March 3, 2023

By Hank Boerner – Chair & Chief Strategist, G&A Institute

Woke! Woke!  And Anti-Woke!  The word is now an important part of the political and cultural conversation in such states as Florida, where it is becoming a vigorous political campaign cry.  Woke comes to Florida to die, the present governor eagerly proclaims.

Where did the expression “woke” come from? Wikipedia offers us this explanation: “Woke is an adjective from African-American Vernacular English meaning [being] alert to racial prejudice and discrimination.”

Think about the impact of the tragedies of the George Floyd, Breonna Taylor, and Trye Nichols deaths and the founding of Black Lives Matter as importance pieces of the “alerts” to the Black communities across America. But woke moved to the mainstream as well. 

As the use of the term spread to a broader range of topic areas, we could say that more of the population is being “woke” — what this really is about is being “awakened” and “alert” to changes in certain areas of interest and importance in our business and personal lives.

Such as (one example) as the importance of ESG issues to asset managers and corporate leadership.  

Now, unbelievably, embrace of ESG in Corporate America and the financial markets is a “woke” thing  – something to be feared, says the governor of the Sunshine State.

The increasing awareness of the importance of ESG material issues accounts for the shift in focus beyond just the reported financial results by fiduciaries to consider an ever-widening range of corporate governance, environmental and societal issues. (Of course now including diversity, inclusion, equitable treatment for all stakeholders.)

Consideration of ESG is now a fundamental part of asset management and fiduciary duties in the U.S. and in Europe.  But — there is growing opposition to the success of sustainable investors (like asset managers embracing ESG.)  Really.

We’ve been sharing news and perspectives about ESG and woke and the attacks by certain Red states attacks on both ESG and woke; these are strawmen for public sector leaders who now target and punish those asset managers adopting ESG analysis and methodologies in their management of clients’ assets.  

The issue now is front and center in the halls of Congress as well. 

The encouraging news there is that state pension fund managers are pushing back, recognizing that in their states ignoring ESG issues will cost their fund (with lower returns on investment).

In the Harvard Business Review, Two authors put many of the issues in perspective for us as they offer possible solutions to rescue ESG from the Culture Wars. They are well versed in the many aspects of ESG, sustainable investing, and corporate sustainability.

One is former Harvard B-school professor Robert Eccles (now visiting professor of management practice at Said Business School, and a lifelong Democrat) and, Daniel Crowley, a long-time GOP leader who served as general counsel to House Speaker Newt Gingrich and who now leads the global financial services practice as K&L Gates LLP.

Bob Eccles is a founder of the Sustainable Accounting Standards Board (SASB); Daniel Crowley lead government relations efforts at the Nasdaq Stock Exchange and National Association of Securities Dealers (NASD). They speak about ESG from a deep and varied background in financial, business, research, and public policy.

A few highlights of their shared perspectives in the HBR piece:

• The planned congressional hearings on ESG presents opportunity to put facts on the record and begin the process of working toward a bipartisan consensus to take the “political passion” out of ESG discussions. (The 2024 president and congressional contests are just getting underway.)
• The key will be to bring ESG definitions back to an original intention, “as a means for helping companies identify and communicate to investors the material, long-term risks they face from ESG-related issues”.
• Climate change is such a risk; fossil fuel companies for whom future revenues would be greatly reduced if governments start to tax carbon.
• For capital markets to properly allocate capital, investors need companies to disclose material investment risks. ESG, they write, is simply about identifying material risk factors that matter.
• The coming House hearings on ESG could be political theater — or a learning opportunity to clarify what ESG is/isn’t.
• This HBR feature article is compelling reading for those on both sides of the ESG equation, for both ESG advocates and critics. Framing the hearings as explorations of not about being “woke” but on the importance of materiality is the way forward, the authors posit.

We urge your reading and sharing of Bob Eccles’ and Daniel Crowley’s enlightening perspectives.

It is unfortunate that the U.S. Culture Wars now drag anti-ESG views into the vital conversations and political theater about addressing the climate change crisis.

The team at G&A Institute will continue to monitor and share top-line results with you as these vital conversations (and shouting matches) focus on the importance of ESG.

The Harvard Business Review article for your reading – tune in to the “hopes” and solutions of the authors:

Rescuing ESG from the Culture Wars (Harvard Business Review)

https://hbr.org/2023/02/rescuing-esg-from-the-culture-wars