As we head towards the end of a tumultuous year for ESG, let’s revisit one of the big headlines for 2024 – the controversial abandonment of DEI programs by Tractor Supply (TSC) and John Deere (even though my initial blog postulated the announcement exclusively made on X could be fake, it wasn’t). Specifically, what durable business impact – as measured by stock price almost 6 months out – did those actions have? At the time of the announcements (June 27 for TSC and July 16 for Deere), reactions from consumers included calls for boycotts and a flood of negative social and mass media reactions.
Almost half a year has passed – what is the market saying now about these unpopular decisions? Perhaps not what you expect. As of the writing of this blog (the morning of November 25), TSC is up over 6% (down from a 52 week high just last month) and Deere is up 20% (a new 52 week high).
Does this trend hold up for companies that rolled back their climate commitments earlier this year? BP, Shell and Amazon eased their climate goals and programs this year in February (a year after a previous rollback), March and May respectively. On November 25, shares in those companies are mixed: BP is -12%; Shell is -6%; and Amazon is +66% (investors seem to expect a home-run holiday buying season).
What does this tell us about stock price and ESG shocks? It is tempting to seek a correlation or causation, but there are too many moving parts in financial markets to isolate these specific actions from that long ago. As with many other company events, investors frequently have short-term memory and quickly return to focusing on operating fundamentals of their investments – revenue, profit, cost management and new product development. Achieving durable value with ESG/sustainability means linking directly to those fundamentals.
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