ESG: The Merger of State and Corporate Power

ESG: The Merger of State and Corporate Power
(Deemerwha studio/Shutterstock)
Kevin Stocklin
News Analysis
In 2022, in the midst of a recession, record inflation, and a tumbling stock market, a corporate ideology known by the acronym ESG emerged from obscurity to become a headline topic. It has been called everything from a risk-management tool and a movement for a cleaner, more just world, to a “con,” a “fraud,” and even—in an Elon Musk tweet—“the devil incarnate.”

The term itself is opaque; ESG brings environmental, social, and governance causes together under one umbrella. The environmental component includes things such as transitioning to wind and solar energy from fossil fuels, and to electric vehicles from gasoline-powered cars.

The social component includes racial and gender equity, diversity training for employees, economic equity, and gun control. The governance component focus on how companies are run and includes racial and gender quotas for corporate boards, management, and staff, and—in the case of Exxon—putting green energy advocates on the board.

The Origins of ESG Ideology

The ESG movement is a derivative of the United Nations Sustainable Development Goals (SDGs). There are 17 SDGs in all, ranging from “no poverty, zero hunger, and good health” to “responsible consumption and production” and “peaceful and inclusive societies for sustainable development.”
In 2019, the World Economic Forum (WEF), an annual gathering of the world’s most powerful political and corporate leaders in Davos, Switzerland, signed a strategic partnership with the U.N. to advance the SDGs throughout the corporate sector. Led by founder and Chairman Klaus Schwab, the WEF issued the “Davos Manifesto 2020: The Universal Purpose of a Company in the Fourth Industrial Revolution.”
Klaus Schwab, founder and executive chairman of the World Economic Forum, delivers remarks at the Congress Centre during the World Economic Forum (WEF) annual meeting in Davos, Switzerland, on May 23, 2022. (Fabrice Coffrini/AFP via Getty Images)
Klaus Schwab, founder and executive chairman of the World Economic Forum, delivers remarks at the Congress Centre during the World Economic Forum (WEF) annual meeting in Davos, Switzerland, on May 23, 2022. (Fabrice Coffrini/AFP via Getty Images)

The manifesto declared that “a company is more than an economic unit generating wealth. It fulfills human and societal aspirations as part of the broader social system.”

During the annual meeting, Schwab told the gathered corporate executives and world leaders, “Let’s be clear, the future is not just happening; the future is built by us, by a powerful community here in this room. We have the means to improve the status of the world.”

In a CNBC interview in 2020, Bank of America CEO and WEF International Business Council Chairman Brian Moynihan said, “To solve these huge problems that the world faces—this is U.N. week and the SDGs are the statement to the world of what we’d like to make progress on—you have to bring capitalism to the task.”
On Nov. 4, 100 executives from the Alliance of CEO Climate Leaders issued a joint letter to attendees of the U.N. Climate Change Conference (COP27), stating, “We are ready to work side-by-side with governments to deliver bold climate action.”

“Accelerating the transition to net zero requires significant collaboration and shared responsibility between the private and public sectors.”

Signatories of the letter included Coca-Cola, Dell, Hewlett Packard, Microsoft, Nestle, PepsiCo, Siemens, Sysco, and Unilever.

Speaking at the COP27 conference, former Vice President Al Gore concurred, saying, “We need $4.5 trillion per year to make this transition, and that can only come by unlocking access to private capital.”

Author and political analyst Michael Rectenwald told The Epoch Times, “This is a massive campaign that has already metastasized to almost all of the corporate world. The tentacles of the WEF extend to almost every sector of society.”

More than 500 of the world’s largest corporations have signed pledges to support ESG goals across industries including banking, insurance, asset management, tech, media, energy, manufacturing, and transportation. These pledges are signed as part of membership in international clubs like Climate Action 100+, the Glasgow Financial Alliance for Net Zero, the Net Zero Banking Alliance, and the Net Zero Asset Managers Alliance.

There’s no segment of the U.S. economy that’s outside the reach of this movement.

From its origins in U.N. think tanks and WEF conference rooms, ESG is then passed down to the corporate world via Wall Street, marketed as an investment strategy for companies to follow—voluntarily or involuntarily.

Carole Crozat, BlackRock’s head of sustainable investing research, explained to investors that “while measuring the alignment of investments to the U.N. SDGs is a complex and evolving task, we believe that their integration in investment decisions can help secure long-term financial performance.”
“Redirecting capital toward U.N. SDGs could offer $12 trillion of market opportunities linked to our long-term social and environmental well-being,” Crozat said.

ESG in Practice

In principle, ESG means that companies look beyond making profits and consider higher political and moral issues, such as the welfare of the planet; in practice, it means that corporations become political agents for left-wing causes. This concept is also called “stakeholder capitalism,” which has been endorsed by CEOs across the corporate world.

Speaking for Bank of America, Moynihan said, “Our research shows that companies that do well on ESG end up doing better ... It defines capitalism the way that people want to define it, which is stakeholder capitalism and solving the big problems of the world.”

