Charlotte Whelan joins the podcast to discuss this month’s policy focus: ESG. ESG is a set of criteria that measures a business’s commitment to Environmental, Social, and Governance principles. We discuss the different forms ESG principles can take — some are commendable and some are misguided — and what is the best way for consumers to respond.

Charlotte works at IWF as a policy analyst focusing on energy and climate policy. Her work has been published in a variety of outlets including The Hill, the Washington Examiner, and the Daily Caller. Charlotte is also a member of the Emerging Leaders Council at the Steamboat Institute. Charlotte graduated from Princeton University and lives in Jacksonville, Florida, with her husband and daughter.


TRANSCRIPT

Beverly Hallberg:

And welcome to She Thinks, a podcast where you’re allowed to think for yourself. I’m your host, Beverly Hallberg, and on today’s episode, it’s our IWF policy focus. We are looking at what is known as ESG, which is a set of criteria that measures a business’s commitment to environmental, social, and governance principles. We’ll discuss the different forms ESG principles can take. Some are commendable and some are misguided. And what is the best way for consumers, for us, to respond?

Joining us is the author of this month’s policy focus, Charlotte Whelan. Charlotte Whelan works at IWF as a policy analyst, focusing on energy and climate policy. Her work has been published in a variety of outlets, including The Hill, the Washington Examiner, and the Daily Caller. Charlotte is a member of the Emerging Leaders Council at the Steamboat Institute. She graduated from Princeton University and lives in Jacksonville, Florida, with her husband and daughter.

Charlotte, always a pleasure to have you on She Thinks. Thanks for joining us.

Charlotte Whelan:

Thanks for having me.

Beverly Hallberg:

So I want to let everybody know that they can find this policy focus, called Environmental Social and Governance: A Primer, they can find it on iwf.org. You are the author of this. There’s so much we’re going to get into. First of all, give us your definition of ESG.

Charlotte Whelan:

So ESG just stands for environmental, social, and governance principles. So it’s the idea that companies will take these ideas into do their business practices and use them to make decisions. Whether it’s just general business practice or investment.

Beverly Hallberg:

And so of course we want businesses to act ethically and legally, but why are we seeing such a move towards ESG? Is this in, actually, the interest of their best business practices?

Charlotte Whelan:

So a lot of companies are starting to ascribe to ESG is I think a form of, honestly, self-defense. Part of it is kind of getting on board with the idea that we are in a climate crisis with the environmental aspect. And a lot of it also is kind of what we think of as woke governance, woke corporatism, that these political activism kind of policies, and they’re want to be on board with those so that different political activists might not look at other unsavory practices that these companies might be doing.

Beverly Hallberg:

And when I think about these types of principles, I think it does mirror what a lot of people are looking for in the products they buy, and that is that a product has some type of value beyond the good. So I think of Tom’s shoes where you buy Tom’s shoes and a portion of that goes to help other people. So people like that aspect. I even think when we think of young people entering the workplace, they’re looking for places to work that align with their values, not just necessarily a paycheck. So looking historically, is what we’re seeing, first of all, just being driven by the fact that — whether it’s an employee or a consumer — they want the products that they purchase, they want the place that they work, to hold the same values as them?

Charlotte Whelan:

So I think it’s a mix. The idea of a socially responsible governance or investing, whatever, has been around for a long time; it’s been used for things like protesting apartheid in South Africa. Kind of sometimes it used to be used as divesting from sin stocks like gambling and alcohol and whatnot. But I think that a lot of employees now both are asking their companies to ascribe to these same kind of principles and ideas that they are. And a lot of U.S. citizens are wanting this, but there is, I think, a change and that companies are seeing this as a way to shield themselves from other criticism. If they ascribe to these more popular political ideals, then they won’t be criticized in other areas.

Beverly Hallberg:

So do you then see companies that are very hypocritical where they espouse a certain value, but at the same time, behind the scenes, they’re actually going against the value that they espouse?

Charlotte Whelan:

Yeah. So for one, one of them is BlackRock. It’s the world’s largest, I think, asset manager, I don’t quite understand what that means, to be perfectly honest. I don’t know what firms do, but they manage a ton of money for the world and they have been trying to get other companies to sign onto this net-zero environmental emissions goal. But ironically, they still invest in coal, which is something that, it can be cleaned up, but they would say is a terrible thing. And they use loopholes to still invest in it, despite their various pledges, because they realize that it’s financially sound for them. And so they want to still invest in it, even if they’re trying to appear to be these environmental champions.

