ESG and DEI policies were always luxury goods

RISING interest rates don’t do their job immediately. Far from it. Central bankers generally agree that it takes some 12 to 18 months to really see the effects. So here we are: It has been around two years since most rates began to rise, and the results are coming in.

In the UK, data from Begbies Traynor showed the number of businesses in critical financial distress was up 26 per cent over the last three months of 2023, with insolvency rates expected to soar this year. This makes perfect sense. When rates rise, costs rise and fragile companies fail fast. Less fragile companies aren’t immune either. When the space that comes with the financial slack of low rates gets taken up, everyone has to make everything a little tighter.

With that in mind, consider the pullback from environmental, social and governance (ESG) and diversity, equity and inclusion (DEI) policies across the public and corporate sectors. In the UK, the Financial Reporting Council has just opted against including ESG requirements in the UK Corporate Governance Code – these were to have increased the role of audit committees in overseeing ESG and expanding diversity and inclusion. BlackRock chief executive officer Larry Fink rarely mentions ESG any more. Elon Musk reckons that “DEI must DIE”. Bill Ackman (whose money matters) has called DEI the “root cause” of the sharp rise in anti-Semitism at US universities. Donald Trump has promised to cancel all DEI initiatives across the federal government. The courts have already called a halt to race-based affirmative action at US universities, and last year, the attorney generals of 13 US states wrote to Fortune 100 CEOs to let them know they would face serious legal consequences if they were to treat people “differently because of the colour of their skin”.