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The rise of inequality and global warming are the two ultimate challenges of our time. After decades of congressional failure to address climate change, the private sector has stepped in and adopted a set of environmental, social, and governance (ESG) policies as a market-based solution to a public policy failure. Corporate executives are free from the influence of lobbyists fighting to impede climate change efforts. They face different pressures: activists and institutional investors pushing for ESG policies. Corporate executives are now expected to undertake the necessary measures to save our planet. Where Congress failed, ESG will succeed.

This article argues that if ESG-driven climate stewardship achieves the scale necessary to have a real impact on global warming, it will hurt the poor and exacerbate inequality. Curbing global warming is fraught with difficult distributional challenges that corporate ESG measures will neither solve nor circumvent. Interventions to combat climate change are nearly always regressive, with the costs of such policies impacting those with the least, the most. ESG implemented at scale will inevitably replicate the regressive effects of various legislative interventions on which all ESG carbon-reduction strategies are based. But, in contrast with congressional action, ESG solutions will not raise any revenue that could be used to offset ESG regressivity. ESG solutions are attractive in large part because they seem to avoid the contentious politics of redistribution, clearing the way for private sector agents to effect policies that stall in Congress. But as the backlash against ESG vividly demonstrates, opponents will seize every opportunity to remind voters—particularly middle- and low-income voters—of the job losses and increased energy costs that will follow ESG policies aimed at curbing carbon emissions.

The most feasible response to these concerns would be legislation that offsets the regressive impact of ESG. That is, while ESG would protect the planet, Congress would protect the poor. However, as this article will demonstrate, Congress will be unable to address the regressive implications of the varied and opaque ESG policies adopted by thousands of corporations in pursuit of their climate stewardship goals. And furthermore, Congress does not have strong incentives to do so.

We conclude that ESG-driven climate stewardship is a poor solution to global warming because the poor will pay the price. We argue that there is no alternative to legislation in tackling both global warming and economic inequality. But institutional investors may nudge this legislation forward by ensuring that their portfolio companies’ lobbying efforts are aligned with their pledges to protect the environment.

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