Americans can be forgiven for feeling disconcerted by the mutation of businesses and financial institutions into centers of woke capital. Following the Dobbs decision, major corporations like Microsoft and Meta affirmed that they would cover employee travel costs to abortion clinics, while others like Walmart and Lowe’s faced pressure to acquiesce to similar activist demands. But pro-abortion measures aren’t the only ways corporations are politicizing themselves: banks are expected to atone for slavery and small businesses are pressured to reduce their emissions even if they lack the resources, while tech giants seek to replicate China’s social credit system.
An important part of the story is the rapid spread of ESG, the investment framework that evaluates companies not according to profit generated or shareholder returns delivered, but on the basis of “environmental, social, and governance” criteria. Since a 2004 United Nations report—produced with eighteen of the world’s largest financial institutions—called for the global “integration of environmental, social and governance issues in investment decisions,” ESG has ballooned into what is expected to be a $34 trillion industry by 2026.
In concrete terms, the report’s abstractions have translated into the politicization of every aspect of business: “E” now stands in for climate alarmism that damages energy industries; “S” for pro-abortion and gender ideology; and “G” for decisions on hiring, firing, and compensation tied to critical race theory. Today, major investment firms grade companies based on their ESG policies, which means that activist notions relating to “environmental justice” and “racial equity” are significantly influencing business decisions. This thinly veiled project to pressure companies into elevating social justice grievances over making profit amounts to a direct attack on the free-market system that has produced more wealth and prosperity than any other in history.
After making deep inroads into corporate America, ESG is finally meeting resistance. A former senior executive at BlackRock, one of the leading proponents of ESG investing, is being vocal about the fact that it doesn’t work. The SEC recently fined Goldman Sachs $4 million for policy and procedural failures related to its ESG investment funds. In the words of a professor of finance at NYU’s Stern School of Business: “It’s very difficult to create a concept that’s empty at its source and toxic at the same time, but ESG people have managed to pull off that trick.”
ESG’s toxic impact on free markets, democracy, and prosperity calls for strong political, legal, and regulatory responses. But ESG also reminds us of the enduring truth that economic structures cannot be abstracted from the individuals and cultures that engender them. After all, ESG investing is enabled by woke CEOs, who enjoy the power and prestige that social justice advocacy confers. Some ESG critics argue that CEOs should focus instead on communicating the good that business does. Ultimately, though, overcoming ESG will require CEOs to grow in humility, developing self-regulatory habits of restraint, as well as a commitment to community.
In his concluding reflection on Law & Liberty’s recent forum on ESG, Samuel Gregg emphasizes the role of CEOs in pushing back against the ideology. While acknowledging that ESG raises longstanding questions about the nature of the relationship between business, society, and government, he believes that intellectual arguments against ESG can only do so much. What’s really needed, he proposes, is for business leaders to be “far more explicit and confident” about the benefits that a profit-seeking system produces. If CEOs were “more skilled” at this kind of public advocacy, there might be “less of a values void in business that schemes like ESG try to fill.” Gregg’s focus on the role of CEOs reflects a broader trend among ESG critics that is likely to intensify with the new congressional balance of power in Washington, D.C.
But is the problem really that CEOs lack communication skills? While Gregg rightly calls for business leaders to articulate that profit is both a sign of customer satisfaction and the foundation of broader social goods, his own choice of language points to deeper concerns. He warns business leaders not to “play the appeasement game or avert their eyes from the wider agenda with which some ESG proposals are associated,” and he advises against the “calculated endorsement” of schemes, like ESG, that undermine the freedom on which capitalism depends. These notes of caution suggest that combating ESG is not just about communication; fundamentally, it’s a question of character. Free markets require free individuals and free competition, but to function correctly they also require these individuals to be virtuous.
As woke CEOs have embraced ESG, often for self-aggrandizing reasons, one virtue that has been conspicuously lacking is humility, which Augustine saw as the prerequisite of all other virtues. Humility involves recognizing the limits of our knowledge, overcoming our self-centered inclinations, and evaluating ideas in ways that orient us toward what is good and true rather than what satisfies our own preferences or fashionable political views. Since these tendencies would be beneficial within the context of resisting ESG, it’s worth encouraging business leaders not just to communicate more effectively, but to attend to cultivating the virtue of humility. In particular, humility will help clarify the importance of restraint and the meaning of community, each of which has tended to be neglected in ESG conversations.