You also see in issues like the NBA with China. They’re saying we’re this all-American league and they’re going to cave to various Chinese demands because they have a huge viewership in China and so they want to keep that up. And there have been so many stories on that front as well.

Beverly Hallberg:

And there’s also just the wading into politics in general, you do mention the NBA in relation to China and the human abuses and atrocities that are taking place there. I even think about it as far as politics. I think of the company, Amazon. I remember when there was the discussion about whether or not we should have a federal minimum wage that is over 15 or roughly $15 an hour. I was seeing ads by Amazon being pushed saying, “This is a great policy. We need to push for $15 an hour.” And I was thinking about that and I was like, well, this is going to push out a lot of their competitors. A lot of these smaller mom-and-pop shops, just small businesses can’t afford to pay all their employees $15 an hour. So I was wondering if this was an effort by Amazon to try to get rid of their competitors. Do you see them use the political play in that way as well?

Charlotte Whelan:

I’m sure that’s at play. I think that a lot of companies right now are seeing that ESG, saying that they’re pro-ESG or they’re incorporating ESG into their various government decisions, practices, is a way to just kind of earn political points. It’s kind of to virtue signal that yes we’re with it. And the really ironic thing is that ESG doesn’t have any really set, defined criteria as to what exactly falls into it. Environmental, social governances, those are really broad ideas. And so the way [inaudible 00:06:18] comes to say, hey, we’re with this general movement. And as you said, Amazon, they can see this as to score political points and also squash their opponents. They squash a competition. And so it’s really, I think, a lot of companies are using it just to promote their own agendas and find ways to just promote the other businesses broadly.

Beverly Hallberg:

There’s a lot of virtual signaling within this as well. Even a company that comes to mind, I think is interesting. The move that they recently made is that Starbucks in the past few days has decided to go back on their mandate to have all employees vaccinated. And I think the reason they made that decision is that they’re struggling to find enough employees to operate their stores across the country. And so they had to make a decision. Do we have fewer hours? Do we shut down stores? Or do we get rid of this mandate that we’ve had on employees now that the Supreme Court has shut it down in order to keep businesses open? So do you think at the end of the day, these decisions to be ESG-friendly all come down to the bottom line, and they are going to pick and choose what they decide to do in order to figure out what makes a profit? And I don’t think making a profit is a bad thing; that is what business inherently does.

Charlotte Whelan:

I think absolutely. I don’t think companies are going to ascribe to these various political causes if they’re not going to help their bottom line. I think that opponents, people who say ESG is terrible, are going to say that it’s going to hurt companies. And it might well; there’s a study from India that shows socially responsible investing did hurt firms’ bottom line, but there are different… The ESG is just so broad and ill-defined that it’s really going to be hard to tell if this actually will hurt companies or if it’ll help them. And I think, as you said, companies are just going to do what’s best for them, and they’re going to see that right now in this political climate, if they say they ascribe to ESG principles, that’s going to be a huge boost for them.

Beverly Hallberg:

Well, I was even thinking about how the U.S. Chamber of Commerce, they’ve even changed their main clause, their definition of what they stand for to include virtue in business as well. So again, there’s this idea that business needs to be more than just the goods that they provide for people. They need to come with this intrinsic value, this inherent value on issues that we all care about. And so I think there is that effort to backfire. And are you seeing, with any of this, that shareholders who the company is beholden to, do you see that there is a fight among shareholders in some of these companies?

Charlotte Whelan:

Oh yeah. You’re certainly seeing quite the conversations happening that some shareholders… Some of this change is in response to shareholder kind of pushing. They want this change. In a lot of environmental issues, especially, they’re saying, “Hey, we’re in a climate crisis. We want to have this change. We want this. We want this company to be more responsible or sustainable.” Whatever, what have you, but other shareholders aren’t interested in this, there’s definitely a big divide happening right now.

Beverly Hallberg:

Are you seeing any companies completely buck the norm and actually set up their business, in addition to the goods that they provide, come out prominently and say, we are the anti-ESG principle company? Do you see any companies taking that approach or try to get customers that way?

Charlotte Whelan:

I honestly haven’t seen it. The closest I’ve seen is I remember with BlackRock and they’re trying to push these various companies to join this net-zero climate pledge. And there are various large asset firms that said, no, we’re not going to do this because our first responsibility is our fiduciary responsibility, responsible to our shareholders. And we’re not confident that this is going to actually provide a good return on investment.