Stakeholder capitalism means that, instead of answering exclusively to shareholders, CEOs will focus on employees, the environment, and society at large. As head of the Business Roundtable, a club of America’s largest corporations, JPMorgan Chase CEO Jamie Dimon applauded the organization’s announcement in 2019 that corporate executives would henceforth follow stakeholder ideology, stating that the American dream was “fraying” and that “these modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”

In accordance with ESG principles, stakeholder-oriented banks such as JPMorgan Chase refused to lend to oil drilling companies in Alaska. Delta Air Lines, Coca-Cola, and Major League Baseball fought against voter ID laws in Georgia that they claimed were racist.

The world’s largest food companies such as Nestle, Danone, Kellogg’s, General Mills, and Unilever encourage—and sometimes pressure—the hundreds of thousands of farmers who supply them to take up a U.N.-approved method of farming called “regenerative agriculture.”

As part of the U.N. and ESG goals to reduce shootings, banks including Citibank restricted lending to the firearms industry. Credit card companies Visa, Mastercard, and American Express began tracking purchases from gun shops.

Amalgamated Bank President Priscilla Sims Brown stated in an interview with CBS that “where there may be gun sales that are intended for black markets or we see patterns of gun purchases made in multiple gun shops ... we can provide that information to authorities to investigate.” PayPal went a step further and refused to allow its payment services to be used to buy guns or ammunition.
Protesters rally in opposition to The Walt Disney Co.'s stance against a recently passed Florida law outside of the company's headquarters in Burbank, Calif., on April 6, 2022. (Jill McLaughlin/The Epoch Times)
Protesters rally in opposition to The Walt Disney Co.'s stance against a recently passed Florida law outside of the company's headquarters in Burbank, Calif., on April 6, 2022. (Jill McLaughlin/The Epoch Times)
Following ESG social criteria, Disney fought to repeal a Florida law that bans the teaching of sexual topics to schoolchildren in kindergarten through third grade, which Disney said was a human rights violation. Disney executives also announced during a staff meeting they were “adding queerness” and “advancing a not-so-secret gay agenda” in the children’s shows they produce.
Corporations across the board began implementing diversity, equity, and inclusion training for employees, with Coca-Cola urging employees to “be less white,” and asset manager Vanguard instructing its white male employees to accept “uncomfortable” criticism about their racist biases toward minorities. United Airlines set racial and gender quotas for hiring new pilots, and Bank of America announced that it would provide no-down-payment mortgages for minorities who want to buy a house.
The WEF, Bank of America, Disney, Coca-Cola, and PayPal didn’t respond to requests for comment.

A Money Machine That Spans the Globe

ESG isn’t just an ideology; it’s also an industry. ESG investment funds and other assets have rapidly grown over the past decade to reach a current $55 trillion worldwide. ESG assets are projected to grow to $100 trillion by 2025.

To put this in perspective, the gross domestic product (GDP) of the entire United States is currently about $21 trillion. The ESG industry is enormous and pervasive; it’s lucrative; and it has created a broad network of vested interests—consultants, rating agencies, accountants, investment managers, and proxy agents—to bring agnostics into the fold. Often, the companies that impose ESG ratings on companies, countries, and even U.S. states, also provide paid consulting services to help them improve their ratings.

The main drivers of the ESG movement are Wall Street banks and investment funds, which control the capital for the world economy. The three largest asset managers, BlackRock, Vanguard, and State Street, together control more than $20 trillion in assets under management. Because they manage index funds, they own shares in most corporations that are included in market indexes like the S&P 500.

“If you just look at BlackRock by itself, it’s the first, second or third largest shareholder in 80 percent of the companies in the S&P 500,” Andrew Puzder, the former CEO of CKE Restaurants, told The Epoch Times. “They use that tremendous voting power, not only to advance this economic leftist agenda, but to put it above their obligation to generate returns for their investors.”

BlackRock, State Street, and Vanguard didn’t respond to requests for comment.

Will Hild, executive director of Consumers’ Research, told The Epoch Times that “the way that these fund managers use ESG to push progressive politics is multifaceted. The first and probably the most public way is they get to vote the shares that they’re managing.”

“The more quiet, sort of less public way is that they have what they call engagement meetings with corporate leadership on these issues,” Hild said. “And when they show up, they don’t say: hey, we’re just representing ourselves, they say we represent ownership of 7.5-20 percent of your publicly traded shares. BlackRock, State Street, and Vanguard together would be the largest shareholder in 90 percent of the S&P 500.”

Speaking at a New York Times conference in 2017, BlackRock CEO Larry Fink appeared to underscore this point, stating: “Behaviors are going to have to change and this is one thing we’re asking companies. You have to force behaviors and here at BlackRock we are forcing behaviors.” Fink writes an annual letter to CEOs, setting priorities for the coming year.
BlackRock CEO Larry Fink speaks at a forum during the opening of the Clinton Global Initiative (CGI), a meeting of international leaders in New York City on Sept. 19, 2022. (Spencer Platt/Getty Images)
BlackRock CEO Larry Fink speaks at a forum during the opening of the Clinton Global Initiative (CGI), a meeting of international leaders in New York City on Sept. 19, 2022. (Spencer Platt/Getty Images)

“If you read his annual letter to CEOs, Larry Fink actually thinks he needs to tell the world’s CEOs every year what BlackRock thinks,” Puzder said. “He doesn’t have to go to every shareholder meeting, he just tells them what to do in a letter. And the letter the year before last said we need to get to net-zero carbon emissions by 2050, which will require a transformation of the entire economy.”

