ESG investing caught in culture war crosshairs in 2023

As 2023 draws to a close, ESG investing — the consideration of environmental, social and governance factors in investment and proxy voting decisions — remains a raging battleground in the U.S. culture wars. There is no clearer sign of this than the array of legislative efforts across the country this year aimed variously at restricting or promoting the use of ESG investing.

It seems there is no segment of the political spectrum that doesn't want to weigh in on whether this practice embodies misguided "woke capitalism" that harms financial returns, or instead reflects a necessary integration of material risks and opportunities that are key to long-term investment performance.

This includes not only state legislators and regulators from red and blue states, but also members of a divided Congress who couldn't realistically hope to pass any ESG laws this term, but nevertheless launched high-profile investigations of ESG investing practices.

Notable 2023 developments include not only the ESG-related statutes that legislators put into effect this year, but also the ways that other actors reacted and adapted to the requirements imposed by the new legislation. On the ground, the people responsible for managing portfolios of assets — including public pension fund officials and private asset management firms — are left to navigate the often-conflicting array of mandates emanating from the political sphere.

The reality of living with this wide spectrum of ESG legislation is resulting in some degree of practical pushback on the culture war rhetoric, which may affect the appetite for additional legislation going forward.

See our 2023 year-in-review discussion in Law360 here.

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