Beverly Hallberg:

So you’ve talked a lot about climate change as one of the principles that companies attach themselves to. Where have the companies been on things such as social justice? Such as maybe trying to bring in diversity training in their organizations or have a very diverse board. How much is that factoring in?

Charlotte Whelan:

So board diversity has been a huge issue for quite a number of years. NASDAQ, actually, one of the big stock exchanges, has wanted to require all companies that trade on their exchange to have a certain diversity quota on their board. So whether it’s women, a minority, a[n] LGBTQ individual, they have a requirement that these companies have to be on… Or these companies have to have this certain individual or certain — I can’t remember the percentage on their board — or else they have to basically say why they don’t have it. So basically public shaming is the result if they don’t have this quota.

And I think this is just a terrible idea because, first off, it’s harming those individuals that are getting put on those boards just to fill those quotas. They’re becoming token women, token minorities, because they don’t know if they’re there because of their own abilities and capabilities. They might just be there to fill a quota, and that’s damaging. I would hate to be placed in a position and just know that I was only there just because I was the best candidate that happened to fit into this certain criteria and wasn’t actually the best candidate for this position.

Beverly Hallberg:

And is that also trickling down these companies to so many of the employees where they are forced to go to certain trainings in order to talk through whether or not they have white privilege, whether or not they’re seeing the world through a lens that the company thinks is a mistake? I mean, we’re even seeing this in the military these days, correct? This has seeped into government. This isn’t just private entities. These are also government agencies that are participating in this, correct?

Charlotte Whelan:

Oh, absolutely. It’s everywhere these days, especially this anti-racist training. Bank of America had a really big program that they required all their employees… Excuse me, that’s a normal word. All their employees to use to go through and it is in the military. I don’t know exactly how far it is in the military, kind of to what levels, but you certainly see it with various individuals involved in leadership and whatnot who are ascribing to those principles and certainly trying to spread it to their people underneath them as well.

Beverly Hallberg:

So as people are listening to this, some people may find themselves in a corporation that does push forward these types of agendas; maybe it’s even changed over the years that they’ve been at an organization. What do you recommend that people do? Because I know reading through your policy focus, you say sometimes these are good things. For example, fighting against the Chinese forced labor and the Chinese detention camps against the Uyghurs and in that certain region. So it can be good, but what do people do when they think that this does run afoul to their own principles? They think this is too political. It’s not what they want to participate in.

Charlotte Whelan:

I think that’s a really difficult question. I think that you’re going to have a different policy with different organizations, different companies, and what they’re going to do. You could try to talk to your supervisors. I honestly don’t know that I have a really good answer for that, because I think that some people could face extreme backlash or with this cancel culture that we’re in right now, they could face this kind of canceling if they’re trying to push back against anti-racist training. That’s kind of the biggest thing I think right now that’s a hot-button issue that they really could be pushed back against.

But they could try to raise the alarm a little bit or spread the word, kind of point out to these practices, if they’re not being highlighted, that these companies trying to just ascribe this political activism kind under the table and just force these trainings may on their employees. I think that’s a way to get the word out, but I think it’s going to be really difficult for individuals. Yeah. I don’t really have a great answer to be perfectly honest.

Beverly Hallberg:

Yeah. No, it’s tough. And one of the things I’ve wondered with this issue specifically, is if you do have enough people within a workplace who stand up and say, “I can’t participate in this” or “I may need to find a new job.” At a time where companies are struggling to find workers, I wonder if it turns more into a worker-driven model, and they have to listen to employees, just like they use healthcare and other benefits to try to attract the best. This may be something, if enough people stand up and say that this isn’t what they desire in a work environment, if enough people decide not to buy the products, usually that can change a company.

The bottom line at the end of the day, as we were saying, does matter. They’re going to continue with this as long as it benefits their bottom line, but when it starts not benefiting their bottom line, then I think there is room for change. But I do encourage people to go to this policy focus. There’s so many examples of different businesses and what they are doing. It is called Environmental, Social, and Governments: A Primer on ESG. You can find it on iwf.org.

But for now, Charlotte Whelan, author of that report, thank you so much for joining us and breaking it down.

Charlotte Whelan:

Thanks for having me.

Beverly Hallberg:

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