Leah Malone is a Partner and Leader of ESG and Sustainability Practice and Emily Holland is a Counsel at Simpson Thacher & Bartlett LLP. This post is based on a Simpson memorandum by Ms. Malone, Ms. Holland, Matt Feehily, May Mansour, and Alicia Washington. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) by Lucian A. Bebchuk and Roberto Tallarita; How Twitter Pushed Stakeholders Under The Bus (discussed on the Forum here) by Lucian A. Bebchuk, Kobi Kastiel, and Anna Toniolo; Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy – A Reply to Professor Rock (discussed on the Forum here) by Leo E. Strine, Jr.; and Stakeholder Capitalism in the Time of COVID (discussed on the Forum here) by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita.
After years of buzz in business circles, ESG seemed to have lost some of its shine in 2023. We saw a host of new state laws looking to limit its use. Mentions of ESG on earnings calls dropped to their lowest level since 2020. Governors from 19 states joined an anti-ESG coalition and conservative members of Congress dubbed July “ESG month” as they held hearings and advanced bills aimed at limiting ESG-based investing. A major asset manager and traditional advocate of investment stewardship publicly took a step back from its ESG focus. Investor demand for ESG products cooled, as the third quarter of 2023 saw the fourth consecutive quarter of net outflows from sustainable funds in the United States.
