“It’s not the invisible hand of the free market; It’s the invisible fist of government”
Vivek Ramaswamy, US Presidential candidate, speaking about ‘ESG’ on a recent CNBC appearance.
Vivek Ramaswamy is an American entrepreneur. In 2023, he announced his bid for the Republican presidential nomination. His platform blends centrist social values, patriotism and anti-’wokeness’. His main thrust, however, is his commitment to free-market economics.
As an entrepreneur, Ramaswamy was heavily against ‘ESG’, which stands for Environmental, Social and Governance. It‘s a doctrine that recommends investors factor in a company's environmental, social and corporate governance issues before investing in it.
Throughout the 2010s, ESG became more popular among investors, with major funds like Vanguard, Blackrock and State Street making it an integral part of their combined 20 trillion dollar investment strategy.
Ramaswamy, by contrast, has stood against the financial establishment’s ESG push. In 2022, he founded his ‘anti-woke’ investment firm Strive Asset Management.
Rather than being guided by ESG principles, Strive’s doctrine was ‘shareholder primacy’. This is the belief that a fund’s primary responsibility is to deliver a profit to shareholders. Accordingly, ESG is practically irrelevant – especially if it interferes with profit.
Immediately, Strive raised 20 million dollars from investors, including billionaire entrepreneur Peter Thiel and hedge fund manager Bill Ackman. Their portfolio has since grown to include over 650 million dollars in assets and a 5 billion dollar consulting role with an undisclosed partner.
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Ramaswamy’s attitude towards ESG has always been more about politics than financial prudence. He built his wealth on a failed effort to bring an Alzheimer’s drug to market (something he avoids talking about). After this, he wrote his first book, Woke Inc.
Woke Inc and its subsequent follow-up, Nation of Victims, is where Ramaswamy’s brand of “anti-woke” capitalism took an overtly political form. He discusses controversial topics such as Black Lives Matter and the social justice movement.
In 2022, Ramaswamy appeared on the political commentator Tucker Carlson’s prime-time show. Shortly after, he left the business world and transitioned into politics.
Ramaswamy’s presidential platform is an extension of the ideology that drove his anti-ESG agenda. His stance is popular and has propelled him to second place in some Republican primary polls.
The decline in concern for ESG isn’t just exclusive to the United States. In the UK, studies show that 83% of consumers think companies should be focusing on ESG practices. However, only 25% say they would pay more for a sustainable product.
Does the lack of consumer concern and growing political opposition to corporate ‘wokeness’ spell the end for ESG?
Probably not.
Ramaswamy’s crusade against ESG hinges on two seemingly contradictory ideas: that corporate efforts to solve societal problems are cynical and ineffective; and that those attempts also somehow pose an existential threat to capitalist success.
Short-term planning and emotional thinking have never been considered the soundest form of investment. Indeed, after Ramaswamy announced his candidacy, his primary backers, Peter Thiel and Bill Ackman, disavowed his campaign. That’s not exactly a vote of confidence.
The common targets of Ramaswamy’s zeal are large well-established investment firms such as BlackRock, Vanguard, and State Street. These giants of the investment space combine to hold 20 trillion dollars in assets. 67% of this is in assets which align with ESG principles.
Large investments like these aren’t made for no reason. Every year, governments worldwide pass regulations to ensure sustainable business practices. In April this year, the EU passed their Fit for 55 campaign, pledging to cut gas emissions by 55% come 2030.
ESG doctrine is a way for funds to future-proof their investments. Ironically, this aligns more with shareholders’ best interests than a politically and ideologically motivated opposition to ESG.
The biggest businesses are adapting to an ESG world. Google’s parent company, Alphabet, recently invested 5.75 billion dollars to support environmentally and socially-responsible projects. ExxonMobil, Total, and Shell proactively support efforts to combat climate change.
Ironically, Ramaswamy’s beloved free market has ended up providing the most condemning verdict of all, as the central pillars of US Enterprise continue to embrace ESG.
It’s tempting to write off ESG as another example of ‘corporate wokeness’ - or Woke Inc, as Ramaswamy calls it. Instead, it’s a doctrine that reflects how the global economy will change over the next few decades.
Ramaswamy claims to be a free-market advocate, but is his ideological opposition to ESG possibly less capitalist than ESG doctrine itself?
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