The ESG Backlash

Episode Summary

Executive Summary: Bloomberg’s Trillions hosts interview Vivek Ramaswamy and Anson Frericks about launching Strive, an ETF firm designed to counter ESG by voting shares for “excellence capitalism.” They argue large asset managers like BlackRock, Vanguard, and State Street use client capital to push political agendas, creating a fiduciary breach and deepening mistrust, while Strive aims to prioritize customers, profits, and shareholder voice.

Main Topics: Strive’s anti-ESG investment mission (Priority: 5/5): Ramaswamy and Frericks explain Strive as an asset manager built to oppose ESG activism by changing how shares are voted and advocating for corporate focus on product and service excellence. Fiduciary duty and client voice (Priority: 5/5): The guests argue that large asset managers are violating fiduciary duty by using everyday investors’ money to advance policies many clients reject, and that end-investors’ views should be represented in boardrooms. Excellence capitalism vs stakeholder capitalism (Priority: 5/5): Ramaswamy frames Strive’s philosophy as “excellence capitalism,” where the customer is the primary stakeholder and companies should focus on mission and product quality rather than political or social agendas. Critique of ESG hypocrisy and double standards (Priority: 4/5): They contend ESG standards shift constantly and are applied inconsistently, especially pointing to claims that firms pressure U.S. energy companies while still profiting from or owning stakes in fossil fuel operations elsewhere, including China. Power concentration among major asset managers (Priority: 4/5): The discussion highlights how BlackRock, Vanguard, and State Street control significant voting influence despite owning relatively small direct stakes, raising antitrust and governance concerns. Market competition and ETF strategy (Priority: 4/5): Strive plans to launch replica ETFs that compete on voting philosophy as much as fees or holdings, potentially making proxy voting a differentiator in fund selection. Apathy, democratization, and shareholder participation (Priority: 3/5): The hosts and guests debate whether investors actually care about voting policies, whether polling shareholders would help, and whether broader democratization of voting is practical.

Key Arguments: ESG has become a battleground for culture-war politics, and investors may be buying political preferences they did not intend to buy. BlackRock, Vanguard, and State Street allegedly use client money to advocate for boardroom policies that many clients disapprove of, which Ramaswamy calls a fiduciary breach. Concentrated voting power in a few asset managers can resemble antitrust-like behavior because it effectively coordinates competitors without open market debate. Strive’s answer is not anti-profit but pro-customer: companies should be excellent at their core mission, whether oil, solar, or entertainment. Stakeholder capitalism is criticized as vague because it leaves asset managers or CEOs to decide which stakeholders matter most, often without public accountability. The end-user client, not just the intermediary pension fund or advisor, should be the real beneficiary of voting and advocacy rights. Voting matters beyond formal proxy ballots because much of ESG influence happens through “engagement” and soft influence rather than shareholder resolutions. Strive believes there is strong latent demand from ordinary Americans who do not want their money used to push political or social causes they oppose.

Data Points: Ownership concentration: 7% - The hosts note BlackRock and Vanguard together have about 7% ownership/voting power across the stock market. Larry Fink’s direct ownership: 0.001% - Ramaswamy cites Elon Musk’s point that Larry Fink may directly own only a tiny fraction while exercising major voting influence. ESG fund performance tilt: Overweight tech / underweight oil - Eric Balchunas says this year’s ESG funds are seen as overweight tech and underweight oil, contributing to underperformance. Customer opposition at Disney: Over 60% - Ramaswamy says survey data suggests over 60% of Disney customers were alienated by its recent political stances. Seed financing: Over $20 million - Strive says it began with a seed round of more than $20 million. Launch timing: Third quarter of the year - Strive says its first ETFs are expected to launch in the third quarter. Podcast product length: 15 minutes - Mentioned in the Bloomberg Daybreak sponsorship promo at the start. ETF voting fee example: 5 basis points - The hosts compare Strive conceptually to Engine No. 1’s Vote product, described as a low-cost ETF at 5 bps. ESG definition example: Nine weeks - Ramaswamy says weapons manufacturers went from not counting as ESG to counting as ESG within about nine weeks.

Pivotal Quotes: "That is a fiduciary breach." — Vivek Ramaswamy: He describes large asset managers using client capital to advocate for policies clients reject. "We stand for this movement that we call excellence capitalism as a counterpart to stakeholder capitalism." — Vivek Ramaswamy: He defines Strive’s core philosophy and differentiates it from ESG-oriented investing. "You don't mess with their money." — Vivek Ramaswamy: He argues ordinary Americans will rebel once they realize their assets are being used for political advocacy.

Implications: Strive’s launch signals that ETF competition may increasingly hinge on proxy-voting ideology, not just fees. If it gains traction, asset managers may face pressure to prove they represent clients’ views more transparently and may need to rethink ESG advocacy.