Also: Italian chaos, Russian gas, and HSBC communism.
Good morning.
Fortune this week assembled the top executives responsible for ESG at 20 of the nation’s largest corporations to discuss the opportunities and challenges they see going forward. The conversation was off the record, to encourage a candid exchange of views. But it was a rich discussion that left me with some clear takeaways about the direction of stakeholder capitalism.
First, and most important: Despite growing attacks from both the left, which sees ESG as a smokescreen to obscure corporate greed and corruption, and the right, which has attacked ESG as a “pernicious” move toward “woke capitalism”, the companies on the call showed no signs of retreat. For them, this isn’t a marketing campaign or a political tactic—it’s a fundamental shift in business strategy. In a survey before the call, three quarters said ESG is already “an integral part” of their company’s strategy, while the other quarter said it is “increasing in importance.”
All the companies represented at the meeting—which included Walmart, Microsoft, Amazon, Coca-Cola, UPS, Home Depot, Bank of America, Bristol Myers Squibb, Cisco, Citi, Delta, Edward Jones, Elevance Health (former Anthem), Edward Jones, Pfizer, Bristol Myers Squibb, GM, GE, Intercontinental Exchange, Verizon, Paypal, Prudential, Target, Guardian Life, and Home Depot—have made significant environmental and social commitments. And the executives on the call have been charged with making sure those commitments are fully incorporated into company operations.
Yet the group clearly faces some challenges. Two jumped out:
• While most on the call support regulation to ensure a level playing field, the actual regulations being proposed by the SEC, particularly on climate disclosure, create some serious problems. Chief among them: by saying companies must meet disclosure requirements if they set a target, the SEC is creating a disincentive for companies to set climate targets.
• The acronym ESG—which was coined by a UN group in 2005 and stands for Environmental, Social and Governance criteria—is unclear, unpopular, and increasingly polarizing. It also has been tarnished by its inconsistent and sometimes misleading use in marketing investment funds. There is widespread public support for companies doing what is right by their employees, their customers, the communities they live in, and the planet they inhabit. But that support isn’t clearly evoked by the term ESG. “We need to communicate this in a simpler way, and get rid of all the acronyms,” said one participant.
The conversation reminded me of a speech given by Bank of America CEO Brian Moynihan earlier this summer in Charlotte, N.C.—hardly a hotbed of “wokeness.” During the speech, Moynihan recalled that in his testimony before Congress, one GOP member asked whether he and the six other financial CEOs testifying were “capitalists.”
“Of course, the answer was yes. I couldn’t believe anyone might expect something other than that answer… Capitalism can deliver for customers, it can deliver for shareholders, it can deliver for our team, and it can deliver for society.
“That is what we call at Bank of America delivering on the genius of the ‘and.’ Profits ‘and’ purpose. Shareholder ‘and’ society. That is stakeholder capitalism. That has driven the world’s prosperity and growth. That is what is needed in the future. You can do both—profits and purpose. It isn’t a false choice. It isn’t ESG. It isn’t woke capitalism. It is simply capitalism done right.”
The conversation this week is part of the lead up to an in-person meeting of the Fortune Impact Initiative in Atlanta Nov. 29 & 30, sponsored by our founding partner EVERFI. You can find more information on the initiative here.
Other news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
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Italian chaos
The Italian Prime Minister Mario Draghi has quit, setting the stage for a fall election and a whole lot of chaos before then. The former ECB chief had called a vote of no confidence, in which his right (Forza Italia) and far-right (League) coalition partners turned on him. They’re expected to win the coming election and go into coalition with the post-fascist Brothers of Italy. Politico
Russian gas
The Nord Stream 1 natural-gas pipeline between Russia and Germany is operational again, following scheduled maintenance. There had been serious fears that Russia may keep the taps turned off—an event that would have had catastrophic consequences for the economy in Germany and beyond. The pipeline is still operating well below capacity, though. Wall Street Journal
HSBC communism
In a first for the industry, HSBC has installed a Chinese Communist Party committee in its Chinese investment banking subsidiary. Foreign banks are supposed to include CCP committees, but the rule hasn’t been widely enforced. Now HSBC has effectively put pressure on its peers to follow suit. Financial Times
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