The political right’s war on “woke capitalism” isn’t winning over shareholders of the nation's largest companies.
Conservative groups such as the National Legal and Policy Center and the National Center for Public Policy Research filed 43 shareholder proposals this year, targeting companies such as Bank of America, Johnson & Johnson and Walt Disney.
Resolutions filed by other shareholders received an average of over 30% support, Morningstar found.
Morningstar says Republican activists are targeting ESG, short for environmental, social and governance investing. Taking into account a company’s performance on diversity, climate change and other issues is a wise investment strategy, advocates say.
“We’re seeing that these so-called ‘anti-woke’ proposals – such as those requesting reporting on the impact of corporate DEI initiatives on groups with no history of socioeconomic exclusion – are getting almost no traction with voting shareholders,” the firm's director of investment stewardship research, Lindsey Stewart, said in an article published by Morningstar, “Anti-ESG Proxy 'Explosion' Ends With a Whimper, Not a Bang.”
Not all of the Republican proposals directly involved hot-button social issues. Some focused on governance issues such as separating the roles of CEO and chairman. Others took on lobbying activities, charitable contributions and human rights.
One proposal on forced labor in China got 36.8% support at Disney. Morningstar cited the Disney proposal as an area of “less political disagreement.”
Traders work during the opening bell at the New York Stock Exchange
Republicans say 'it's a first step'
Anemic support for conservative proposals shows the outsize influence of the nation's three biggest fund managers, according to Scott Shepard, director of the National Center for Public Policy Research’s Free Enterprise Project.
BlackRock, State Street and Vanguard, which manage trillions in assets, push a progressive agenda “not just with assets invested in ESG-labeled funds, but with the influence arising from all of the assets invested with them,” Shepard said.
Scott Shepard, director of the National Center for Public Policy Research’s Free Enterprise Project
In challenging big-money managers and corporate executives on divisive social issues, conservatives didn't expect to get traction right away, says Paul Chesser, director of the National Legal and Policy Center’s Corporate Integrity Project.
“It’s a first step for conservatives,” Chesser said in an email. “We did not expect that any of our resolutions would pass, although we’d hoped they would. But the vast majority, well upwards of 90% certainly, presented by progressive shareholders have been shot down over the years also.”
Average support for ESG resolutions fell to 26.6% this year from 32% in 2021, according to data provided to Reuters by activist group As You Sow and researchers Proxy Impact and the Sustainable Investments Institute. Some 34 resolutions still won a majority of support, the same level as the previous year, the data showed.
ESG backlash is part of culture wars
Republicans say the political left is using ESG to advance an ideological agenda that wouldn't stand a chance at the ballot box. The shareholder push is part of a broader backlash against "woke" corporations and money managers.
“I’m old enough to remember when liberals accused big business of consistently being on the side of Republicans,” former Vice President Mike Pence wrote in a May op-ed in the Wall Street Journal. “But in 2022 the woke left is poised to conquer corporate America and has set in motion a strategy to enforce their radical environmental and social agenda on publicly traded corporations.”
Former Vice President Mike Pence speaks at the Bremer County Republicans' Grill and Chill lunch on Aug. 20 in Waverly, Iowa.
Republican officials in red states are pressuring Wall Street firms to drop efforts to combat climate change. Texas on Wednesday banned 10 financial firms including BlackRock from doing business with the state because they "boycott" the oil and gas industry. State comptroller Glenn Hegar cited ESG.
Florida Gov. Ron DeSantis attends a media event regarding the 2022 Florida Python Challenge on June 16 in Miami.
Morningstar has become a Republican target. A probe by attorneys general in Missouri and multiple states is targeting the ESG practices of Morningstar Sustainalytics, a subsidiary. Morningstar said in a statement that it plans to respond.
“The Republican view on ESG is political hyperbole that seeks to marginalize and vilify the ideas that companies should focus on creating value for all stakeholders, address diversity and pay equity issues affecting their workforce, and take steps to alleviate the risks of climate change to their businesses,” Jon Hale, Morningstar’s director of ESG Research for the Americas, recently wrote.
