As the anti-ESG political debate escalates, companies find themselves stuck in the center of this increasingly fiery battle between anti-ESG proponents and lawmakers and pro-ESG corporate stakeholders focused on managing ESG-related risks and opportunities.
While some companies are addressing it “head-on” by calling out “anti-ESG risks” in their 10-Ks, most seek to stay clear of potentially becoming being the target of anti-ESG campaigns. A recent piece from Teneo advises that companies take a hard look at their communication strategies to ensure the messaging clearly depicts how ESG initiatives link to their business strategies and long-term financial objectives. While acknowledging the debate is far from over and that there is no communication strategy that will make both sides happy, the article suggests organizations:
- Take inventory of current disclosures. Review annual ESG reports, websites, press releases, proxies and annual reports to determine how consistent the message is in describing ESG strategies and how clearly these communications frame the direct linkage between ESG activities to the long-term business strategy. Reviewing peer disclosures can be a helpful exercise.
- Assess political and activism risks. Although large, well-known companies and those considered to be paving the way with ESG strategies have received the most attention from some Republican lawmakers and conservative groups, any company should expect skepticism and questioning of their ESG initiatives. Understand specific risks as you evaluate communications.
- Refresh materiality assessments and renew stakeholder engagement. Take the time to review the materiality of ESG objectives, particularly when there are ties to incentive compensation plans. Semler Brossy highlights key considerations to ensure pay programs reinforce the critical messages about ESG. Companies should make sure they understand changing viewpoints from key stakeholders.
- Continue to focus on the “G.” Governance, the least controversial of the three letters, should continue to be a priority especially as it relates to social and environmental matters.
- Prepare for tough questions. CEOs and corporations are (sometimes publicly) being accused of being inappropriately “woke” and that a commitment to ESG demonstrates opposition to capitalism, so having a solid and consistent communication strategy is crucial for being able to address criticisms.
Meanwhile, ISS slipped under the radar with its new “global board-aligned proxy voting guidelines,” which are not, in fact, aligned with board views. Instead, the new guidelines seek to “mend fences” with Republican lawmakers – who oversee key customers that are pension funds -- by recommending against ESG proposals. “We went out, we took their feedback, and we created this global policy. We believe it will satisfy many of the Red State pension funds and their legislatures,” ISS’s head of Investment Stewardship said in a Reuters interview.
