Impossible Mission

Ramaswamy launched Strive after his 2021 book Woke, Inc.: Inside Corporate America’s Social Justice Scam, which argued (persuasively) that companies use ESG and social justice concerns as a cynical smokescreen. His (less persuasive) solution: to remove social justice from consumerism and free the market.

To that end, Strive manages nine exchange-traded funds (ETFs) that allow consumers to buy stocks in a range of companies, as well as two mystifying bond ETFs that serve no discernable anti-ESG purpose (the firm maintains that they are part of the broader strategy, though bondholders almost never have voting rights).

Among the portfolios is Strive US Energy ETF, which allows investors to hold energy giants like ExxonMobil and Chevron; its publicity promises “to unlock value in the US energy sector by mandating companies to focus on excellence.” Other ETFs give investors exposure to technology stocks, emerging-market stocks, and the US semiconductor market. In all cases, Strive’s plan is to vote against ESG proposals and engage with management to sway companies to its position.

Yet if the point is to help companies resist the pull of ESG demands, the mission is almost comically hopeless.

The main problem for Strive and other anti-ESG firms is that in the broader market, they are minnows among whales. Strive’s $1 billion in managed assets is impressive for a little-known firm less than a year old, but its capital is dwarfed by BlackRock, Inc.’s $9 trillion, or Vanguard Group, Inc.’s $8 trillion. Both asset managers offer similar ETFs and tend to be the largest investors in most American companies, making any attempts by Strive to vote against them essentially meaningless.

“I don’t necessarily see, at least this year, their voting record meaningfully changing the outcome of any of these things,” said Alyssa Stankiewicz, associate director of sustainability research at Morningstar.

So far, Strive can point to very few wins. On the section of the company website dedicated to highlighting “engagement in action,” Strive notes that it sent letters to Southwest Airlines, McDonald’s, the Walt Disney Company, Apple, and Chevron. With Exxon, the company fared a little better, scoring an actual meeting with the CEO. The only successful outcome of the stern letter-writing campaign was Exxon adding additional board members — an outcome Strive wanted, although the company’s actual influence over the decision is unclear.

“Anti-ESG funds make noise,” Stankiewicz said. “I don’t have concerns at this point about anti-ESG funds significantly denting demand for ESG.”

Money to Be Made

Yet changing the game may be beside the point.

With a large and growing platform within the Republican Party, Ramaswamy’s newfound popularity is a major draw for potential investors and a perfect advertising opportunity. The candidate currently holds fourth place in the Real Clear Politics average of polls for his party’s nomination and has become a regular television guest.

While Ramaswamy officially stepped away from the fund in February to focus on his presidential run, a filing to the Securities and Exchange Commission on September 20 listed Ramaswamy as the majority shareholder with between 50 percent and 75 percent ownership of Strive Asset Management through the parent company Strive Enterprises, Inc.

Strive Enterprises, meanwhile, hasn’t sat idle. In November 2022, the company’s proxy advisory wing, Strive Advisory, LLC, contracted with the Indiana state pension system for a review of its investment policy in a deal capped at $150,000, industry publication Responsible Investor revealed. For ad hoc work from Ramaswamy himself, the state was charged $4,000 an hour.

As Documented and the Lever have reported, Ramaswamy has used his connections through the dark money group State Financial Officers Foundation to pitch Strive portfolios and products to at least twelve state pension funds. And for pension funds looking for anti-ESG options, Strive is the big dog.

“We don’t see any other fund manager that has those kinds of political connections to get them rocketed up to the C-suite level decision makers,” said Coleman.

“For decades, Blackrock, State Street, Vanguard, Invesco, and other large asset managers have educated and discussed the merits of stakeholder capitalism, ESG, and pitched their case for why American capitalism is outdated,” Strive said in a statement. “Strive is educating the same pension funds on why shareholder capitalism outperforms.”

That means that regardless of Ramaswamy’s performance in the race for the Republican nomination, his newfound stature is already paying dividends. At the same time, the push is a boon to a coordinated political strategy worried about money being channeled away from damaging industries.

“Some are looking to leverage many levers of power to keep money flowing into those industries,” said Frances Sawyer, the founder of Pleiades Strategy, which focuses on sustainability. “This is throwing all the spaghetti at the wall to try to thwart a major economic trend.”

Brick Wall of Reality

Strive isn’t alone, either. Of the twenty-four remaining anti-ESG funds tracked by Morningstar (three shut down earlier this year), only six have seen investor outflows this year. The rest have seen combined inflows of over $582 million.

The biggest winner in this rush toward anti-ESG ETFs is Strive, with the firm’s Emerging Markets Ex-China portfolio raking in $149 million and the Strive 500 ETF pulling in about $144 million. The Strive 500 tracks the five hundred largest US stocks, like the S&P 500.

Other winners include several ETFs managed by Inspire Investing, which offers faith-based portfolios. It’s primary offering, the Inspire 100, trades under the BIBL ticker and offers investors exposure to companies like software company ServiceNow, Inc. and oilfield services company Schlumberger NV. Inspire saw total inflows of about $112 million this year, according to Morningstar data.

Then there’s the God Bless America ETF, run by Curran Financial Partners, which brought in $11 million. The fund trades under the YALL ticker and boasts an unsurprisingly high exposure to Tesla stock.

The recent success of anti-ESG funds comes at an inconvenient time for the ESG industry at large as issuers and investors alike grapple with issues of greenwashing and more existential questions of whether it’s even possible to use the financial industry to bring about environmental and social change.

Yet the future is still uncertain for the anti-ESG push. Even Strive, which Ramaswamy explicitly launched as an answer to “woke capital,” has pared down its rhetoric in the face of high demand for ESG products. In a letter to investors reported by Semafor, the company worried that appearing too political could constrain growth.

“Strive is strictly pro shareholder primacy and argues that the current industry debate is incorrectly focused on the broad ESG vs. anti-ESG categorization,” a Strive spokesperson said in emailed comments.

The company’s softer stance may reflect the rush to brand and sell ESG products. US SIF, an industry association, estimated the total sustainable investing market size to be $8.4 billion. Against such odds, even the relative success of anti-ESG funds this year may prove fleeting.

“The huge brick wall of reality is something you can’t ignore,” said Sawyer.