Politics hang over US brands during Pride month

Greetings from Aspen, Colorado, where the Aspen Ideas Festival is playing out this week. As in previous years, sustainability issues feature prominently on the programme.

This year there are two striking new twists: firstly, the acronym “ESG” — or environmental, social and governance — is falling further out of favour, with almost none of the speakers willingly deploying it.

“I don’t use the word ESG any more, because it’s been entirely weaponised . . . by the far left and weaponised by the far right,” observed Larry Fink, head of the mighty BlackRock group and once a champion of the acronym. With or without that ugly acronym, Fink stressed that the asset manager remained focused on sustainability issues, such as climate change.

And that brings us to the second main theme: no matter the language used, the green transition is top of mind for investors and companies ever since the Inflation Reduction Act’s passage. However, this conversation is now deeply entwined with national security issues. In recent years there has been a bigger White House embrace of industrial policy and of an economic policy “reset”.

Thus, during the event, I heard lively debates about the irony of Texas becoming a top solar power state, and whether it matters that America is importing most of the components for solar and wind power from China. (The consensus is that it does, but there is no alternative right now.)

There was also heated discussion about how many subsidies will be needed, for how long, to make hydrogen viable in America — and how quickly the rare earth mineral supply chain can be moved to the west (or not).

This will run and run; check back in with our upcoming newsletters for more on these emerging discussions. Meanwhile, we have a piece today on the emotive fights around Pride merchandise and the challenge this poses for US chief executives. Plus, Chris Flood reports on why it is high time for sustainability investors to pay more attention to the bond markets. (Gillian Tett)

Pride meets prejudice as Americans’ ‘political brains’ take over 

In any other Pride month, it would seem routine. But when more than 50 companies signed a statement last week rejecting harassment of LGBTQ communities and supporting those who serve them, the decision was a little bolder than before. 

The likes of Accenture, Moody’s and Pfizer will have been aware before joining the campaign organised by LGBTQ advocacy group GLAAD of the costly backlash that Bud Light, Disney and Target have encountered from conservative politicians and consumers lately. 

Indeed, the statement coincided with two polls showing how high the stakes are for business. One by Ipsos, conducted for GLAAD, showed that a quarter of Americans — including most Republicans — would be less likely to buy from a brand or store that sold Pride-themed merchandise. 

Another by Harris, part of marketing group Stagwell, found that Disney had become one of the country’s most polarising brands after a sharp drop in favour among Republicans. Pfizer, TikTok and collapsed crypto exchange FTX were similarly out of favour with conservatives, while Democrats shunned the Trump Organization, Fox and — since Elon Musk’s takeover — Twitter.

According to Mark Penn, the former Clinton pollster and Microsoft strategist who chairs Stagwell, we typically use our “consumer brain” for choosing brands and our “political brain” for voting. Partisan ruptures, fuelled by social media, meant that politics increasingly influenced Americans’ decisions as consumers.

Companies needed to be more aware of how to be socially responsible without getting caught in “wedge politics”, Penn said. Penn declined to comment on Budweiser, a Stagwell client, but said brands should have both Democrats and Republicans look over their marketing before it goes out. 

“They have to make a conscious decision that they’re going to step out” on a sensitive issue, he told Moral Money: “You don’t want somebody six layers down do something and have a CEO woken up at 3am” because a campaign misfired.

In “a 50:50 country”, however, that will not be easy, especially in the run-up to the November 2024 election. “The next 17 months could be very treacherous months,” Penn warned. (Andrew Edgecliffe-Johnson)

How asset managers’ bond buying boosts fossil fuel expansion

Twenty of the world’s biggest asset managers bought bonds worth at least $3.5bn over the past 18 months from 40 companies that were expanding their fossil fuel operations, according to Reclaim Finance.

The Paris-based campaign group has just released its latest critical assessment of the asset management industry’s progress towards achieving net zero carbon emissions by 2050, a goal that Reclaim Finance argued was being undermined by investment companies’ appetite for bonds linked to fossil fuel projects.

The $3.5bn of buying was identified from Bloomberg data by Reclaim Finance, which said this estimate was likely to be a significant understatement of the true extent of demand from fund managers.

“Asset managers are pouring cash into fossil fuel expansion via the bond market,” said Lara Cuvelier, a campaigner at Reclaim Finance.

Fresh money was being provided for fossil fuel projects “without any conditions or strings attached” through bond sales to companies, such as Freeport Indonesia PT, China National Petroleum Corporation, BP, ConocoPhillips and Eni, according to Reclaim Finance.

This called into question the “credibility and effectiveness” of asset managers’ ESG engagement with these companies, said Cuvelier.

The leading passive fund managers BlackRock, Vanguard and State Street were the biggest investors in fossil fuel bonds, which were included in broad index-tracking funds.

Bondholders — unlike shareholders — do not have the ability to express their disapproval of a company’s climate policies at annual meetings.

But sustainability specialists working for asset managers insist that they can and do make their views known about fossil fuel funding, whether it is done via debt issuance or an equity raising.

Reclaim Finance pointed out that only a third of the world’s top 30 asset managers had policies that restricted investments in companies that were expanding their coal operations. The situation only slightly improved in the oil and gas sector, where a dozen of the top 30 had policies aimed at restricting output expansion plans.

“Existing engagement policies will not succeed in decarbonising the global economy,” warned Cuvelier. (Chris Flood)

Smart reads

• Tropical forest loss increased 10 per cent year on year in 2022, with tree cover equivalent to the size of Switzerland destroyed globally, according to a report published yesterday. Read the full story from our colleagues in São Paulo and London.

• Dozens of leading companies including PepsiCo, Heineken and Nike, are calling on the EU to set more ambitious emissions standards for trucks. In a letter to EU environment ministers seen by the Financial Times, 41 businesses argued that if the bloc was to achieve its 2030 emission reduction goal it was “essential for us that a rapidly growing number of zero emission trucks become available”.