Billionaire Carl Icahn Calls Out Wall Street ESG ‘Hypocrisy’ in McDonald’s Fight

(Bloomberg) -- Billionaire activist investor Carl Icahn said Wall Street’s ESG efforts may be the “biggest hypocrisy of our time” with firms cashing in on the investing strategy without concern for actual societal impacts.

The world’s largest money managers, their bankers and lawyers “seem to be engaged in a cover-up to downplay their ESG-related economic incentives and promote their purported social impact,” Icahn said Thursday in a letter to McDonald’s Corp. shareholders. “Clearly, the ESG status quo on Wall Street needs to change.”

Icahn criticized asset managers for “subjectively selecting” which environmental, social and governance issues are important. If ESG is to be more than marketing and way to raise money, investors must “back up their words with actions,” he said.

ESG has ballooned into an industry embraced by the investing and financial world, with the label now slapped on everything from loans to exchange-traded funds as fund managers and bankers generate hundreds of millions of dollars in fees. The global market adds up to about $40 trillion of assets, according to estimates from Bloomberg Intelligence.

That growth has prompted some current and former sustainability executives and academics to criticize ESG for having limited impact in tackling systemic societal issues. Even the man who led a group that coined the acronym has said the finance industry has “sprinkled ESG fairy dust” on products and that there will be an industry shakeout in the next five years.

Icahn said that while ESG covers a range of issues, it’s both “unacceptable and irresponsible” that large asset managers have put little emphasis on animal welfare in their stewardship and proxy-voting guidelines.

Icahn has proposed adding new directors to the boards of McDonald’s and Kroger Co., saying the companies are mistreating pigs in their supply chains by sticking pregnant sows in tight crates. He told McDonald’s shareholders in his letter that backing his two directors -- including one that runs a sustainable-investment firm -- would send a message to management teams across the U.S. and the world.

“As climate change and other natural resource challenges continue to threaten our world, animal welfare is an increasingly pivotal societal issue,” Icahn said.

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