Antitrust vs. ESG
Cutthroat corporate competition means there can be only one bottom line
I admit to feeling a bit ambivalent about ESG investing. For the uninitiated, ESG stands for Environmental, Social, and [corporate] Governance investing, and it means that investment ought to take a lot of stuff into account besides how much profit a company makes. This is traditionally mostly about climate change — not investing in companies that emit lots of greenhouse gases. But the concept is increasingly being applied to other things people want companies to do, like supporting human rights overseas, diversity, employee compensation vs. executive compensation, worker input into corporate decision-making, etc.
I’m ambivalent about ESG because I like most of the goals but I’m suspicious of the methods. On one hand, climate change is very scary, and that threat overrides a lot of other concerns about what investors should and shouldn’t do. Governments in the biggest polluting countries generally seem to be dropping the ball on speeding the transition to renewable energy, so the investor class might as well step in and do what it can. The movement to divest from coal seems to have made progress in speeding the death of that dirty fuel, and that’s a good thing:
And the other goals of the ESG movement generally seem like good things too (though I think a lot depends on the implementation).
On the other hand, fundamentally, ESG seems like the investor class trying to reshape our society to fit its own vision of what that society should look like. The more things get included in the list of ESG considerations, and the more that affects corporate behavior, the more investors’ social preferences become reflected in our day-to-day social relations. And remember, most of the stocks in the U.S. are owned by rich people. That instinctively feels like a vision of dystopian capitalism.
But on the other other hand, you can argue that a monomaniacal focus on shareholder value (i.e. profit) is itself a form of influence over the day-to-day relations of society. A society where everyone is forced to run around making as much money as possible, because rich people tell corporations not to care about anything besides money, is also a society where rich people’s preferences rule our daily lives.
The classic corrective is democracy — voters can vote in politicians who make laws to prohibit pollution, unsafe working conditions, unfair labor practices, and so on. And democracy probably doesn’t lose efficacy under an ESG regime; the only danger is that people might convince themselves that ESG is a substitute for democracy, and reduce their efforts to influence the political process because they assume a benevolent investor class will take care of things.
All of this discussion is a bit moot, however, if ESG doesn’t make economic sense. If abandoning the bottom like for three or five or twenty bottom lines hurts a company’s ability to sustain its market penetration and payroll, that company’s ability to improve society will wane along with its profits.
And here we come to the title of this post: “Antitrust vs. ESG”. Because if the U.S. moves toward an environment of increased competition, that will put more pressure on companies to focus purely on staying alive. And the recent stock crash and earnings squeeze will only increase this pressure.