The results of this week’s midterm elections send a clear and important message to the C-suites and boardrooms of U.S. corporations: the hard swing against smart ESG policies such as reducing climate-changing emissions or creating inclusive workplaces was woefully misplaced. In fact, I would go as far as to say these results show that most companies dramatically misjudged the situation.
Consider where these wins came from. Democrats decisively picked up Senate seats in Kansas, South Carolina, Iowa, and Texas, places that were supposed to be the heartland of the anti-ESG movement. In fact, one of the biggest anti-ESG voices, Vivek Ramaswamy, lost his bid for Ohio Governor by almost 6 points. Similarly, in Texas, Governor Greg Abbott, who had signed into law one of the first anti-ESG measures and in recent years sought to lure major companies away from Delaware by allowing them to prohibit shareholder proposals and adopt other pro-management measures, lost by almost 7 points. If anti-ESG standard bearers lost the races for governor in Ohio and in Texas, the anti-ESG argument was never as compelling or powerful as many in corporate America assumed it was.
So, it’s time for companies to re-anchor themselves to the strong business case for ESG and to their own values of social responsibility and sustainability. That means restaffing ESG teams and reinstating ESG policies, practices and disclosures. It also means resisting the SEC’s efforts to silence shareholders and taking action to support our democracy.
Now, I know many companies will have a different first reaction. It will go something like this: “We swung too hard on climate and diversity in the late 2010s and early 2020s. Then we swung too hard the other way from 2023 to 2026. We’re done swinging. We’re going to keep as low a profile as possible.”
But that, again, misjudges the situation.
A company that ties its policies to whoever holds power will keep reversing course every two to four years. The only way to stop swinging is to tie your policies to something that holds steady: your own business and your own values. Most of your original ESG policies were not a response to politics. You adopted them because they made business sense and fit the company’s values. Re-anchor yourself there.
And there is no lying low. Employees, customers, activists on both sides, state attorneys general and plaintiffs’ lawyers have already developed a taste for scrutinizing corporate ESG policies. If you don’t define your position and anchor it to your business case and values, everyone else will define it for you.
Some will say the legal risk is too great. That risk is real and deserves attention. But the answer to legal risk is not silence. The answer is found in policies that are carefully designed, clearly tied to business outcomes, and well documented. A company that can explain why a policy serves its business is in a far stronger position than one that quietly dropped its commitments and can no longer say what it stands for.
And remember who owns these companies. Average support for anti-ESG shareholder proposals has stayed below 2%. Investors never asked for the anti-ESG overcorrection.
Finally, it’s important to remember that divided government, like the one we will have starting in January, has historically been viewed as constructive for markets. With power shared across parties, sweeping policy changes can become less likely, giving companies and investors greater predictability about the rules of the road. That stability can support business planning, investment and confidence, while requiring elected officials to seek broader agreement on major economic questions. Although divided government is no guarantee of healthy markets or economic prosperity, it can provide the institutional balance and policy restraint that markets often value.
As we head into the 2027 proxy season, we and other long-term investors will be asking companies a simple question: What do you stand for, and why? The companies that can answer it, grounded in their business and their values, will be the ones that finally stop swinging.
