- A number of conservative lawmakers have voiced their disapproval of ESG investment.
- Insider identified key players like Andy Barr of Kentucky and Louisiana’s treasurer.
- Investors and regulators are examining Wall Street’s massive sustainability efforts.
Republican officials are becoming increasingly vocal in their attacks against investing with governance, environmental, and social considerations. This is putting more scrutiny on ESG-labeled funds. Wall Street’s huge sustainability operations are already facing a serious challengeInvestors and regulators.
The criticisms of politicians such as Sen. Tom Cotton, Arkansas, and John Schroder (the treasurer of Louisiana), are becoming more pointed.
It remains to be seen what the lasting effects of anti-ESG legislation, and political rhetoric will be as politicians try to improve their profile ahead of the US midterm election.
They also present a challenge for ESG investors, big US banks, and asset managers. ESG products and ESG teams heavily fundedThis could change the way ESG is perceived and embraced in the long-term. In May, $2 billion was withdrawn by investors from US equity-traded funds after the collapse of wider markets. Bloomberg Intelligence dataThe first month of outflows in three-years.
Morgan Stanley equity analysts stated that “we believe many of these policies and proposals that ‘push back on ESG’ may impact sentiment more that long-term AUM Growth,” adding that states with such policies and proposals account for around 30% of the total assets of US public pension funds.
These treasurers, governors, state legislators have sway over various aspects of the ESG ecosystem. This includes writing policy and selecting funds for state investment. Their online platforms are also used by them to attract followers. Sen. Cotton tweeted on June 21 that he wanted Congress and the Department of Justice to crack down on ESG investing. Then, the next day, he tweeted: “The next Congress will act to end this fraud.”
ESG standard-bearers like S&P Global and BlackRock, the world’s largest money manager and an influential proponentESG investing is possible Often, they are the subject of their criticisms. These corporations sell ESG-linked products in order to make money and to appeal to investors who wish to see their values reflected within their portfolios. They often view large financial institutions’ ESG strategies instead of being left-leaning agendas.
This push, which includes parts Coordinated actions between states, also reflects a wider shift of Republicans challenging corporate America — a departure from years past, when the party was often aligned with interests of big business.
Republicans will be focusing on anti-ESG issues as they prepare for the midterms. within the larger context of wider culture warsKodiak Hill Davis, vice president of government affairs at the Niskanen Center, and cofounder of Republican Women for Progress, stated that this was a way for Democrats to criticize government overreach and gain support for Republicans.
BlackRock spokesperson Insider in an older statement“We are a fiduciary for our clients, helping them to navigate investment risks and options so that they can achieve their long-term financial objectives, not engineering decarbonization outcomes in real economic terms.”
These are the key GOP players that are aiming at ESG investing.
John Schroder, Louisiana Treasurer
Schroder, who will take over as the chair of State Financial Officers Foundation (a group of conservative state finance officers), announced Oct. 5 that the state’s investments of $794 millions with BlackRock would be liquidated.
In a Let me knowLarry Fink, BlackRock Chief Executive Officer, said that he had divested $560million to date and would complete his divestment before year-end. He takes issue with the firm’s commitment to supporting a goal of net-zero greenhouse gas emissions by 2050 or sooner.
Fink wrote that he was disgusted by his anti-fossil fuel policy. Chevron’s asset manager is still among the largest institutional shareholders of Marathon Petroleum, Chevron, Chevron, and BP.
Schroder wrote, “I fully understand, as your representatives pointed out during our recent meeting that BlackRock currently invests oil and gas companies.” “However, your consistent public messages have made it clear to me what BlackRock demands from CEOs of fossil-fuel companies and all other companies they invest in.”
Allison Ball, Kentucky Treasurer
On June 29, Ball sent a letter with other Kentucky officials to S&P Global’s ratings business to object to the company incorporating ESG factors when determining states’ credit ratings. It also objected the company’s assessment of her State.
According to the company’s website, ESG considerations play a significant role in credit rating assessment since before ESG was a common term. Ball, now in her second term of state treasurer opposes ESG use in credit indicators.
The letter stated that it created a “dangerous framework for state borrowing mechanisms,” whereby state creditworthiness would fluctuate wildly based upon ever-changing political tides. Ball stated that she agrees with her Utah “friends”, who have similar concerns. She was referring to a memo Gov. Spencer Cox sent to S&P in April.
A spokesperson for S&P Global Ratings referred Insider to the firm’s most recent credit report of Kentucky, from February, which affirms its A credit rating with a positive outlook and its ESG assessment of E-2, S-3, and G-2. S&P uses a scale of 1 to 5, with 1 denoting the most positive rating in that category.
Riley Moore, West Virginia Treasurer
Moore is a vocal opponent to ESG investing. He declared that asset managers and banks could be relegated to the sidelines if they don’t work with the energy sector. Moore’s office published an article on July 28. ListeCompanies that are not subject to certain policies regarding fossil fuels were exempted from contracts with the State, such as Morgan Stanley and Goldman Sachs.
He has been focusing his efforts on BlackRock and its commitments to encouraging companies to transition into an economy with net zero greenhouse gas emissions,Moore claims that such a move punishes states like Moore’s. BlackRock Funds manages funds on behalf of clients and is a significant shareholder of fossil fuel companies.
According to the US Energy Information Administration (US Energy Information Administration), West Virginia is America’s fifth-largest energy producer. The state produces about 5% percent of the country’s total energy.