To a significant degree, ESG’s rise has been enabled by a lack of restraint among business leaders and the broader culture in defining the nature and ends of business. Profit is no longer enough; ESG investors and activists seek an extravagantly expanded conception of the values that business should pursue, including divisive ideas related to diversity, equity, and inclusion. (Predictably, this has prompted some right-leaning critics to call for a more assertive political response that would replace ESG causes with an alternative set of mandated values.)
What can humility teach us about restraint? Here we might turn to the medieval theologian Thomas Aquinas, perhaps an unlikely source of business advice. (Though since ESG seems like religion for many of its advocates, maybe theology is the best response.) For Aquinas, the function of humility is “to temper and restrain the mind, lest it tend to high things immoderately.” ESG ideology is a textbook case of the modern mind’s failing to restrain itself, failing to keep business in its proper perspective, and failing to focus on profit and shareholder value. Instead, ESG investment metrics encourage CEOs to strive for dubious goals that lie outside the regular scope of business and belong more properly to the realm of NGOs.
By contrast, business leaders who embody humility would be less inclined to prioritize their own needs, ideological motives, or self-regard. They might be more receptive to the growing evidence that ESG doesn’t work, with funds underperforming and investors increasingly doubtful of ESG’s redefinition of the core purpose of business. More broadly, a posture of humility and restraint is a more natural fit with the messy uncertainty of free markets, which work precisely because they enable free individuals to exchange goods and services with each other—not because they can be managed and manipulated with reference to ESG priorities.
As corporate and political elites find more and more ways to publicly signal their compliance to ESG orthodoxy, Aquinas’s insight that true virtue is an “internal movement of the soul” might also be relevant. The ability to restrain ourselves from inadvisable public actions rests on the awareness of our own private limitations: the inner person shapes the outer world. This means that virtue will not be found in external gestures, but in the inward choices that we make over time. It can, as Aristotle said, be cultivated. The model of the CEO as humble, restrained, publicly modest, attentive to virtuous habits of mind, and carefully focused on delivering value for customers and shareholders sits uneasily with cocktail receptions and networking dinners at Aspen ESG summits. But it’s a model that needs to be restored if ESG is to be resisted in the long term.
If ESG undermines a modest and restrained approach to business, it also challenges traditional views of the meaning of community. This is because ESG prescribes cookie-cutter practices of governance, social relations, and environmentalism, compelling businesses to incorporate arbitrary, predefined, and often contentious issues as part of their strategies. McKinsey, one of the largest management consulting firms and a leading ESG advocate, concedes that “top-down ESG pronouncements can seem distracting or too vague to be of much use.”
As an alternative to the top-down, coercive uniformity of ESG investment theories, humility will help business leaders and other supporters of free markets to prioritize the value of community. Humility is often seen as a personal disposition, but its etymology implies a wider, communal dimension. It is closely related to the Latin word humilis, which literally means on the ground, or grounded. To be humble, then, means to be grounded, rooted, and formed as part of a community, whose members we engage with constructively and without undue concern for our self-centered inclinations—or for calculations of what might be politically expedient.
How might this aspect of humility bear upon ESG? It reminds us that businesses—before they are anything else—are on-the-ground enterprises, located within specific industries and cultures, responding to customers, and providing goods both directly and indirectly to local communities. As such, businesses will flourish with a local, contextual approach to social and environmental considerations, rather than the one-size-fits-all ESG agenda emanating from international conferences. In this sense, it is unsurprising that resistance to ESG is being driven most notably by state leaders, who are best placed to discern its adverse effect on key industries.
Being humble is not the same as being lowly. It means recognizing that our actions are significant precisely because they shape the social fabric, each of whose members are of equal worth and dignity. It matters that CEOs attend modestly and diligently to the core purpose of business, which is to generate profits and shareholder returns, create jobs, and provide needed products and services. And it matters that CEOs perform this role as grounded in the communities that they form, and by which they are formed in turn. These are not small things—and if they provide the basis for repelling a toxic investment ideology that threatens America’s free-market economy, they will turn out to be more valuable than any corporate communications strategy.