When the term ‘ESG’ (Environmental, Social and Governance) was coined in 2004, it was all about making capitalism more conscious and caring. Meeting at the United Nations headquarters in New York, mega financial conglomerates like Goldman Sachs, Morgan Stanley and HSBC signed the ‘Who Cares Wins’ charter to take a ‘leadership role’ in integrating kind-hearted policies into the financial markets.
From the get-go, ESG championed several pet progressive projects: stopping climate change, increasing management diversity and promoting human rights. Companies promised to integrate these campaigns into their investment decisions and research. Today, as the new report ‘Woke Capitalism’ from think tank Civitas explores, ESG has broadened to include causes such as Net Zero, DEI (Diversity, Equity and Inclusion) and anti-racism.
What no one could have predicted in 2004 is ESG’s near-universal takeover of the economy. There is hardly a major financial institution in the country without an ESG goal, agenda or rating. Thousands of British businesses are paid-up members of diversity schemes like B Corp, or Stonewall’s Proud Employers. An extraordinary $40 trillion is expected to be invested in European ESG assets by 2030, a figure roughly twice the size of the European Union’s total GDP.
The incontrovertible flaw of ESG, however, is that it is an inherently political project. It is through ESG that employers have instructed staff to introduce themselves with gender neutral language. When Nigel Farage lost his account with Coutts Bank, it was because his views did not ‘align’ with their values as ‘an inclusive organisation’. Criticising workplace diversity schemes that promote highly contested ideas like critical race theory and transgenderism could risk losing your job. ESG is, by its very nature, exclusionary, not inclusive.
In fact, the public’s perspective on ethical branding and ESG is strongly tied to their politics. In new polling conducted for ‘Woke Capitalism’, Civitas found that Labour voters were twice as likely to find brand ethics important (39%) compared to unimportant (20%) when considering day-to-day shopping. Reform and Conservative voters were twice as likely as Labour voters to find brand ethics unimportant overall (42% and 39% respectively). If ESG were not political, why is there such a divide along partisan lines?
More than that, ESG damages our economy. Despite it being a national priority, many defence manufacturers find it ‘extremely difficult’ to even open a bank account, as Civitas revealed earlier this year. In 2023, High Speed 2 recorded that it employed 167 staff in its PR department, including three DEI managers on annual salaries of £200,000. While seemingly virtuous, by prioritising ESG, companies sidetrack other strategic objectives – like growth the economy badly needs.
Even shoppers are against ESG. Our polling also found that only 7% thought brand ethics on social justice issues were extremely important in their day-to-day shopping. Consumer interests like value for money and convenience were, unsurprisingly, of far greater importance than brand ethics. If even shoppers don’t want it, who is it serving?
Supporting ESG is a perfect example of a ‘luxury belief’. Rob Henderson created the term to describe the privileged students he met at Yale who supported defunding the police, decriminalising drugs, and rejecting marriage. Henderson noted that social status was not conferred through money and education, but through ideas and beliefs.
The think-tank More in Common’s revelation that private school alumni are almost twice as likely to vote Labour than those from state schools underlines this point perfectly: environmentally-friendly, financially costly ideas are far more likely to be held by richer metropolitan liberals whose status is bolstered by their progressive advocacy.
Stopping woke capitalism requires more than just a change of heart, but a change to national policy. As our report points out, there is an endless amount of policy and legislation mandating ESG. This includes the Social Value Act, which mandates a 30-page social value checklist for all public procurement, no matter the size or circumstance. Contracted businesses must have a racially diverse workforce, among other policies.
Similarly, the Companies Act now requires annual reports from all major companies on energy usage, carbon emissions and, from 2026, measurable goals for meeting these targets. The 2010 Equality Act requires training staff on equal opportunity. Mandatory gender pay gap reporting nudges all large employers to make their workforces equally gendered, even if there are perfectly clear reasons for a disparity.
But like a bullet ricochet, the regulatory effect is often doubled as companies voluntarily go above and beyond the necessary regulation to adhere to ESG actions they believe are good practice.
Of course, capitalism should be full of good practice. Businesses, after all, can only thrive on strong bonds of trust between company and consumer. British history is littered with examples of conscious capitalism. It was British opponents of slavery that boycotted buying slave-produced sugar, Cadbury that built the beautiful Bournville village for its workers and Lloyds of London who provided insurance for Martin Luther King Jr’s cars during the Montgomery bus boycott.
Today, conscious capitalism lives on through schemes like Fairtrade and Red Tractor. Last month, toy chain The Entertainer went 100% employee-owned, joining brands like John Lewis, Waitrose, Go Ape, and Wallace and Gromit animator Aardman.
Far from being conscious – ESG is dangerous. It excludes, divides and now we know – it is not what consumers want. It is time Britain withdrew its ESG policies, and fostered a culture of real conscious capitalism.
