SALT LAKE CITY (AP) — Republicans are pushing back against Wall Street’s increasing consideration of factors such as long-term environmental risks in investment decisions, the latest sign of the party’s willingness to sabotage its ties with big business to gain a cultural battleground.
Many are targeting a concept known as ESG – which stands for Environmental, Social and Governance – a sustainable investing trend sweeping the financial world. Red state officials derided it as politically correct and tried to prevent investors contracting with the state from adopting it at any level.
This is the latest acronym-based outrage for right-wing activists who have previously brought critiques of race theory (CRT), diversity, equity and inclusion (DEI), and social-emotional learning (SEL) to the forefront Sources, they are at rallies, conservative media and the legislature.
ESG has yet to become a mainstream political message, but backlash against it is heating up. Last week, former Vice President Mike Pence attacked the concept in a speech in Houston. On Wednesday, the same day he tweeted that he planned to vote Republican, Elon Musk attacked Tesla after it lost its place in the S&P 500’s ESG index. He called it a “hoax weaponized by fake social justice warriors.”
The concept requires investors to consider criteria such as environmental risk, pay equity or a company’s transparency in accounting practices.With the help of a recent disclosure request and analysis by rating agencies, who have adopted these principles so much that those who use them control $16.6 trillion in investments held in the U.S.
In response, Republicans, historically known for their support for less regulation, have tried in many places to impose new rules on investors. Their efforts reflect how willing party members are to distance themselves from big business to fight back against what they see as ideological enemies.
“I don’t think we are the party of big business anymore. We are the party of the people – more specifically, we are the party of the working people. The problem we have is that the big banks and corporations are now trying to decide how we are going to live our lives. life,” said West Virginia Treasurer Riley Moore.
Opponents criticize ESG as politicized and as a potentially costly departure from purely financial investment principles, while proponents say considering more precise criteria can more accurately explain risk and promise more stable returns.
“We focus on sustainability not because we are environmentalists, but because we are fiduciaries to capitalists and clients,” Larry Fink, chief executive of the investment firm BlackRock and a major backer, wrote in a letter this year. tell customers.
But Moore and others, including Utah Republican state Treasurer Marlow Oakes, argue that favoring green investments over fossil fuels would deprive key industries of access to the financial system and capital. They target S&P Global Ratings, adding ESG scores to their traditional national credit ratings. They worry that if there is no change, their scores could make borrowing more expensive for items such as schools or roads.
in april letterOaks asked S&P to retract its analysis, which rated Utah’s environmental risks as “moderately negative” due to “long-term challenges to water supply, which may remain a constraint on its economy … given the prevailing drought conditions in the western U.S. “
The letter was co-signed by the governor, legislative leaders and a state legislature delegation, including Sen. Mitt Romney, whose former firm Bain Capital said ESG factors are “strategic, fact-based and diligence-oriented”. It said the rating system “attempts to legitimize questionable and unproven behaviour” and attacked the “unreliability and inherent political nature of ESG factors in investment decisions”.
While he likens ESG to critical race theory, Oakes said his biggest concern is capital markets and the attempts by his so-called opponents of fossil fuels to manipulate them by forcing investors to choose companies with high ESG scores.
“DEI, CRT, SEL. It can be hard to keep up with the acronyms,” he wrote in an economics blog last month, “but you need to know a relatively new term: ESG.”
The widespread adoption of carbon-neutral or net-zero standards by investors effectively limits access to capital for oil and gas companies, hurting their returns and potentially sending gas prices soaring, Oaks said.
In a dozen red states, officials have questioned the idea that the ongoing energy transition could make fossil fuel-related investments riskier in the long run. They argue that hiring asset managers with a preference for green investments uses state money to advance an agenda that is out of sync with voters.
In the state capitol, anti-green investment efforts are supported by conservative groups such as the American Legislative Exchange Committee and the Heartland Institute, a think tank skeptical of the scientific consensus on human-caused climate change, that supports Act to strip state funds from the financial sector. Organizations that use ESG or prohibit them from using ESG to rate businesses or individuals.
exist Texas, West Virginia and Kentucky, lawmakers passed bills requiring state funding to limit deals with companies that shun fossil fuels.Wyoming considered Prohibit the use of criteria different from accounting and other financial metrics, such as ESG, to assess a business’s “social credit score”
Legislature passes a law after conservative talk show host Glenn Baker visits the Idaho State Capitol and calls ESG a ‘steroid’ for key racial theories In March, state funds were banned from investing in companies that put ESG commitments above returns.
The U.S. Legislative Exchange Committee recently released a model policy that would subject banks that manage state pensions to new regulations that limit investments driven by what it calls “social, political and ideological” goals.
While the policy was not directly mentioned, the group’s chief economist Jonathan Williams said the mainstreaming of ESG was the driving force in the broader trend of political correctness. He said his research showed that a combination of factors beyond traditional financial metrics could reduce returns on already underfunded state pensions.
Sustainable investing advocates deny the allegations and say considering the risks and realities of climate change amounts to responsible investing.
West Virginia and Arkansas Most recently, BlackRock spun off their pension funds from BlackRock in response to asset managers adding businesses with smaller carbon footprints to their portfolios. Moore, the treasurer of West Virginia, hopes more will follow suit.
For all its enthusiasm, green investing discourse differs from recurring debates about gender and sexuality or how to teach history. Supporters and opponents alike admit they are surprised that pensions, credit ratings and investment decisions have become campaign rallies.
At last month’s convention in Utah, thousands of Republicans roared when Sen. Mike Lee described green investing in terms similar to critical race theory — another based on acronyms Word of foil: “Between CRT, ESG and MSNBC, we got too much BS,” Lee said.
Bryan McGannon, lobbyist at the SIF: Sustainable and Responsible Investment Forum in the US, said opponents were wrong to view sustainable investment trends as political. If states refuse to consider how they might reduce their reliance on fossil fuels in the future and limit the way they consider environmental risks, they are making decisions with incomplete information, he said.
“If a state doesn’t consider these risks, it could be a signal to investors that it might not be a wise government to put our money in,” McGannon said. “Investors use a lot of information, and ESG is part of that.”
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Associated Press writers Stan Choe in New York and Lindsay Whitehurst in Salt Lake City contributed to this report.
