CORPORATE CLASH — Companies across the country are continuing to reassess and scale back sustainability and diversity initiatives in moves that might have as much to do with bottom-line concerns as with the anticipation of increased hostility under a Republican trifecta in Washington. Goldman Sachs Group’s move last week to withdraw from the Net-Zero Banking Alliance was just the latest in a series of shifts highlighted by Walmart’s announcement last month that it would begin curbing its diversity policies in the face of pressure from a conservative activist. These walkbacks from programs that major corporations embraced only a few years ago certainly have something to do with the attacks from the right that have thrust corporate policies into the political spotlight, your host reports. But they also underscore the struggles that businesses have faced in trying to make the economic case for environmental, social and governance principles and diversity, equity and inclusion programs. After all, there are legitimate questions about whether companies would roll over quite so easily if they were able to articulate a clear financial return for those programs in the first place. “What the new era looks like is an expected focus on being able to demonstrate the business value and being able to justify investments,” said Andrew Jones, senior researcher at The Conference Board’s ESG Center, a global nonprofit think tank. A new survey from The Conference Board found that 41 percent of corporate executives believe that the return on investment from their sustainability initiatives are either underperforming or uncertain, while only 17 percent felt that way about their “traditional investments.” Just 3 in 10 feel their company is effectively communicating the results of sustainability initiatives. In a world where Republicans have put large corporations on the defensive through state legislation, litigation, investigations and advertising campaigns, companies may be deciding to cut their losses. "A well-counseled client will say the fact that I could spend $10 million and defeat a lawsuit means, it will cost me $10 million to stay in this group if I think there's a reasonable risk that I'm going to get sued,” said Jonathan Gleklen, partner at Arnold & Porter and chair of the firm’s antitrust practice. “And I think a well-counseled client will say, ‘Is this really worth $10 million to me, to be able to put the logo on my website when I can drop out of the group, do all the same things, make my same public statements about my commitment to net-zero? When it was costless to put the logo on my website, that was a good PR choice. But it's no longer costless.” In some cases, even walking away from coordinated efforts to address environmental and social problems isn’t good enough to keep companies out of harm’s way as they also face pressure on the left to do more to fight climate change. Nearly a dozen Republican state attorneys general sued BlackRock, State Street and Vanguard last month, accusing the "Big Three" asset managers of antitrust violations by colluding to manipulate the decline of the coal industry to meet climate targets. Iowa Attorney General Brenna Bird, who joined that lawsuit, called it "the tip of the iceberg" — and said that President-elect Donald Trump's win inspired officials to bring the litigation after more than year of teasing it. "As part of that election, Americans rejected woke extremism, and they sent President Trump a strong mandate to restore our country," Bird said in an interview. "It's very good for this issue that he is president, because that will help us to fix some of these problems. It's very helpful." Next up for Bird and like-minded AGs, she said, is potentially escalating efforts to similarly challenge the big proxy advisory firms, Glass Lewis and Institutional Shareholder Services. ISS said in a statement that it "remains committed" to working with officials to further understand its role in the proxy process. But many companies maintain that while the mood around ESG and DEI continues to shift, much of the actual work itself will remain. A separate Conference Board report from October found that while 60 percent of corporate executives view the political and social climate around DEI as very or extremely challenging, fewer than 10 percent of firms plan to reduce DEI resources over the next three years. Companies will still be expected to meet mandatory climate reporting standards out of Europe and California even as federal rules are expected to get squashed by the incoming administration. And more than two dozen companies including Ikea and Samsung met with congressional Republicans last week to underscore the business case for keeping the clean energy tax credits and other incentives included in the Inflation Reduction Act. “Our general goals of addressing climate risk and opportunities, integrating nature and water into that, and doing so at a policy level, a corporate level and investor level, won't change,” said Mindy Lubber, president and CEO of sustainability nonprofit Ceres, which organized the Capitol Hill meetings. “Our tactics and strategies will unquestionably see some changes. There will be a lot of defense at the federal level. Companies may not raise the flag and do big public campaigns, but they're not going to stop looking at climate risk and the opportunities because there's nothing those investors care about more, as they should, than getting good returns.”
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