ESG isn’t a belief system. It’s how risk shows up in financials
There is a growing habit – mostly American, often loud – of treating ESG as a single cultural package: climate, DEI and whatever social flashpoint dominates the cycle. It makes for sharp copy. It is also a category error in the markets where stewardship decisions are actually made.
In the UK and EU, ESG is regulated process: rules, disclosures and supervisory expectations designed to surface financially material sustainability risks. Think less ‘cause’, more ‘cash flow’.
In the US, ESG is frequently cast as a proxy for wider battles over corporate speech and political identities
Across the UK and Europe, faith-based investing has long been expressed through formal, responsible-investment practice rather than culture-war branding. Since the 18th century, Church and other faith investors have used exclusions, active ownership and escalation on issues such as armaments, gambling, labor standards, human dignity and climate responsibility, while still grounding their decisions in long-term fiduciary duties.
The core category error is to treat ESG, SRI and CSR as synonyms and then attack the bundle as ‘woke’. So, what is the difference? Here’s how our clients see it
- SRI is generally a mandate-level values choice through screens and tilts (no guns, no alcohol, no GMOs etc)
- ESG is the analytical lens for financially material risk and return factors
- CSR is a company’s own responsibility framework and operating practice.
Conflate method, mandate and management architecture, and you get poor stewardship analysis and false public debate.
The rules of the game are procedural, not ideological
For issuers, this is now an operational reality: reporting scope, assurance readiness, data lineage, disclosure controls, board oversight and evidential traceability. For IR and corporate secretaries, the pressure point is consistency between what is said in reports, what is raised in engagement meetings, what is minuted in board and committee rooms and what can be defended under challenge.
Stewardship has moved the same way: policy transparency, disclosed voting, reported outcomes. It’s not about ‘believe’. It is 100 percent ‘explain’.
The US culture war is loud. Accountability is quiet
This is where friction starts. In the US, ESG is frequently cast as a proxy for wider battles over corporate speech and political identities. Some ESG-sceptic frameworks say they are depoliticizing stewardship and returning to fiduciary basics. The objective is understandable. The execution is often blunt. Heat stress is not ideological. Flood exposure is not ideological. Transition costs, supply-chain litigation risk, harassment claims and human-capital failures are not culture-war abstractions. They are operational and legal realities. If they can move revenue, costs, capex, discount rates, financing terms or liabilities, they belong in board oversight and vote analysis. Ignoring them is not neutrality. It is an analytical choice, with consequences.
Who is reshaping proxy, and for what purpose?
Proxy voting is not being reshaped by one actor. It is being recontested by a complex, and sometimes very opaque, ecosystem.
- Politicians and regulators are applying pressure to proxy infrastructure and recasting voting advice as a site of ideological conflict
- Policy entrepreneurs and ‘anti-ESG’ providers are building alternative voting views and reframing what counts as fiduciary stewardship
- Large asset owners and managers are demanding tighter policy customization and clearer vote rationales aligned to their own mandates
- Issuers are responding by professionalizing engagement strategy, targeting disclosure quality and stress-testing governance narratives against polarized investor blocs.
The purpose is not mysterious: narrative power defines legitimacy, process power controls defaults in voting workflows and governance power shapes the board-shareholder-intermediary balance.
Let’s pop the ‘proxy advisers as regulators’ balloon, please
In the culture-wars script, proxy advisers are cast as shadowy, unelected regulators running corporate America by remote control. It is an effective villain story, but still a story.
Research analysts don’t own votes, set fiduciary duties or exercise state power. We’re hired intermediaries in a client-governed chain. Asset owners and managers choose mandates, can override recommendations and remain legally accountable for final voting decisions. Information influence at scale is not the same as control.
A fair criticism from sceptics is that cookie-cutter voting templates can drift from client intent
For company secretaries and IR teams, that distinction matters: arguing with the caricature wastes everyone’s time. Engaging the actual decision-makers and their mandate constraints wins outcomes.
Engagement beats divestment, but only if it is explainable
Most serious participants agree on one point: selling stock is a blunt instrument; ownership gives leverage. Quiet, evidence-based engagement often outperforms performative AGM conflict. But engagement has legitimacy only if it is explainable. If change is secured, say what changed (without disclosing material, non-public information), why it matters financially, who owns delivery internally and how progress will be tracked. Otherwise, ‘engagement’ becomes a black box where any prior can be smuggled in.
Templates? Left, right or benchmark, they’re lazy power
A fair criticism from sceptics is that cookie-cutter voting templates can drift from client intent. True. But that is not an argument against sustainability analysis; it is an argument for better stewardship practice. Custom policy should be genuinely custom: built from legal obligations, beneficiary mandate and issuer-specific risk pathways, not from a default template with a few toggles changed.
And the warning cuts both ways. An anti-ESG template is still a template. If the default answer to climate or workforce-related proposals is always ‘no’, ideology hasn’t been removed; it’s just been inverted.
‘Values vs value’ is a false choice most days
Yes, some proposals at both extremes attempt to legislate culture by proxy ballot. Those should fail – and quickly. But most issuer-facing stewardship work is not on the fringes. It is in the middle: oversight quality, conduct controls, supply-chain resilience, transition credibility and disclosure reliability. These are governance and risk-control questions. If they map to financial outcomes, they are fiduciary questions. If they don’t, pause.
ESG risk disclosure is not about ‘belief’
This is not about joining or rejecting a tribe. It is about governing credibly across a fragmented political environment while maintaining disclosure integrity and board accountability to all shareholders, not just the loudest faction. ESG risk disclosure, properly done, is not about ‘belief’. It is the discipline of identifying how sustainability linked risks and opportunities affect financial outcomes – and being transparent about the reasoning. That’s good for corporations, good for shareholders, good for employees, good for consumers and good for the planet.
Sarah Wilson is chief executive of Minerva Analytics
