Spelling Out the Meaning of ESG

Stacks of coins with seedlings sprouting out of them

Every day, customers vote with their dollars, including by avoiding or preferring certain products and companies based on their policies and practices. Ideally, these policies and practices – often encompassing issues such as human rights and sustainability – would be held to a reliable standard. And commitments to sustainability, more robust diversity, equity, and justice practices, as well as climate action, in particular, are an ever growing area of focus for both consumers and the businesses. All this is encompassed by the acronym ESG.

Our latest podcast episode, “Environmental, and Social, and Governance…Oh My!” explores the term environmental, social, and governance (ESG) and brings together Brian Frosh, former Maryland Attorney General, and Bethany Davis Noll, Executive Director of the State Impact Center, to do more than just define the acronym. Listen closely as they dig deep and bring some of the messiness surrounding ESG to light, including how politicized the term has become, and how this translates into harm to businesses, our economy, and everyday people. In a future episode, we will explore these harms further by carefully unpacking community demands for companies to address the relationship between white supremacy and ESG.

It is important for investors to understand ESG and how it can affect their investments. Former AG Frosh emphasizes three main questions for investors to consider: Are companies polluting? Are they violating state law? And, are they trying to cheat the system? Making ESG data available enables investors and asset managers to take these factors into consideration and make informed decisions about investment strategies. “Any smart business today is looking at each of those categories [ESG] to make sure that they’re not going to get in trouble,” Former AG Frosh states in the episode.

The big question is: why wouldn’t we want the people managing our retirement or college savings, and other funds, to consider ESG data and climate change for that matter? At the end of the day, we are getting to a point where climate change is becoming increasingly difficult to deny, yet some politicians have been working to create roadblocks for asset managers and companies that want to incorporate ESG factors into their policies and procedures. Similarly, some government officials are even threatening asset managers and businesses, and are pushing for bills that limit asset managers’ ability to consider ESG data in their investment strategy. As Former AG Frosh explains in this episode, with extreme weather events occurring more frequently, it’s hard to look the other way and listen to figures who are pushing away from environmental efforts.

For example, did you know that several states proposed or passed laws in 2023 to limit ESG investing? Estimates suggest that these policies could result in billions in losses for pension returns and tens of millions in increased costs to taxpayers. Former AG Frosh brings his expertise and passion to bear on these issues, and more.

We hope you enjoy this episode, and visit the episode page for show notes and other resources.