Finimize - 🇺🇸 Big US firms said no to ESG

What’s going on here?

The three biggest money managers in the US put more environmental, social, and governance (ESG) initiatives in the – non-recycling – bin in the first half of this year versus the same time last year.

What does this mean?

State Street, Vanguard, and BlackRock own a combined 20% of all S&P 500 companies, so their votes carry serious weight. Back in 2021, the trio used that power to champion a record number of proposals related to climate change, diversity, and human rights. But they’ve since changed their tune. This year, State Street’s investing arm backed just 6% of environmental proposals and 7% of social ones, BlackRock voted for 4% of ESG proposals, and Vanguard a flat zero. Those figures are all down from the same time last year, reflecting the shift in the finance industry.

Why should I care?

For markets: Save the world or make more money… It’s basically Sophie’s Choice.

Conservative US politicians have managed to curb the push for ESG, loosening regulations and discouraging firms from working together to cut greenhouse gas emissions. It seems other issues simply matter more than the whole “the planet’s on fire” thing: Bain & Co reported that CEOs have bumped sustainability down their priority lists in favor of inflation-related initiatives, AI, and geopolitical issues. Plus, many major firms are quietly winding down their commitments to diversity, equity, and inclusion programs.

The bigger picture: Someone has to pay for the planet.

Europe is still all-in on sustainability, mind you. Investors and politicians are continuing to support eco-friendly products and plans in the region. Plus, Europe has stricter regulations in place. Although, that could mean that European companies face higher compliance and regulatory costs than US competitors. And if buyers aren’t willing to pay more for ethically minded products, European firms might have to foot the bill themselves. That could keep the region’s firms trading at a discount to their American peers.

What’s going on here?

The UK’s national debt relative to the size of its economy hit 100% for the first time since 1961, and Brits don’t even have groovy tunes and go-go boots to distract them this time.

What does this mean?

The UK government's budget deficit – the difference between its revenues and expenses – has been widening, with more money being spent on energy subsidies, social services, public-sector pay, and interest payments on debt. So the government’s been forced to borrow money by selling bonds. At some scale, too: it borrowed a more-than-expected £13.7 billion ($18.2 billion) last month. That’s the highest August figure on record outside of the pandemic. So since the start of the financial year in April, the UK government has borrowed a heart-rate-raising £64.1 billion ($85.1 billion) – 11% more than the Office for Budget Responsibility had initially predicted in March.

Why should I care?

Zooming in: It’s time to settle up.

The report is the penultimate snapshot of the country’s public finances before the newly elected government reveals its financial plan at the annual Budget event next month. This one could be a biggie: the UK has already been warned of “difficult decisions”, after a pick-up in the economy earlier this year failed to improve the country’s finances. In other words, folk should expect an unpopular combination of spending cuts and tax hikes.

The bigger picture: Winter is coming.

Brits seem to have heeded the warning. Data out on Friday showed that a key index of consumer confidence in the UK plunged seven points to land firmly in the negatives, indicating high levels of pessimism. The last time the index fell that fast was in April 2022, when energy costs hit the roof in the wake of Russia’s invasion of Ukraine. That signals that households are losing faith in their finances – a big deal given that consumer spending accounts for two-thirds of the UK economy.