ESG Backlash in the United States—Investor Concerns or “Red Scare”?

The United States lags far behind its counterparts regarding regulation on ESG investing. Part of this delay stems from a perceived “ESG backlash,” which has contributed to the SEC’s reluctance to require industry to disclose ESG practices. The regulatory landscape has now shifted, with the SEC proposing two ESG-centric rules—the ESG Fund Disclosure Rule and the ESG Names Rule. Both rules have garnered numerous comments from academics, industry, investors, NGOs, and political actors. But the interest—and backlash—extends beyond public comments. States, investors, and other entities have instituted litigation that challenges ESG and anti-ESG policies alike. Amid this conflict, it is still unclear whether ESG backlash is investor-led or a political tool. To determine the source of the backlash, we analyze the comments for and against both rules. We also examine previous and ongoing ESG litigation to uncover whether these trends foretell litigation against the SEC rules.