Tackling problems such as climate change and economic and racial inequality through the market is, of course, what ESG is all about. But so far its results have been, erm, limited.
Your average millennial or Gen Zer may tell you the best answer is just to blow the whole corrupt system up and start from scratch. But the Coalition for Inclusive Capitalism, a group of business leaders and academics founded by Lady Lynn Forester de Rothschild, believes a better capitalist future is possible.
And this week, the coalition laid out its plan for achieving that future. The key, it says, is treating workers more equitably.
“The wealthy and most powerful in our society, many of whom have seen their wealth grow enormously during the time of Covid-19, must give up some of the privileges they have gained and pay their fair share of the costs of building a sustainable economy based on well-paid jobs,” the group writes in its new Framework for Inclusive Capitalism.
The group makes the case that businesses do better when they treat their workers well. But it does not simply leave it to companies to choose to do the right thing.
One of its key tenets is that companies should not obstruct their workers from unionising (we understand this may seem rudimentary for our readers in the UK and elsewhere. But in the US, where the labour movement has been decimated, it is a big deal). “The historic and hard-earned right of American workers to join a union, which was recognised in the 1930s, [must be] given life in the 21st century,” said Leo Strine, a member of the coalition, a former chief justice of the Delaware supreme court and one of the most influential judges in US corporate law.
Convincing investors that this is the way may be a challenge. Traditional investors, of course, see unions as an impediment to profit maximisation. Amazon is currently fighting hard to stop its employees at a distribution centre in Alabama from unionising. If its workers succeed in organising, we will eat our hat if the company’s stock price rises on the news. But workers’ rights often fall by the wayside for ESG investors as well.
Strine has highlighted this problem in the past, calling for a new “E” (for employees) to be added to the ESG acronym. But he believes some larger fund managers are coming around to the big picture. “You can’t have the centre hold, if the capitalist system is not good to the many who make it work,” he said. “And ultimately for the investment community, if the centre doesn’t hold there are going to be radical changes that affect them as well.”