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As ESG awareness and disclosure has been growing in the USA over the past few years, so too has the anti-ESG movement – as detailed by my colleague Kit last year. 

Just last week, Texas announced it had banned Barclays from participating as an underwriter in the state’s municipal bond market for failure to respond to requests for information over its ESG policies. 

Barclays’ participation in the Net-Zero Banking Alliance (NZBA) was viewed as enough evidence for it to be considered a “fossil fuel boycotter” and were banned despite Texas not receiving evidence of policies directly. 

Perhaps the more surprising element, is that within the UK, Barclays is hardly seen as a ‘green’ bank. 

Climate activists targeted their AGM last May and they came under scrutiny last August for a loan to Shell, which they later said is for ‘environmental financing’ purposes. They are also classed as ‘#1 in Europe for fossil fuel financing’ on Bank.Green, a website used by consumers to check their bank’s fossil fuel record. 

Whilst Texas continues to crack down on what they see as ‘woke’ ESG policies, California passed legislation in October 2023 requiring corporates doing business in the state with more than $1 billion in annual revenues to report Scope 1 and 2 emissions beginning in 2026, with Scope 3 disclosure required from 2027. 

This is ahead of the potential SEC Climate disclosure rule which is due to be decided on this spring. Nevertheless, the California legislation coupled with Europe’s Corporate Sustainability Reporting Directive (CSRD) mean that many US companies are already required to report on sustainability issues. 

So how are corporates within the US dealing with this conflicting sentiment? 

A report from the FT on the recent World Economic Forum noted that political backlash has led to hesitation from company execs “particularly if they are in America” in using the acronym “ESG”.

Even so, looking at the ~ 2100 US companies on the Integrum ESG platform, the average ESG score of US companies is 1.87 (max achievable score is 4). Breaking this down even further, the average sustainability score across US companies is 1.79 compared to an average governance score of 1.96. 

This could be a reflection of the wider acceptance of governance, as corporate governance frameworks have been around for longer and the link between strong governance practices and reduced risk is well established. 

Although there is evidence connecting robust ESG performance to increased returns, clearly not everyone has been fully convinced of its advantages so far. 

It is worth noting that last year’s average ESG score for US companies was 1.76. The mixed sentiment and reluctancy in using the “ESG” label therefore do not seem to have slowed improvements in ESG disclosure and performance within the country.

Written by Integrum ESG Head of Research Hannah Bennett.