Why the Right Should Embrace Social Investing

Forget 'woke' capitalism. Pay attention to what ESG data reveals about a company's long-term prospects

- By Nicholas Creel

With Republicans now in control of the House, many within their ranks have vowed to use their power to take on ESG (environmental, social and governance) investing, seeing it as a form of activist-driven "woke capitalism" that has no place in an analysis of a company's valuation or in making investment decisions.

However, ESG is far from "woke." In fact, ESG is best seen as a natural outgrowth of conservatism that has been rejected by Republicans out of pure partisanship, not ideological principle.

ESG gets its woke label because this sort of analytical framework also looks at non-explicitly financial data when deciding whether a company is worth investment. Qualities such as environmental and social impact are examined to determine the effect the company has on the world. Internally, this framework also looks at how the company is run, which turns on factors such as how inclusive and diverse it is and the degree of transparency it operates with. Taken together, these elements get evaluated and graded in much the same manner that a company's creditworthiness gets rated based on its assets and liabilities.