Reflections on the Aspen Institute ESG Summit 2024 Day -1

After a year in which the logic for incorporating financially material information about environmental, social and governance factors into investment or corporate strategy became, depending upon the source, woke or toxic, I offer some reflections on the year to come inspired by past events and a short hike nearby to tomorrow's opening of the Aspen Institute's ESG Summit.

Last year the organized counter-movement was evident but its impact yet unclear. Last year, it felt cathartic to hear Tom Petty's Won't Back Down close out the opening day. ?Today, after President Biden has adopted the same theme, last year’s stubborn optimism rings a little less powerfully. What will this year’s summit bring?

As I reached Spiral Point after the gentle switchbacks up the rim trail, I saw the long trail ahead for me tomorrow climbing over 5000 feet up the East Snowmass Trail. Perhaps, despite the progress made in integrating ESG factors, we remain in the early stages of a long game. We have reached the foothills and experienced some false summits and views of the trail ahead but the hard work remains. We must rest well, fill our packs with water and sustenance, stay focused and press on. The journey so far has been but prologue. The easy victories weren’t the true summit of mainstreaming ESG only the first steps from base camp. As I turned back o to the rim trail, I entered my first Grove of Aspen trees. The path led through them with many miles ahead both today, tomorrow and beyond. In this metaphor, the summit attendees should focus the next few days on sharing resources, inspiring each other with tales of their journey so far but preparing for the much longer journey ahead by forging alliances, overcoming past differences and recognizing their common foe.

Not long after, however, the rim trail lived up to its name with steep descents to the left and right And only a precarious knife edge trail following the rim of the canyon. Dead Aspen trees mingled among those still alive forming a warning of the risks of false steps. Here precarity and fragility were felt most powerfully. With prior allies and champions like Larry Fink at BlackRock and Chris James of Engine No. 1 or Paul Polman of 联合利华 leaving the front lines, the defense against the backlash seems more daunting, less manageable, more tenuous. In this metaphor, we need to spend the summit identifying new allies who will take up the fight. Who are the fanatics who believe in the logic of ESG and impact and recognize the threat at hand to all they have accomplished? Who will emerge from the shadows and join those fanatics to buttress the gates and make desperately needed progress towards a climate transition and social justice? Who are the new allies and champions that will emerge to support the movement that suddenly teeters on the edge of disaster?

As the hike progressed, I came upon an odd sign encouraging me to turn right onto an easier more manageable trail rather than left which required expert skills and highlighted the need to respect private property and not infringe upon a private driveway. I chose the harder route and skirted the property line of a palatial private property at 530 Wildcat Way with incredible unobstructed views of Wildcat Reservoir. As I shared the exclusive views of their tennis court from the public side of the property line, two dogs challenged the peace of the late afternoon. They barked and then surged past the fence to nip at my heels and encircle me. A young woman yelled at them to come and go back to their house. A standoff on the rim trail expert route which had once been public but this family and its dogs wanted to itself. No apology ensued (nor, fortunately, blood spilled).

However, from this standoff emerged my storyline for the 2024 Aspen Institute ESG summit. We must challenge the notion that private property is sacrosanct even if it impinges upon and attacks public welfare. Private enterprise can generate enormous benefits. It can lift billions out of poverty but it can do so through creation or destruction. When wealth and value (the home at 530 Wildcat Way has a current valuation exceeding $14 million) is created at the expense of harm to others (e.g., hikers’ views and peace or, more importantly, carbon emissions, water table depletion, worker health, human rights and more) the balance between private property and public welfare must be reevaluated. Firms who profit by harming the natural environment, harming their workers, taking from stakeholders should not be afforded the same rights as firms who create and distribute value that satisfies the needs and, indeed, hopes of their stakeholders. This is the challenge we face and which many on the left and right agree.

We all want to support companies that are good neighbors, that pay a fair and living wage, that don’t defile the air we breathe and water we drink. Tradeoffs between value created and destroyed are inevitable but the tradeoffs must be assessed not shunted aside in the name of property rights. Let’s agree we need to measure these impacts and find the mix of investment strategies,?corporate strategies and public policies that reward those that create more than they destroy. Let’s make the taking of public welfare, the warming of the planet, the disenfranchisement of ethnic, racial or other identity groups more costly. Let’s move beyond simple scores of companies goods and bads to measure their true impacts and then work with the communities in which they operate , the states in which they do business and the nations in which they domicile to reward those that create more they destroy.

Attendees of the ESG Summit and other fanatics who agree with this simple demand, engage. The journey ahead is long, the risks of a misstep today severe and the challenges of the property owners blocking progress along the rim trail and towards measuring and rewarding value creation over value reallocation are evident. What can we do together to ride the ridgeline, summit the pass and continue our journey? I look forward to your inspiring answers to this question and others in the coming days…

• How do other 2023 attendees feel about Tom Petty’s Won’t Back Down this week?

• Which picture and metaphor best captures the state of ESG in July 2024? 1) Over the foothills but many thousands of feet still to climb (or as R. Edward Freeman highlights, the early innings of a long game) thus requiring more collaboration and resource sharing and less competition among members of the movement if we are to reach the summit; 2) On the precipice of a ridgeline between wokeism and toxicity in search of new public faces, defenders and champions; 3) Facing concerted opposition from misconceived notions of the sanctity of private property even if that property created value by taking it from others or imposing negative externalities on others requiring a new way to speak about ESG factors, investments as well as the anti-ESG movement; 4) all of the above?; 5) some other metaphor entirely?
• What is the balance between public policy or regulation and private ordering in maximizing total value? How does it depend on the outcome of the US Presidential election?

• Will ESG be supplanted by another label(s) or persist? What would prevent the anti-ESG movement from attacking the next label that makes progress?

• Who will hold greenwashers and virtue claimers accountable? How?

• Who will replace Larry Fink and Chris James and Paul Polman as the public faces of the movement?

• How to balance the benefits of disclosure regulation and internalization of externalities against the costs of reporting immaterial factors and the misuse of cost equalization for protection, nationalism and nativism?

• Will ESG remain among the top 4 majors at the Wharton School?

• Despite the current greenhushing, will those who invest in the training and champion the cause of total value creation be rewarded in the long-term or will private property rights and short-term returns no matter how earned at whatever cost reign supreme?

Hoping for answers, more questions, shared perspectives and a memorable hike before the opening reception at the Hotel Jerome on day 0 tomorrow.

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