The Bud Light case for ESG

Let's talk about beer.

If you pay much attention to current events, you can guess the one I have in mind: Bud Light. But this isn’t really going to be about a beverage that purports to be “easy to drink” and “easy to enjoy” as much as it is about ESG.

I often write about environmental, social and governance issues related to investing. Covering this beat has helped me — and hopefully some of you — further understand how ESG factors can affect investment decisions, for better or worse.

It's a frustrating subject to cover. This isn’t because of trends in the use of ESG factors, nor how sustainable investments have performed.

It’s because, in a time during which the idea of truth has become subjective, the definition of ESG seems to be up for debate.

For those who consider such factors in investment decisions, ESG is a source of data that help assess risk and opportunity. But to some, ESG is synonymous with big, shadowy corporations pouring a liberal agenda all over the white-picket-fence-and-apple-pie American way of life. At worst, it’s called an existential threat to democracy.

Of course, ESG has become a victim in the culture wars. It’s a boogeyman that was created in search of a problem, much like the war on “wokeness.” Regarding the latter, I’m unsure of how much opponents are contorting and appropriating a term about recognizing racism and social injustice, or how much they are leaning into it authentically.

FROM FIZZ TO FLAT

To summarize the recent Bud Light advertising failure: The beverage maker made a gesture by giving a very limited sponsorship to trans influencer Dylan Mulvaney, presumably with the goal of showing how inclusive it could be, thus extending its appeal to a younger, more progressive drinker base.

That backfired when some conservatives, including Robert James Ritchie, aka 52-year-old “Kid Rock,” who for whatever reason some people pay attention to, aggressively objected. Ritchie very publicly took a semiautomatic rifle to several cases of Bud Light.

Sales to the brand’s otherwise loyal base started to drop.

Anheuser-Busch inevitably backpedaled, with CEO Brendan Whitworth stating: “We never intended to be part of a discussion that divides people. We are in the business of bringing people together over a beer.”

Because inclusivity, apparently, is divisive.

ESG, GOOD OR BAD

From an ESG perspective, the irony I see in this is that the forces pushing against any sort of progressive social agenda by a beer maker are the same ones railing against the use of ESG factors in investing, i.e., Florida Governor Ron DeSantis.

Because assessing reputational risk — as would be useful for Anheuser-Busch investors in this case — is all about ESG.

Whether you saw financial risk or opportunity in the company’s initial decision to align itself with a trans woman requires consideration of ESG data.

Maybe it could have been an opportunity if Anheuser-Busch stood its ground. The company has marketed to the LGBTQ+ community at least since 1995, and its recent partnership with Mulvaney was not its first ad opportunity featuring a trans person — in 2016 it had a TV ad featuring comedian Ian Harvie.

Amid the current conservative war on “wokeness,” the company caved, seeming to view a firm stance on trans rights by Bud Light as unnecessarily risky. Now, no one is really happy with Anheuser-Busch. And this episode has been extremely unfair to people in the trans community, who already face immense discrimination and acts of violence against them.

FINANCIAL IMPLICATIONS

The company’s stock hasn’t taken a big hit — and it might not. The incident may soon be forgotten in the dizzying news cycle that will give the anti-woke crowd something else to focus on.

But fiduciaries investing other people’s money tend to pay attention to headline risk, or reputation. Going further, campaigns that support or reject inclusivity can be evaluated if you consider ESG data. And it’s hard to argue that such data cannot be financially material.

I’m skeptical of many big companies’ intentions, and Anheuser-Busch is not out to make the world a better place — it wants to sell Bud Light to as many people as it can and make mountains of money.

Generally, I would say the same about companies that have been vilified for their alleged stances on ESG, including BlackRock, State Street and Vanguard.

STATE-LEVEL PROBLEMS

As numerous states have implemented restrictions on using ESG factors for publicly invested assets, some have confused sustainable and socially responsible investing with ESG. Laws or mandates from state leaders have sought to prevent investing practices that their pension funds don’t use in the first place. Yet, these orders are proclaimed as a major victory, as if they prevent asset managers from eagerly burning piles of cash and advancing whatever social agenda they are accused of having. Some pension professionals in red states have spoken out, projecting that anti-ESG measures could ultimately cost them billions of dollars, and that has led to a handful of bills being watered down.

But the wave of restrictions either keeps asset managers from considering ESG data or has a chilling effect on their ability to do so. How does that help the retirement savers whom politicians claim they are trying to protect?