Antitrust, ESG, and the “Little Green Shoots” of Capitalism

February 6, 2024

The Anglo-American business law firm Norton Rose Fulbright released an international survey of 200 senior executives that portrays the 2024 deal-making environment in hopeful terms, portraying it as having “green shoots of optimism amid uncertainty.”

Producing green shoots of optimism is, of course, what capitalism excels at. Uncertainty is what history excels at. War and the rumor of war, inflation, and market turbulence are to be expected. Policies, on the other hand, can be self-inflicted wounds. The survey identifies two concerns for M&A activity posed by the U.S., UK, and EU in the form of ESG and antitrust policies.

Environmental, social, and corporate governance (ESG) regulation imposes a risk premium on deals today that did not exist a generation ago. Twenty-five percent of executive respondents included ESG-regulation as among the top two factors most likely to suppress deal activity in 2024. Almost three-quarters expect ESG scrutiny to increase, forcing companies into elaborate contortions and data gathering to prove to a jury of NGOs, proxy advisors, asset management firms and various greeniks that they don’t deserve to be slaughtered like the capitalist swine that they are.

The reign of progressive antitrust policies in the United States and EU, spreading to Japan and other parts of East Asia, is combining with intrusive ESG standards to impede M&A activity. Indeed, some commentators posted on the law firm’s website see ESG as a way to impose more social responsibility on corporations that have supposedly been free for decades of serious antitrust scrutiny. No post on this website questions if the governments of the world, all of which maintain a monopoly of violence, might be using antitrust in irrational ways that harm consumers and make all private institutions beholden to politicians. ESG adds to this effort by giving activists unlimited ammunition to find an infraction and demonize a company for investigation.

To be fair, the survey finds that more than one-half of the executives polled expected the M&A market to grow in 2024. Executives also expressed a significant increase in their appetites for a deal.

That’s what little green shoots do until they are cut down.