Virginia governor says ESG transparency has gone too far

The former co-head of the Carlyle Group weighed in on ESG

Virginia Governor Glenn Youngkin, who ran one of the nation’s biggest investment firms before he took office, said ESG investing is under fire because it has morphed from a philosophy for picking stocks into a weapon for penalizing companies that don’t make the cut.

“Is having world-class transparency and governance a good thing? Yes, it’s a really good thing,” Youngkin, a Republican and the former co-head of Carlyle Group Inc, said during a Bloomberg News editorial board meeting on Monday. But the definition of what’s good for the environment, social goals and governance isn’t one-size-fits all, he added.

ESG “means different things to different people. It just does,” Youngkin said. Amid this swirl of criteria, he continued, investment firms are telling companies, “If you don’t do X, then we’re going to penalize you, as opposed to just not invest with you.”

At the end of the day, the economics of returns should justify the investment decisions, Youngkin said.

ESG investing has come under the spotlight in recent months, as Republicans like Florida Governor Ron DeSantis have used it as another front in the culture wars to call out what he calls ‘woke capitalism.’ 

Assailing investment decisions and major finance firms like BlackRock Inc is another legacy of former President Donald Trump’s administration, when he turned on its head the Republican Party’s longstanding and positive relationship with the business community and embraced a more populist stance on a range of issues. 

Like DeSantis, Youngkin is a potential 2024 GOP White House aspirant, although when asked, he said that he was focused on governing in Virginia.

Youngkin’s 2021 gubernatorial victory was considered a sign of optimism among Republicans heading into the 2022 midterm elections. 

Yet that momentum failed to materialize as the party posted a lackluster showing that allowed Democrats to expand their majority in the US Senate. Republicans captured only a narrow majority in the House that has already been marked by public infighting, highlighted by the struggle last week to elect California Republican Kevin McCarthy as speaker. 

Youngkin maintained that traditional Republican tenets, such as free enterprise, lower taxes and public safety remain a winning formula for the party. 

“I do believe that there’s a moment where a majority of voters really agree with so many of our fundamental values as a Republican party and we’ve just got to recognize that we don’t have to ask everybody to agree on everything,” Youngkin said.