We’ve Been Here Before: Defending Long-Term Value Amidst Political Backlash

Feb 7, 2025 |Bryant Sewell and Whitney Shepard

Even before election day, ESG (Environmental, Social, and Governance) investing, and therefore long-term just and sustainable value creation, has been under threat from elected officials within the Republican party.

The threat now looms larger as the president-elect intends to upend years of progress in sustainable investing and corporate accountability, including plans to expand the production of fossil fuels, reduce environmental regulations, and dismantle key climate monitoring agencies and “terminate every diversity, equity and inclusion program across the entire federal government.”

As stewards of capital and architects of tomorrow’s economy, we face a clear choice: retreat in the face of political pressure or stand firm in our conviction that sustainable, responsible business practices are fundamental for a just economy and fully realized multiracial democracy.

History will remember which path we choose.

Fiduciary Duty

Certainly there are those who believe that a deregulatory agenda and retrenchment on ESG is favorable and see corporate guardrails and accountability as unnecessary barriers that harm profitability. However, informed and seasoned long-term investors know the opposite is true.

Corporate actors that fail to consider ESG factors and the systemic risks presented by climate change, racial inequity, and attacks on labor rights are susceptible to missing critical signals at both the company and market level that hurt value creation.

The well-funded anti-ESG movement deploys disinformation and denialism to obscure a fundamental truth: ESG metrics aren’t political statements — they’re essential tools for understanding real business risks and opportunities in a rapidly evolving global economy. For investment managers responsible for the retirement savings and financial futures of millions of Americans, ESG denialists, including the largest asset managers, handicap their ability to fulfill their fiduciary duty to identify and manage long-term risks.

Earlier Progress

The threats to sound environmental, social, and corporate governance only increase when an unchecked administration takes us backward. In this moment of heightened tension, responsible investors must be mindful and recall how much collective power they have demonstrated in the face of similarly adverse circumstances. You’ve been here before.

The period between 2017 and 2020 saw tremendous progress toward building a sustainable and inclusive economy despite the Trump administration’s flagrant attempts to undermine your efforts: in 2017, after decades of persistent engagement, you organized to secure unprecedented climate scenario analyses at major oil companies; in 2018, you achieved majority votes addressing gun violence risks; by 2019, you halted bank financing of private prisons; and in 2020, you ousted Lee Raymond — the former CEO of ExxonMobil and the principal architect of American corporate climate denialism — from leadership at JPMorgan Chase, the world’s largest fossil fuel financier.

These weren’t just isolated victories. These were seismic shifts that laid the groundwork for even more significant wins in climate action, workers’ rights, and racial equity.

Demanding Action

But let’s be clear: We cannot win tomorrow by simply repeating yesterday’s strategies. The recent anti-ESG and anti-DEI backlashes have provided the largest asset managers with the cover and short-sighted justification to return to rubber-stamping the actions of companies that pollute the planet and harm workers and communities.

These large asset managers operate as unappointed quasi-regulators of governance standards and are poised to have more power under the incoming Trump administration. Their countenancing of harmful corporate behavior has exacerbated economic inequality within our country and fanned the flames of resentment and backlash. Given the scale and urgency of these combined threats, it is no longer enough for responsible investors to rely solely upon dialogue; they must demand action.

To unlock the transformative power of their capital, responsible investors must be innovative and broaden the scope of their stewardship activities to disrupt the concentrated power of the largest asset managers. The recent reversals of these asset managers show they prioritize their institutional success above their responsibilities to clients — we will win when we use our collective power as clients to demand that they live up to their fiduciary duties.

Majority Action exists to highlight and unlock the transformative power of capital for good. We believe in the power of engaged stakeholders and responsible investors when properly organized to revolutionize boardroom dynamics and corporate priorities to work for, not against, common interest. Particularly now as policy pathways will likely be closed, the capital markets remain our most powerful lever for systemic change, whether for progress or regression. It is our choice.

Forceful Stewardship

As descendants of African Americans whose enslavement was foundational to the American economy and of Japanese Americans who were sent to internment camps via presidential executive order, we intimately understand the consequences and what is at stake when power operates without accountability.

For people of color and working class people, inclusion in American democracy and its economy is not a right afforded. We have and will continue to fight for and demand inclusion within the systems and access to the gains that would not exist without us. We need aligned investment decisions that create a safer and more sustainable tomorrow, and where equitable economic and democratic participation are seen as inalienable civil rights.

Responsible investors who understand ESG as a risk-mitigation and value-creation strategy should not be deterred by forthcoming headwinds. They should not be divided, gaslit or bullied into submission at the expense of the long-term investments of clients and beneficiaries. Instead, as Timothy Snyder, author of On Tyranny has recently advised, it is time to “know what you stand for and what you think is good.”

We need business and elected leaders who embrace accountability and inclusion as essential gifts for progress. It is time to take stock and update our toolkits, to nurture our will to be bold and brave, or risk being a part of what Martin Luther King Jr. referred to as the “appalling silence of the good people.” This moment demands more than passive resistance or strategic retreat- it demands bold action and forceful stewardship. Let us answer the call together.

Bryant Sewell and Whitney Shepard are Co-Executive Directors of Majority Action.

This piece initially appeared in ImpactAlpha on November 20, 2024.