In this week’s edition of Economy and Society:
- ESG critic appointed to Labor Department
- European legal scholars argue against ESG rollback
- German chancellor argues against CSDDD
- Second-largest public pension shifts ESG efforts to private markets
- ESG legislation update
- Shareholder proposals seek to end business with Israel
In Washington, D.C.
ESG critic appointed to Labor Department
What’s the story?
The Department of Labor this month appointed Justin Danhof—a critic of ESG investing and a proxy voting and corporate engagement expert—as a senior policy advisor in the Employee Benefits Security Administration.
Why does it matter?
Danhof’s appointment brings an anti-ESG voice into a role that shapes guidance for retirement plans.
What’s the background?
Danhof previously led the Free Enterprise Project at the National Center for Public Policy Research, where he filed shareholder proposals opposing ESG initiatives and helped organize pushback against the strategy. He also worked at Strive, an asset management company founded by Vivek Ramaswamy to promote non-ESG investing.
Read more:
According to Pensions & Investments:
“Without Justin’s efforts, I don’t know if there would even be a pushback against ESG,” said Stephen Soukup, author of the 2021 book, “The Dictatorship of Woke Capital: How Political Correctness Captured Big Business,” who credits Danhof with getting him involved in the anti-ESG movement. “I think that he’s essentially the founder of the capital markets pushback against ESG,” Soukup added.
In public remarks and writings, Danhof, whose bio on X says he’s “pioneer of the post-ESG movement,” has railed against large asset managers and their ESG investing practices. Most notably, Danhof has criticized BlackRock and its CEO Larry Fink.
In a March 2023 post on X, Danhof linked to an opinion piece critical of Fink and wrote, “Larry Fink uses other people’s money to advance leftist policies throughout corporate America.”
European legal scholars argue against ESG rollback
What’s the story?
More than 30 European legal scholars argued that proposed changes to the EU’s ESG reporting rule—the Corporate Sustainability Due Diligence Directive (CSDDD)—could expose the union to legal challenges.
Why does it matter?
The arguments come as the EU moves to roll back parts of the CSDDD, with officials from member states—including France and Germany—arguing reduced regulations are needed to ease compliance burdens and keep European firms competitive with the U.S.
What’s the background?
For more on the EU’s efforts to roll back the CSDDD, see here.
Read more:
According to Bloomberg:
Pressure to scale back regulations has come from member states including Germany and France, amid concerns European companies will be too burdened by regulatory requirements to compete with US and Asian rivals. Negotiations are set to continue for months, with a final proposal unlikely until the end of the year.
European Commission President Ursula von der Leyen has made clear she wants to cut red tape, with the likely outcome a slimmed down framework for environmental, social and governance requirements in the bloc. …
[Thom] Wetzer [founding director of the Oxford Sustainable Law Programme] says he’s aware of “many parties that are active in the litigation space,” and they are “looking very carefully at this part of the omnibus bill and are ready to launch new cases to clarify legal obligations at member state levels.”
German chancellor argues against CSDDD
What’s the story?
German Chancellor Friedrich Merz asked the EU during his first visit to Brussels to eliminate the Corporate Sustainability Due Diligence Directive (CSDDD) rather than continue scaling it back.
Why does it matter?
Chancellor Merz said Germany will revoke its national corporate reporting law and that he expects the EU to follow suit. The EU has not announced plans to eliminate the directive.
Read more:
According to ESG News:
Despite strong backing from civil society and ESG advocates, parts of the business community have criticized the directive for imposing what they consider excessive and costly compliance obligations that could erode European competitiveness.
Merz, representing the center-right Christian Democratic Union (CDU), aligned himself with corporate concerns, while expressing general support for the Commission’s broader drive to reduce red tape.
The Chancellor’s statement places Germany—the EU’s largest economy—at odds with the bloc’s legislative direction on sustainability governance, potentially reshaping ESG policy debates ahead of the 2028 enforcement timeline.
In the states
Second-largest public pension shifts ESG efforts to private markets
What’s the story?
CalSTRS, the second-largest public pension fund in the U.S., announced plans to stop treating ESG as a separate strategy for public stocks and to shift ESG efforts to private investments.
Why does it matter?
CalSTRS has supported ESG efforts in public markets, including its role in hedge fund Engine No. 1’s 2021 campaign to add climate-focused directors to ExxonMobil’s board. It is now joining other large asset managers (including BlackRock) in placing more emphasis on ESG in private markets, where critics say such efforts face less scrutiny and fewer disclosure requirements.
Read more:
According to Responsible Investor:
Documents published ahead of an investment committee meeting on Wednesday show that the $350 billion Californian fund plans to merge the public sustainable allocation into its wider global equity programme and allow SISS staff to focus solely on expanding climate solutions across private markets.
According to the documents, “the integration of material sustainability factors in active public equity strategies has matured to the degree” that it makes sense to merge the two portfolios and would be “no longer efficient” to maintain them as separate allocations. …
On the private side, the fund has committed $2.8 billion, of which $948 million has been invested or called. The committed capital is mainly to opportunistic climate infrastructure investments, accounting for 55 percent of the commitments, while hybrid/innovative climate investments account for 23 percent and venture and growth equity make up a further 18 percent.
ESG legislation update
Twelve state legislatures took action on 26 ESG-related bills last week (since May 5). One bill in Oklahoma was enacted into law, four passed both chambers, and six crossed over from one chamber to another.
States with legislative activity on ESG last week are highlighted in the map below. Click here to see the details of each bill in the legislation tracker.
In the spotlight
Shareholder proposals seek to end business with Israel
What’s the story?
Intel and Lockheed Martin are the two latest companies facing shareholder proposals seeking to end their business dealings with Israel.
Why does it matter?
ESG investor groups have filed shareholder proposals over the last 18 months pressuring companies—especially in defense and tourism—to end business ties linked to Israel’s military actions in Gaza. Critics say such proposals aim to force firms to choose between maintaining Israeli business relationships and protecting their ESG reputations.
Read more:
According to Isaac Willour of Bowyer Research in a commentary piece at The Daily Wire:
Activists at Intel argued that the company should completely “reassess [its] business relationship with Israel,” alleging that the human costs of war against Hamas are grounds for Intel to uproot its ties to a country it’s invested in for more than half a century. And then came the boom: “We risk exclusion from important ESG indices that screen for human rights compliance in conflict zones.”
There’s no analysis that could make it plainer than that. The real case for why Israel’s most consistent business partners should divest, at its heart, boiled down to ESG ratings. That’s the case: this long standing relationship, that both provides shareholder return and protects innocent civilian life in a just war against one of the world’s most brutal terrorist organizations, has to go so that Intel’s ESG score doesn’t suffer. …
The implicit premise here is, of course, that Israel’s actions to subdue Hamas and defend itself against a fighting force that expressly seeks its annihilation are incompatible with ESG dogma. And it’s not just Intel — today, Lockheed Martin shareholders will vote for the second year in a row on a shareholder proposal pushing the company to stop its similarly long standing relationship with Israel, arguing that Lockheed selling fighter jets renders it complicit in war crimes.