Despite its rhetoric to the contrary and its membership in various global ESG organizations, BlackRock has vehemently denied that it uses its influence to push a political agenda. Responding to a letter (pdf) from 19 state attorneys general who asserted that “BlackRock used citizens’ assets to pressure companies to comply with international agreements such as the Paris Agreement that force the phase-out of fossil fuels,” BlackRock countered (pdf) that its funds were highly rated from a performance perspective and that “our participation in these initiatives is entirely consistent with our fiduciary obligations.”

Other financial institutions that have pledged support for the ESG movement include Bank of America, Citibank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Wells Fargo, HSBC, Deutsche Bank, and UBS. And in pledging fealty to ESG goals, corporations are not only aligned with each other, but with governments, as well.

“It’s now becoming increasingly difficult to tell where the private sector ends and the government begins,” Alex Newman, CEO of Liberty Sentinel Media, told The Epoch Times. “We’re seeing a merger of the two.”

JPMorgan Chase, Citibank, Goldman Sachs, and Morgan Stanley also didn’t respond to requests for comment.

“In my experience, large Wall Street banks are not charitable institutions,” Vivek Ramaswamy, entrepreneur and founder of Strive Asset Management, told The Epoch Times. “You look at which firms are rewarded with government packages, like who gets the COVID-19 stimulus packages; a lot of that flowed through BlackRock.”

Tom Jones, president of the American Accountability Foundation, told The Epoch Times: “What we’re seeing is a new revolving door in Washington. We’re seeing liberal activists, whether they’re in the administration or on Capitol Hill, instead of leaving those positions and going to K Street to become lobbyists in Washington, what we’re seeing now is they’re going to Wall Street. And they’re using the enormous influence that these Wall Street firms have to really drive policy at the state and local level in a way they haven’t done before.”

Director of the National Economic Council Brian Deese speaks during a briefing in the James S. Brady Press Briefing Room of the White House in Washington, on March 31, 2022. (Nicholas Kamm/AFP via Getty Images)
Director of the National Economic Council Brian Deese speaks during a briefing in the James S. Brady Press Briefing Room of the White House in Washington, on March 31, 2022. (Nicholas Kamm/AFP via Getty Images)

Brian Deese, for example, who’s the current National Economic Council director, was global head of sustainable investing at BlackRock, Hild noted.

“And you have Tom Donilon, who’s now been put in charge of a significant portion of our foreign policy, vis-à-vis China. And again, he comes right out of BlackRock and it’s going down the line.

“The Biden administration has been heavily staffed by BlackRock alums, and in some cases, it’s even scary some of the issues that they handled when they were at BlackRock. Tom Donilon, for example, recommended to clients while he was there that they tripled their exposure to China, and now he’s in charge of a portion of the Biden administration’s foreign policy vis a vis China.”

A Democratic Deficit

What’s most striking about ESG is how, in joining corporations with government under a common cause, it has created a new power structure that often supersedes national laws and overrides the Constitution. Working in collaboration with government agencies, corporations have engaged in enforcement, censorship, and warrantless surveillance, often doing what the government is legally prohibited from doing.

Some believe that this public–private alliance, which overrides democratic institutions, is necessary because the crises that humanity are facing—including climate change and racism—are so dire.

“The climate crisis is about human security, economic security, environmental security, national security, and the very life of the planet,” President Joe Biden said in his speech at the U.N. COP27 summit on Nov. 11.

Calling for a “sustainability revolution” at the COP27 conference, former Vice President Al Gore condemned “the culture of death that surrounds our addiction to fossil fuels by digging up dead life forms and burning them recklessly in ways that create more death.”

But others are wary about this concentration of power and authority in so few hands, and the public’s loss of a voice or vote in such major decisions about the future.

“How you address racial inequity or global climate change, these are important enough questions that we should resolve them through free speech and debate in the public square by putting people into public office who are accountable to the American electorate. Companies are not accountable, BlackRock is not accountable, Larry Fink is not accountable,” Ramaswamy said.

“This is the heart of the question that was an issue in 1776, where we said for better or worse, citizens decide how to settle these common political questions through the political process where everyone’s voice and vote counts equally.”

New York University Finance Professor Aswath Damodaran told the Prague Finance Institute in November 2021: “Do you really want Larry Fink and Jamie Dimon deciding what’s good or bad for the world? You’ve outsourced what should be your responsibility as a voter, as a citizen, to CEOs of companies. Nothing good has ever come of doing that.”

Kevin Stocklin is a business reporter, film producer and former Wall Street banker. He wrote and produced "We All Fall Down: The American Mortgage Crisis," a 2008 documentary on the collapse of the mortgage finance system. His most recent documentary is "The Shadow State," an investigation of the ESG industry.
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