Anti-woke activism: A turning point for ESG?

The importance of ESG has become almost unquestioned. Issuers, investors and most of the financial markets are convinced of the material importance – and financial reality – of ESG issues for companies. But that has not stopped what has been termed the market’s first anti-woke ETF from gaining significant backing in its first months of operation.

In September, Strive Asset Management’s US Energy ETF – with the ticker symbol ‘DRLL’ – reported it had attracted $315 mn in less than a month even as other anti-woke funds failed to attract nearly as much.

At the time, Vivek Ramaswamy, executive chair of Strive, said it showed everyday people did not agree with asset managers using their cash ‘to advance social and political agendas they do not agree with’. The fund’s success, he added, showed that ‘people are voting with their feet’. 

Though the numbers are relatively small, the US Energy ETF has been backed by PayPal co-founder Peter Thiel and hedge fund manager Bill Ackman. So far, it is largely pegged to the XLE Energy ETF, which in turn tracks the largest US oil firms, with the majority of its holdings split between ExxonMobil, Chevron, ConocoPhillips and EOG Resources.

Strive has also launched another fund that tracks the Solactive GBS United States 500 Index and a US Semiconductor ETF that promises to back only US makers of computer chips, to avoid any problems that might arise from geopolitical issues in Taiwan.

Ingrained in all of them, says Ramaswamy, is a mission to ‘serve clients’ financial interests without regard to social or political objectives’. He has already started writing to firms including Chevron and Disney to lambast them for bowing to pressure from other holders like BlackRock, State Street and Vanguard to adopt climate-friendly measures. 

Meanwhile, lawmakers in Republican-leaning states have claimed asset managers are pushing a political agenda by divesting from fossil fuel firms. Texas officials cite a 2021 law that it said should protect its oil firms from being boycotted by BlackRock or other investors. BlackRock has pushed back on claims it is putting its climate agenda ahead of its clients, sending a letter to attorneys general in 19 states to defend itself. 

This is an extract of the article published in the Winter 2022 issue of IR Magazine. Click here to read the full article.