GRC Professionals Navigate US ESG Debate

The rise of environmental, social, and governance (ESG) investing has become a lightning rod for political division in the United States. What was once a widely accepted approach to sustainable and socially responsible business practices has now emerged as a battleground for political agendas across Republican and Democratic legislators.

As the originators of governance, risk, and compliance (GRC) and provider of GRC knowledge to over 150,000 global GRC professionals, the OCEG team has closely monitored the growing controversy.

Facts About The Growing US ESG Controversy

Here are the facts we’ve considered over the last year as our team has monitored the matter:

Concerns Across Investors & Companies

• More than two-thirds of US states proposed anti-ESG legislation in 2023, with half of those measures passing into law (Gelles, 2023)
• $13 billion was pulled from ESG funds in 2023, the "worst calendar year on record" (Gelles, 2024)
• Investors are souring on ESG due to "green-washing concerns, red-state boycotts and boardroom debates" (Gelles, 2024)
• Companies like BlackRock have grown quieter on ESG as political tensions rise (Frank, 2023)

Concerns Across Political Parties

• Republicans argue ESG promotes a "liberal" agenda and hurts industries like fossil fuels (Gelles, 2023)
• Democrats see the backlash as a "pure fossil fuel pressure play" (Gelles, 2023)

Concerns Across Businesses

• 31% of major corporations have adjusted their language describing DEI projects in response to the backlash (Davis, 2024)
• 17% have reduced external communication on diversity initiatives (Davis, 2024)
• 83% say their DEI initiatives remain the same despite the backlash (Davis, 2024)
• Nearly half of large US companies have already experienced ESG backlash, and 61% expect it to persist or intensify (The Conference Board, 2023)

Conclusions Around The ESG Controversy

As an organization dedicated to democratizing GRC knowledge, we recognize the multifaceted nature of the ongoing debate surrounding ESG investing. As we’ve examined the facts, we’ve drawn the following conclusions:

The Use of ESG as an Acronym is Increasingly Politicized

On one hand, the evidence suggests that ESG has become increasingly politicized and "toxic" in the United States, with concerns over "green-washing" and the perception that ESG policies are harming certain industries, especially in Republican-led states. Companies have faced significant backlash from federal and state officials, as well as from their own employees, consumers, and investors.

ESG Remains An Influential Global Industry

On the other hand, the data also shows that the ESG market remains a multi-trillion-dollar industry, attracting investors seeking solid returns and social impact. Proponents argue that ESG can help companies better manage environmental and social risks, align with the preferences of consumers and employees, positively influence financial performance, and present a coherent, strategically aligned narrative to stakeholders. This remains the case across much of the global market outside of the US.

Navigating ESG as GRC Professionals

As an organization dedicated to global GRC excellence, we acknowledge the nuance and complexities inherent in this debate. Our priority is, and always will be, to ensure that our GRC frameworks, educational resources, and advocacy efforts remain focused on the substance of responsible business practices rather than being unduly influenced by political dynamics.

As a result, the backlash against ESG in the United States has prompted OCEG to reevaluate its approach to using the acronym. We recommend that our members shift away from using the term "ESG" and instead focus on the core concepts behind it–environmental impact, anti-discrimination, sustainability, transparent governance, and more.

These core concepts will always be included in GRC frameworks and programs. We cannot allow the importance of such matters to be hijacked by political interests that seek to undermine the very purpose of responsible business practices.

In light of this, OCEG will use the term "corporate social responsibility" (CSR) rather than ESG to continue prioritizing environmental, social, and governance factors without being entangled in the divisive political debates surrounding the ESG acronym.

We recommend that any of our members concerned with the matter do the same and will ensure that all resources published after August 21, 2024, will reflect the change.

About OCEG

OCEG, a global nonprofit think tank, pioneered GRC and Principled Performance®. For over twenty years, OCEG has democratized GRC knowledge, offering open-access frameworks, resources, education, and certifications to professionals worldwide. Through the OCEG GRC Capability Model™ and Principled Performance®, OCEG drives leadership and strategy.

OCEG's 150K+ members include individuals at all levels, from C-suite to individual contributors across small and midsize businesses, international corporations, nonprofits, and government agencies.

OCEG aims to establish democratized GRC knowledge as the global standard by offering open-source frameworks and affordable, accredited education. OCEG educates its members on achieving Principled Performance through integrated capability models across six critical disciplines: Governance and oversight, Strategy and performance, Risk and decision Support, Compliance and ethics, Security and continuity, and Audit and assurance.