The embattled environmental, social, and governance (ESG) movement has another new foe: Inspire Investing, a Christian financial firm that renounced the term in an Aug. 18 blog post from CEO Robert Netzly.
“The hard left wants to say that ESG can only mean their view, in typical cultural Marxist fashion,” Netzly told The Epoch Times in an Aug. 26 interview.
“We just don’t want to be associated with that anymore.”
Inspire, which manages over $2 billion in assets, previously identified some of its funds as “faith-based ESG,” grounded in Biblical values. Unlike many other ESG-focused firms and funds, Inspire has invested in firearms companies—specifically, Sturm Ruger & Company and Vista Outdoor.
“We believe state pensions should not be forced to invest along any particular ESG guidelines, but should have the freedom to do so if they decide that is in the best interest of their constituents,” Netzly said in that June interview.
What changed?
According to Netzly, as recently as a year ago, “nobody had a clue” what ESG meant.
“Today, everybody with a radio who’s a conservative knows what it is and it’s specifically evil, right? And it’s earned its reputation,” he continued.
Notably, although Inspire has abandoned the term “ESG,” it will not alter the contents of any of its funds.
ESG Controversy Spreading
Inspire’s pivot comes as controversy over ESG spreads.As noted previously, many states have tried to distance themselves from ESG, with state treasurers targeting firms they believe oppose their states’ energy industries.
BlackRock, one of the companies Texas targeted, argued that their inclusion was “not a fact-based judgment,” given their heavy investment in Texas-based energy firms.
ESG’s swift rise in popularity has also led to concerns about ESG fraud.
They called it “deeply problematic,” arguing that it violated the First Amendment by requiring companies that rely on ESG factors to disclose greenhouse gas emissions associated with their portfolios.
Another debate concerns the appropriateness of including “S” and “G” in ESG. Netzly suggested that an anti-conservative interpretation of those elements of ESG helped spur Inspire to forsake the label.
“The economic transition required to reduce emissions is also an inherently a social transition,” their blog entry stated.
A representative for U.N. Principles for Responsible Investment told The Epoch Times in a Sept. 1 email that they would not comment on the inclusion or exclusion of ESG by Inspire.
ESG Pushback Not Always a Rejection of Stakeholder Capitalism
Dan Katz, a Trump administration alumnus, does not think the broadening rejection of ESG spells doom for values-based investing or the broader rise of stakeholder capitalism.Katz founded an ESG alternative, Jobs, Security and Growth (JSG) Investing, because he believes there’s an appetite for values-based financial products that prioritize American interests.
“I think the reaction to ESG comes down to the fact that ESG has marketed itself as all things to all people, when in reality it’s impossible to reduce judgments as complex as environmental or social impact down to a single standard, let alone other things that are important to Americans,” he said in an Aug. 29 email.
“Therefore, it’s natural that ESG advocates (including the Biden administration) that are trying to impose the ESG agenda across the economy are getting pushback, as people realize that ESG is also too narrowly-focused on its core issues at the expense of many other priorities to be a standard across the economy.”
Netzly voiced similar sentiments on values-based investing and, more broadly, the legitimacy of stakeholder capitalism.
The stakeholder approach contrasts with the shareholder capitalist model, championed by economist Milton Friedman during the 20th century.
“How do you maximize value for shareholders? Well, if you’re an oil and gas company, you avoid oil spills and regulatory issues. You’ve got to take care of the environment while you’re doing your job. You’ve got to make sure that the communities you’re working in are not going to revolt against you. You can’t take advantage of supply chain labor issues in an unethical way because it’s going to come back and bite you,” he said.