Ed Waitzer is a lawyer and a senior fellow at the C. D. Howe Research Institute and a former chair of the Ontario Securities Commission.
Regulatory agencies in the United States, for example, are increasingly subject to political interference and, because they are specialized, are often incapable of addressing the cascading impacts of risks that spread within and across systems, sectors and societies. That can lead to systems collapse and potentially existential consequences.
The movement appears to have led to measurable reductions in carbon emissions, particularly on the part of companies susceptible to influence by these large institutional investors. Mandated sustainability reporting will amplify that effect. Unlike governments, market actors have neither the ability to raise revenues that could be used to offset such regressive effects nor the incentive to make distributional adjustments. Moreover, while the odds of governments effectively offsetting the regressive effects of their own climate policies are low , the chances of them attempting to do so for policies implemented by the private sector are lower.
From this perspective, the recent anti-ESG backlash, which has caused politicians to sour on the movement, is predictable, with opponents seizing on job losses and increased energy costs for middle- and low-income voters. The same political forces and lobbyist campaigns that oppose climate stewardship by governments, leading to increased reliance on the private sector’s ESG measures, are now causing politicians to object to and frustrate ESG-driven climate reforms.