context.

Christopher Wigley1959 saw the release of 'Rio Bravo' starring John Wayne – arguably, the archetypal US Western and cowboy movie. The film ends with:

Stumpy (Walter Brennan): "Do you think I'll ever get to be Sheriff?"

Dude (Dean Martin): "Not unless you learn to mind your own business."

So, there is implied a link between authority and 'turning a blind eye' to activities, in this particular culture. By extension, companies may have negative impacts on the environment – for example, pollution – but historically interest in such impacts from investors is not necessarily welcomed by some businesses. This may be the background to Anti-ESG.


Of course, more ethical values are not recent but go back many hundreds of years. Arguably, America is the nation that pioneered Responsible Investment. There are numerous examples:

In 1758, the Quaker Philadelphia Yearly Meeting prohibited members from participating in the slave trade – buying or selling humans. This is arguably the first occasion of Responsible Investment in the world.

"Arguably, America is the nation that pioneered Responsible Investment"

Following the temperance movement in the nineteenth and twentieth centuries, the first Responsible Investment fund was launched in the US in 1928. It was the Pioneer Fund which excluded investment in tobacco and alcohol.

In 1967, a group called FIGHT bought shares in Eastman Kodak to press Kodak for better living conditions and job opportunities in Rochester, New York, for Black employees.

In 1969, there was the first Responsible Investment shareholder resolution. This was put to Dow Chemical questioning the morality of producing Napalm and Agent Orange – used in the Vietnam War.

In 1971, the Pax World Fund (US) was launched, which was the first modern Responsible Investment mutual fund not investing in arms, gambling stocks, tobacco, etc.

So, environmental and social values run deep in American culture, not just for centuries but for millennia as they are also shared by Native Americans.

It is interesting to note that just as the bison were cleared from the Plains in the nineteenth century so cattle could graze, and herded by cowboys, so the Brazilian Amazon is being cleared today again for cattle grazing – as the global demand for meat grows – accompanied by the related higher methane emissions.

As humankind seeks scarcer resources in the oceans and in space, there is the choice to scar this planet and other planets further, or adopt a more responsible approach, considering environmental impact also.

After all, environmental impact assessments are nothing new with local projects, and have been interwoven with finance for many decades.

While there are many positives in a wild west, short term activities solely focused on financial return, with a blind eye turned to negative environmental and social impacts, is not sustainable on a planet with finite resources. It is perhaps time to transition from a kind of 'Cowboy Capitalism' to 'Conscious Capitalism.'

New Thinking

'Conscious Capitalism' has potential too.

Firstly, more than ten years ago, ESG was considered an activity that just reduced risks. Then with the emergence of Green Bonds, it was realised that ESG was also about 'risks and opportunities', as Green Bonds funded new green projects.

Now it is perhaps time to see ESG as about "risks and infinite possibilities". ESG is developing now in new spaces, for example, green infrastructure, green private debt, green tech, etc. It is time for investors to perceive the full optionality in the investment universe. Investors should now make the quantum leap into all the ESG possibilities in the investment universe.

Secondly, diversity is a strength. Diversity and inclusion can draw on the power of different cultures, perspectives, innovation paths, etc.

Thirdly, there is the possibility of Three Generation Thinking (3GT). Rather than choose the 'quick and easy' path to profit, and regardless of negative environmental and social impact, there is value in considering the impact of decisions for future generations. Sometimes, business has tunnel vision obsessed with profit and blind to environmental and social impacts. Taking one step back, who would choose to impoverish their children and grandchildren?

Schools of thought

There are possibly four schools of thought in relation to ESG:

1. Anti-ESG

Requires a sole focus on financials. However, this is contrary to other industries, for example, real estate, transportation, technology, etc which do consider environmental and social impacts

2. ESG reducing financial risk

This is possibly an early ESG view. However, today it would ignore the infinite possibilities provided through innovation, green tech, green infrastructure, etc

3. Premium ESG

As positive impacts of some investments have been identified, so some have sought to charge more for these assets. An unhelpful 'greenium' has emerged in secondary markets for some Green Bonds for example, as possibly the over-subscription of a bond for financial reasons has been mis-read as an over-subscription for impact reasons. This school of thought is problematic generally in terms of making the case for ESG, long term financial returns, etc

4. 'Win-Win-Win' ESG

In this context, assets are priced according to financial value. However, negative and positive impacts are also identified and recognised as part of the picture. It is a 'win-win' in terms of financial value and non-financial value

It is also a 'win-win' in terms of beneficiaries – for investors and issuers alike. It is a 'win-win' for investors as they receive a market return plus a reduced negative impact or a positive impact for their portfolios. Security selection is, after all, the art of 'win-win' decisions – identifying attractive financial returns with reduced negative impact and increased positive impact.

It is also a 'win-win' for issuers as it achieves funding at a market rate and achieves other benefits, for example, diversifying an investor base, signalling sustainability, etc

Importantly, there is also a consciousness of both environmental and social impact with consideration for future generations. Consequently, it is in fact a 'win-win-win' for investors, issuers and also for the environment and society


It is important to note here that there is no such thing as absolute freedom in a liberal democracy. Freedom exists always in a social context. No individual can choose to do whatever they like, because it always impacts on others at some time, and individuals normally assess how their decision affects others before they take it.

This is why there are legal systems – for the protection of society. It is also unavoidable to have some guiding values within this context. Further, no one has the right to say it is wrong to have certain values whether these values are Christian, Muslim, vegetarian, against climate change, against wildlife species extinction, etc.

"To be pro unrestrained fossil fuel, is in one sense like being pro slavery – because it has limited regard for the impact on others"

Consequently, values have been inexorably linked with finance for thousands of years – the issue of slavery is just one example. For as long as there has been slavery, there has always been resistance to it. To be pro unrestrained fossil fuel, is in one sense like being pro slavery – because it has limited regard for the impact on others.

Further, investors always have the right to be selective in what they invest in.

It can be seen investment is not financial and political ('woke'), but rather, it is – as it has always been – a combination of financial and ethical (values).

Examining the origins and threads of finance through history, it can be seen that Anti-ESG is not permanent, it is temporary.

Christopher Wigley is a specialist in sustainable bonds


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