After U.S. environmental and social shareholder proposals received record levels of support in 2021, 2022 and 2023 bore witness to an increase in anti-ESG proposals and a cooling off in support levels for pro-ESG resolutions.

The investors and conservative groups that have been labeled anti-ESG argue that the rise in responsible investing has resulted in diminished financial returns for investors, driven by a left-wing government and an uptake in corporate ESG commitments pushed by stakeholders.

The movement advocates for companies and investors alike to refocus on the financials and steer clear of making political or social statements that could potentially alienate large portions of their stakeholder base.

Anti-ESG players opted to imitate the pro-ESG activists in both their engagement mechanisms and rhetoric, using shareholder proposals to put forward their concerns at annual meetings and draw companies into a debate. Interestingly, some of their proposals may find common cause among leftwing proponents, raising concerns regarding child labor and human rights more broadly.

Here, Diligent Market Intelligence (DMI) highlights five key players in the anti-ESG movement, outlining their key engagements and thoughts on the current state of responsible investment.

The National Legal and Policy Center (NCPPR)

Conservative think tank NCPPR is perhaps the most prominent player in the anti-ESG movement. In an interview with Diligent Market Intelligence (DMI), NCPPR’s Fellow and Free Enterprise Project (FEP) Director Scott Shepard said that the think tank is dedicated to keeping “shareholder money and the corporate voice out of taking any side on public policies and social debates not related to their core business purposes.”

“We often get slapped with an anti-ESG label, but our corporate engagements are pro-fiduciary and pro-neutrality,” Shepard said.

In 2023, NCPPR filed 57 proposals with U.S. issuers on the risks of ESG investing, up from 30 a year prior. Proposals this year concerned the risks of corporate statements on abortion, business activities in China, and audits of corporate net-zero goals.

Shepard noted that the rise in corporate diversity and inclusion policies is a particularly significant risk for companies, citing a June lawsuit in which a New Jersey court ruled Starbucks must pay a white former employee $25.6 million in damages for racial bias. Shepard suspects many more cases of reverse discrimination will come to pass, amid pressure on issuers to enhance employee diversity.

Shepard also made clear his thoughts on how leading fund managers are failing to remain politically neutral when investing clients’ money.

“Despite recently implementing its Voting Choice program to allow asset owners to vote their own shares, none of BlackRock’s automatic options allow for investors to vote for our or our allies’ shareholder proposals and against leftwing ESG proposals, the best they have is allowing investors to automatically vote in line with management recommendations.”

The National Legal and Policy Center (NLPC)

Conservative non-profit group NLPC was the second most-active filer of anti-ESG resolutions in 2023, filing 18 proposals at U.S. issuers, seeking content censorship risk audits and government take-down requests and content censorship reporting, among other topics.

NLPC’s proposals seeking reporting on operations in China were among its best received, winning 7.5% and 7.4% support, respectively, at Boeing’s and Walt Disney’s annual meetings.

Despite so-called anti-ESG proposals receiving little backing from investors, Chesser said the importance of these filings cannot be underestimated.

“Liberal activist shareholders have dominated this [shareholder proposal] process for many years and now ‘own the battlefield,’ which should not be a ‘battlefield’ — it should be a process in which shareholder proponents engage to try to help improve governance, leading to better company performance and returns,” Paul Chesser, Corporate Integrity Project director at NLPC, told DMI in an interview. “This is why you are now seeing conservative activist shareholders increasingly engage, and you are seeing the pendulum swing back in the other direction.”

American Conversative Values ETF

American Conservative Values ETF (AVC) partnered with NCPPR for the first time this year, filing four shareholder proposals with U.S. issuers on the risks of political speech and diversity and inclusion policies.

In a discussion with DMI, CEO and founder William Flaig said the fund is not anti-ESG but believes the rise in ESG investing means companies and asset managers often fail to place sufficient focus on investor returns.

“In our mind, stakeholder capitalism and corporate resources should be used to maximize shareholder returns and some ESG policies do not necessarily do that,” Flaig said. “One notable example of this is Exxon Mobil, which is facing pressure to go green. Exxon is not a market leader in sustainable energy, so forcing it down this avenue is not in the best interests of shareholders.”

ACV’s proposals asking the senior management of both Home Depot and Berkshire Hathaway to avoid making political statements received 1.7% and 0.8% support, respectively, while a request for Mastercard to conduct a cost-benefit analysis of its diversity and equality initiatives garnered 0.5% support.

Flaig went on to tell DMI that the rise in ESG reporting regulations will likely damage shareholder returns even further.

“If you examine all the looming ESG reporting regulations from the perspective of shareholders, you have to ask how they are beneficial,” he said. “The cost of compliance alone must be significant. We are at risk of ESG considerations becoming entrenched in corporate culture, where resources would be better spent elsewhere.”

Strive Asset Management

Strive Asset Management, founded last year by Republican presidential candidate Vivek Ramaswamy, is unique in that it adopts a more activist-oriented approach when engaging with issuers on the risks of responsible investing.

Strive first made headlines in September, when it sent letters to the leadership of Chevron, Apple, and Walt Disney Co., criticizing their decisions “to adopt value-destroying human resources policies” and to get involved with state policymaking.

More recently, the fund manager also wrote to McDonald’s, expressing concern that its decision to set diversity, equity and inclusion (DEI) targets could put the company at risk of litigation.

“It is difficult to understand how asking third-party vendors to engage in non-merit-based employment practices is intended to increase McDonald’s long-term financial returns,” Strive’s letter read. “It is unlikely that most of McDonald’s shareholders support such policies—and even less likely that a majority of them would be willing to sacrifice their investment returns to promote them.”

It seems that Strive may be changing its approach, however. In a letter to investors, recently made public, the ETF acknowledged that the fund is being viewed as “political- over investment-oriented,” a perception it seeks to shed as it looks to expand its growth opportunities. The majority of the fund manager’s assets are invested in energy companies but returns have remained flat, following an initial bump at launch.

Steven Milloy

Former Fox News commentator and lawyer Steven Milloy is one of the few individual investors to partner with NCPPR and submit proposals concerning the risks of ESG investing. His resolution asking Chevron to rescind its “misguided” Scope 3 emissions reduction targets received 1.3% support at the oil major’s May 31 annual meeting.

In his climate-related proposals, Milloy argues that corporations should not be pressed on reducing Scope 3 emissions derived from their value chain, as such requests “seek to force [companies] to sell less of the products [they] produce and from which [they] profit.”

Interestingly, Milloy’s highest-performing proposal this year had an ESG slant, asking Ford to report on child labor related to the increased mining of cobalt for the production of electric vehicles. The proposal won 6.5% support at the U.S. vehicle manufacturer’s May 11 annual meeting.