Impact Cords: This Week's Moves (No. 6) February 15, 2025
The sustainable finance landscape is experiencing seismic shifts as political, regulatory, and market forces collide. This week brought landmark developments that signal both challenges and opportunities for ESG and impact investing. From regulatory reversals to innovative community investment models, the events of the past few days offer crucial insights into the evolving nature of sustainable finance and its resilience in the face of mounting pressures.
The Great ESG Pushback: Numbers Tell a Different Story
While the political winds may be blowing against ESG, the data tells an fascinating story. According to a new Equilar study published in the Harvard Law School Forum on Corporate Governance, anti-ESG shareholder proposals have indeed surged – reaching 92 filings in just the first half of 2024, compared to a mere nine in all of 2020. But here's the kicker: these proposals are consistently failing to gain traction, with median support never rising above 5% since 2020. It seems the bark of the anti-ESG movement may be louder than its bite.
Climate Disclosure: The SEC's About-Face
In a move that sent tremors through sustainable finance circles, Security Exchange Commission Acting Chairman Mark Uyeda announced in an official statement that the agency is reconsidering its climate disclosure rules. The rules, which would have required companies to report on climate risks and greenhouse gas emissions, are now in limbo as the SEC "deliberates next steps." Meanwhile, ISS | Institutional Shareholder Services, the influential proxy advisor, announced in a public statement that it's halting consideration of board diversity in its voting recommendations. It's like watching dominoes fall, if the dominoes were carefully crafted ESG policies.
The Rise of "Patriotic" Investing
In perhaps the week's most eyebrow-raising development, Trump Media & Technology Group announced plans to launch "patriotic economy" ETFs, as reported by The New York Times' DealBook. These funds aim to provide alternatives to what they call "woke funds," potentially including energy companies hoping to drill on federal land and U.S.-only manufacturers. It's a bold move that raises interesting questions about the intersection of politics and investing – and potential conflicts of interest, given the regulatory oversight involved.
Community Investment Bright Spots
But it's not all storm clouds. In Portland, Oregon, a remarkable experiment in community ownership is showing promising results, as reported by ImpactAlpha. The Plaza 122 project has enabled 350 lower-middle-class residents to invest in and benefit from local real estate appreciation, with investments as low as $10 per month. So far, more than 120 families have cashed out stakes totaling $310,000, proving that innovative impact investing models can create tangible community benefits.
Global Picture: A Tale of Two Approaches
As the U.S. grapples with its ESG identity crisis, other nations are charting their own courses. According to Bloomberg Green, the UK stands alone among major economies in submitting an updated climate plan aligned with the Paris Agreement's 1.5°C goal. Meanwhile, New Zealand has begun rolling back climate policies, potentially previewing what broader global climate policy might look like in a shifting political landscape.
Sustainable Fashion Gets a Digital Boost
In a bright spot for circular economy advocates, sustainable fashion tech is attracting serious investor attention. Archive, a San Francisco-based platform helping retail brands manage secondhand sales, just secured $30 million in Series B funding, as reported by ImpactAlpha. The company's software helps major brands like New Balance, Dr. Martens plc, and The North Face implement trade-ins and returns strategies for the growing secondhand market. With the used apparel market expected to add approximately $120 billion in the next three years, it's a timely investment in sustainability that also makes business sense.
Looking Ahead
The developments of this week underscore a critical juncture for ESG and impact investing. While political and regulatory headwinds present immediate challenges, the underlying momentum of sustainable finance shows remarkable resilience. The continued growth of community investment models, the evolution of sustainable fashion technologies, and the persistence of climate-aligned planning among major economies suggest that the foundations of ESG remain robust. The key question facing the sustainable finance community is not whether ESG will endure, but how it will evolve to meet current challenges.
About the Cordes Foundation
The Cordes Foundation was founded in 2006 by Ron Cordes and Marty Cordes. Following the sale of Ron’s investment management business, the couple blended Ron’s experience in financial services with Marty’s work on issues that affect women and girls to create a family foundation focused on social entrepreneurship, impact investing and the economic advancement of women. In 2014, when they were joined by their daughter, Steph Stephenson, and son-in-law, Eric Stephenson, CAIA, CFP®, the Foundation expanded its strategic focus to include ethical fashion brands, sustainable supply chains and engaging millennials in impact investing. Its mission is to connect social entrepreneurs with the resources they need, convene events to strengthen the ecosystems of impact investing and social entrepreneurship and catalyze 100% of its balance sheet for impact.