Backlash against ESG investing in US may be transient, but may also have lasting impact

THE backlash against ESG (environment, social and governance) in the US began long before the presidential elections in 2024. But since President Donald Trump formally took office in January, the rollback of DEI (diversity, equity and inclusion) initiatives, which fall under the “S” or social element of ESG, has gathered pace. Large companies such as Target, Meta and Amazon have scaled back their DEI programmes. DEI, associated with the “woke” culture in the US, isn’t the only thing that has incurred the ire of American conservatives.

BlackRock, the world’s largest fund manager and arguably the most prominent advocate of “purpose” in investing, perhaps exemplifies the tightrope US-based managers are currently navigating. Larry Fink, BlackRock chief executive, has stopped using the term ESG because “it has been entirely weaponised”, he has said. He now favours “transition investing” instead.

Along with other managers, BlackRock has dropped out of climate groups such as the Climate Action 100+ and the Net Zero Asset Managers initiatives. Vanguard and BlackRock have also toned down their diversity guidance for companies’ boards, taking a less prescriptive approach. BlackRock, for instance, has removed a 30 per cent diversity target for S&P 500 companies that it previously had.