SUSTAINABLE FINANCE NEWSLETTER-After midterms, Trillium's Kron looks for an ESG resurgence: Ross Kerber

By Ross Kerber

Nov 11 (Reuters) - The opinions expressed in this column are those of the author, a correspondent for Reuters.

Corporate America's public displays of politics see-saw.

After the #MeToo and Black Lives Matter social movements, many US companies embraced social-issues messaging. Then they reversed course under pressure from Republican politicians. Many have been scrubbing their websites of terms like "diversity" and "climate" since President Donald Trump took office for the second time in 2025.

Landslide victories for Democrats in last week's midterm elections shifted the ground again. It is not yet obvious how CEOs will respond. Trump-backed regulators remain in place, poised to punish. On Election Day, officials disclosed that defense contractor Lockheed Martin agreed to pay nearly $30 million to settle claims it discriminated against white workers.

Trillium Asset Management said in a postelection blog post that most companies have "dramatically misjudged the situation" in evaluating the risks of environmental, social and governance (ESG) considerations.

The results show that rather than lying low, companies need to renew their ESG commitments, said Trillium, one of the more influential sustainability-minded investment firms, with $4.6 billion under management. I was curious to hear more so I spoke with Trillium Chief Advocacy Officer Jonas Kron in a video call on Monday.

The following transcript has been edited for length and clarity. You can find a full video of our conversation by clicking here.

Question: Thanks for being here. This is an interesting time to be a corporate activist because we're coming through a whipsawed period for a lot of these companies and CEOs. Could you talk about the pressure they were under and where you see things going now?

Answer: I might even broaden the time horizon back a little bit further, after the global financial crisis, so 2009, 2010, that's really when you started to see companies starting to take a closer look at environmental, social, and governance factors and the relationship between those factors and their financial performance. There was that explosion that occurred starting in 2019 but it was really built on a much more lengthy, robust foundation where the companies anchored their ESG policies to their business case and to their values as a company.

Q: Given all that, why did they all back away so quickly from ESG?

A: When President Trump came in, there were executive orders that really did change things quite dramatically, at least changed the perception. One thing they did not do was, they did not make any of these things illegal. They did not change the law. What they changed was perception, and they created a lot of fear, a lot of uncertainty, and a lot of doubt.

Q: I believe those orders used the phrase "illegal DEI" without defining exactly what it was.

A: Right, and without changing the law. But those EOs really brought the hammer down.

Q: If I'm an executive and I see the president referring to "illegal DEI," even if my lawyers are saying to me, well, technically he's not defining what you've done is illegal, I'm going to get scared and I'm going to pull back.

A: That's where I think it's really important to sort of distinguish between political pressure and genuine investor demand. And I think the companies over-indexed to political pressure and under-indexed for genuine investor demand. The anti-ESG shareholder proposals (get) low votes, like 1%, 2%. I think it tells you a few different things that are useful in this conversation.

The anti-ESG political campaign, what was happening at the state level, what was happening with (unsuccessful Ohio governor candidate Vivek) Ramaswamy, that didn't actually translate into comparable shareholder support. You know, investors had the opportunity to endorse resolutions challenging climate change policies, equity and inclusion policies or other ESG practices in general.

And by vast, vast majorities, 98% chose not to go along with that. ... they rejected them. And I think that really provides a useful market signal to not only to other investors,
but to boards of directors, to management teams. Mainstream institutional investors do not view many of the proposals of those anti-ESG proposals as really advancing shareholder value.

Q; But on the flip side, I don't remember any of the major asset managers speaking up in defense of "let's keep our eyes on climate change, let's stand by the changes to DEI that investors have already pushed through." You and your allies did not have the big money behind you, at least publicly.

A: Right. What we saw, and we still are seeing it, is the asset managers and the companies were trying as hard as they could to just remove themselves from the conversation, to just get out of it completely.

I think the problem with that approach, you know, that, you know, trying to appear neutral, about trying to just be silent and hope that it would just go away, is that I think what we saw on both sides, anti-ESG and pro-ESG, is a real appetite for digging into what the companies are doing on these topics and what they have to stand for. Civil society organizations got interested in that and attorneys general and legislators got interested in that. So the companies can't stay silent. Because if you stay silent, all those other people, all those other organizations, they're going to start defining your company for you. And that's even more dangerous.

Q: Where would you like to see things go from here? We're talking about a week after there was major Democratic landslide in midterm elections. But it leaves the Trump administration in place in another two years. The agencies don't change. So what really changes here?

A: We did see a very strongly worded letter from Senator (Elizabeth) Warren, who is (likely) going to be the chair of the Senate Banking Committee, which is the oversight committee for the SEC basically calling into question, I think, pretty much everything that Chairman Atkins has done over the last two years.

What Trillium was really saying in the blog piece was, let's remember what happened when companies anchored their ESG policies and practices to the business case, to their businesses, and to what the companies stood for in terms of values and mission. And that's, I think, all that we wanted to encourage companies to do is to re-anchor themselves there and not to swing every two years based on politics. The companies need to find their pathway that can keep them solid.

We do look at companies one at a time and try to figure out what's going to make them financially successful. But like all investors, we are widely diversified. And widely diversified investors need to think about a couple of things. The health of the overall US economy, and what is the economy for? It is to serve the people of the United States of America and globally.

Q: Investors are here to get rich.

A: Well, it depends on your timeline horizon. You know, like maybe you're an investor that's operating on a quarterly by quarterly, you know, basis, and you're trying to think of it that way. But, you know, Trillium has been around for over 40 years at this point. Our clients are committed to the long term.

Q: One of the answers of the big asset managers (to political pressure) has been to put forward these shareholder voting frameworks. For the companies, it has the advantage of removing themselves from the conversation. Do you see that as a positive step?

A: What it does is, it makes power more diffuse and it makes the influence more diffuse and less centralized. And so that can cut a couple of different ways.

Q: Is it too early to ask you what shareholder resolutions you've filed or thinking about filing for the 2027 springtime shareholder season?

A: I have a couple that I can share. One is at Microsoft on climate change, and that one will be going to a vote on December 8th. We also have a shareholder proposal at Starbucks, and that one won't be going to a vote until March. That one is focused on their rescission of the Environmental Partner and Community Impact board committee.

Q: Both of those resolutions seem like they could be like good bellwether resolutions about the political environment, right?

A: Yeah.