Moore’s concerns prompted the Board of Treasury Investments to stop using BlackRock funds in January. West Virginia had only $21.8 million invested with BlackRock at that time. Moore stated that since then, the state has used Dreyfus’s fund. This is a unit from BNY Mellon. A spokesperson from BlackRock declined comment.
Rep. Dan Crenshaw from Texas
Rep. Crenshaw is a Texas native whose dad worked in Texas’ oil and gas industry. He was elected to Congress in 2018. He serves on several committees that directly affect environmental policy, such as the House Energy and Commerce Committee and House Select Committee for the Climate Crisis.
In April’s episode of his podcast, Senator Crenshaw stated that ESG factors “threatening to destroy America’s energy industry, including natural gas industry which is the latest target for ESG and radical activist investor.”
Arkansas Sen. Tom Cotton
Senator Cotton sits on several committees, including the US Senate Committee on the Judiciary. He recently spoke out on Twitter to voice his concern about corporate ESG.
Tom Brenner/Pool via Reuters
He said to his 325,000 followers on June 21: “Let’s label the ESG movement as illegal corporate collusion in order to implement leftist policy.” Then he added another tweet the following day: “The next Congress is going to take action to stop this scam.”
It is not clear what is illegal about ESG investing or what plans Sen. Cotton has. Spokespeople for Senator Cotton did not respond to a request seeking comment.
Curtis Loftis is South Carolina Treasurer
He emailed JPMorgan management last September and warned them to “stay out of political culture warfares and particularly abstain form the petty and ‘woke’ cancel cultures.” According to a New York Times Report May.
Loftis, currently serving his third term in office, sent a letter to SEC in June opposing the climate disclosure rule. Loftis views the SEC’s disclosures as excessive.
Loftis released a statement saying that “this is another flagrant attempt from the Biden Administration to take power away the states by circumventing democratic process and legislating via SEC regulations.”
Rep. John Rose of Tennessee
Rep. Rose, currently serving his second term in Congress, is a member on the US House Committee on Financial Services and wrote a May letter to the SEC expressing concern about the commission’s climate disclosure rules.
According to the letter, “To do business in public companies, small farmers would have to disclose a substantial amount of climate-related info.” Small farms don’t have full-scale compliance departments, which is a big difference from large corporations.
According to a report, Rep. Rose indicated last month that he believes Republican lawmakers will attempt to repeal the SEC’s rules in the event that the party wins control of Congress this fall. Report from the Hill.
Rep. Andy Barr from Kentucky
Rep. Barr presented a March bill called the Ensuring Sound Guidance Act. It requires fund managers to prioritise financial return over all other factors when acting for their clients as fiduciaries.
Barr, who is a member of the US House Committee on Financial Services introduced the bill together with Rick Allen, a Republican from Georgia. Rep. Allen serves on the Health, Employment, Labor and Pensions Subcommittee.
The ESG Act was created to protect investors against losing their returns due to politically motivated asset managers who place more emphasis on environmental and social goals than returns.
Rep. Barr said the ESG movement is a “threat” to America that is “undermining American competitiveness, according to an Axios report last month.
Sen. Dan Sullivan of Alaska
Senator Sullivan is a member of the US Senate Committee on Environment and Public Works. He introduced a bill to curb the power of large asset manager BlackRock in May. His proposed legislation is linked to the firms’ commitments towards ESG. Sen. Sullivan spoke on CNBCMai
Sen. Sullivan, along with his cosponsors including Republican senators. Marco Rubio and Rick Scott, both from Florida, would like to see power shift away form big money managers through proxy votes and instead towards investors in those funds.
He stated that this would “democratize corporate governance” and eliminate large amounts of influence these firms have at shareholder meetings, often to push for political agendas.
Since last October, BlackRock A program was established and expanded.It was intended to make proxy voting more accessible to large investors such as endowments and pension funds.
Gov. Greg Abbott of Texas
Last year, Governor. Abbott signed a bill into law that prohibits Texas from doing business or investing with companies that have severed ties to the energy sector.
Marco Bello/Reuters
According to an NPR report from April, Rep. Phil King, Texas, stated that the bill “sent a strong message both to Washington and Wall Street that Texas would boycott you if Texas boycotts Texas energy.”
Abbott, who is running for reelection in November was quick to condemn ESG investing. It was One of the first state laws to do so. A spokesperson for the NPR: State’s Comptroller’s OfficeIn April, it was said that enforcement of the law had been “difficult”.
NPR spokesperson said that “The simple truth of the matter is that the creation and maintenance of this list would not be a problem if these companies were transparent, open, and honest about their positions on the fossil fuel sector.”
Senator Mike Crapo of Idaho
Senator Crapo, who is a member the US Senate Committee on Banking, Housing, and Urban Affairs, expressed concern about ESG frameworks.
Last month, Sen. Crapo Hosted a discussionJulie Ellsworth, Idaho Treasurer, spoke about ESG investing. Vivek Ramaswamy was also present. Vivek is a well-known anti-ESG pundit and is widely followed on Twitter. Sen. Crapo stated that he does not support rating agencies using ESG scores to evaluate credit ratings of states.
“The use and acceptance of these criteria may appear innocuous at first glance. However, many standards can be subjective and grant corporations and regulators undue influence on public policies,” Sen. Crapo stated.
This story was published for the first time on July 7, 2022. It was then updated on October 6, 2022 in response to the announcement by the Louisiana treasurer that he would liquidate all state investments with BlackRock by the year’s end.
