Backlash Against 'Woke Capitalism': US Firms Shedding Staff in ESG Roles

By Phyllis Dunson February 14, 2024 3 mins read 128 Views

US firms, including Amazon, Google, and Meta Platforms, are experiencing a decline in staff with environmental, social, and governance (ESG) roles, according to research. This trend reflects a growing backlash against what critics call 'woke capitalism'. In December 2023, there were 3,071 departures from ESG jobs in the US, compared to 2,897 arrivals, resulting in a net loss of 174 positions. The exodus was most pronounced in technology, financial services, and consulting firms. The cooling in chatter around ESG and attacks on its principles have influenced hiring requirements, according to industry experts.

Article Highlights

ESG Jobs: A Reversal of Fortune

The reversal of fortunes for ESG jobs is evident in the latest data. Live Data Technologies, which monitors the employment market, found that US firms saw a net loss of 174 ESG roles in December 2023. Meta Platforms, Amazon, and Google had the highest number of ESG job departures among US firms last year. The trend was also observed in other technology, financial services, and consulting companies. However, none of these firms have commented on the exodus. Joe Dubbin, managing director at Cripps Leadership Advisors, a recruitment firm, stated that there has been a cooling in chatter around ESG and a pronounced attack on its principles.

ESG: From Socially Conscious to Controversial

ESG refers to business standards that promote socially conscious behavior, such as investing in renewable energy or reducing fuel consumption to combat climate change. However, controversy arises when ESG strategies prioritize funding for diversity, equity, and inclusion (DEI) initiatives, which some conservatives argue marginalize white men. This has sparked a heated debate about whether efforts to create a fairer society and reduce carbon emissions align with investors' strategic interests in mitigating climate risks and social unrest.

Pushback from Investors and Politicians

Companies are now facing pushback from investors who have withdrawn billions of dollars from ESG funds in search of higher returns elsewhere. Republican politicians and conservative activists are also critical of diversity-hiring initiatives. The hiring of ESG positions has generally been on the rise since 2018, with a dip in 2020 due to the pandemic, and a peak in late 2021. However, the gap between new hires and departures narrowed in 2023. Net inflows totaled 1,432, significantly lower than the average of approximately 15,000 over the previous five years.

ESG Funds Face Challenges

The decline in hiring ESG workers reflects a cooling fad as investors withdraw from socially-conscious funds. In 2023, ESG funds experienced their worst year on record, with $13 billion pulled out by investors in the US alone, according to a report by Morningstar. This outflow outweighed the inflows seen in Europe, resulting in a global decline in the market. In the fourth quarter of 2023, investors withdrew $5 billion from ESG funds, marking the fifth consecutive quarter of net outflows. Concerns about poor returns, a perceived leftist agenda, and 'greenwashing' were among the reasons cited for the exodus.

Questions About Sustainable Finance

The weak performance of ESG funds raises questions about the future of sustainable finance in the US. Lawmakers from several states are attempting to resist the incorporation of ESG principles into business and investing. Despite the recent underperformance, ESG investing has seen significant growth in recent years. The pandemic fueled the boom in ESG investing as energy prices fell and portfolios that excluded fossil fuels performed well. However, as lockdowns ended and economic activity resumed, these strategies struggled. By the end of 2023, the amount invested in US sustainable funds totaled $323 billion, 12 percent lower than the record-setting amount in 2021.

ESG: Investing in a Better Future?

The underperformance of ESG-focused funds challenges the core argument of ESG: that investors are rewarded by investing in companies that aim to make the world a better place. Advocates of ESG argue that it is a smarter way to invest, as it considers longer-term concerns such as the economic impact of climate change and extreme weather events. While many countries are increasing their investments in renewables and phasing out carbon-intensive power sources, the transition is not without challenges, and short-term disruptions hinder progress.