The political machine behind America’s anti-ESG investment movement

Texas Senator Brian Hughes, who attended a committee hearing in 2021, asked asset managers BlackRock and State Street in December 2022 about their policies on green investing.
Source: Tamir Khalifa/Getty Images News via Getty Images

This article is the first in a two-part series on efforts to combat the growing role of ESG in investment policy.

In mid-December 2022, Texas legislators summoned BlackRock and State Street executives to a remote courthouse 151 miles east of Dallas to discuss their environmental, social and governance investment policies. I answered the question.

The nearly six-hour hearing is part of a closely coordinated campaign against ESG investment standards led by Texas and at least 23 other Republican-led states, conservative think tanks and right-wing groups. bottom.Fossil fuel friendly benefits A history of influencing US energy and social policy drives this effort. According to a document obtained by S&P Global Commodity Insights:

Members of the Texas Senate State Affairs Committee are questioning whether big asset managers BlackRock and State Street are asking public pension funds to exit the fossil fuel industry, a key component of the Texas economy. I want to know.

“If there is no funding for energy projects, they are not complete,” Bryan Hughes, chairman of the committee, said in the conference room. “Energy costs will rise and jobs will disappear.”

Conservatives have combined these economic concerns with Republican dissatisfaction with the Biden administration’s environmental and social policies to fuel an anti-ESG investment campaign over the past year with alarming speed.

“They’ve built a very strong state-based network that gives them direct access to lawmakers,” said Jesse Coleman, a senior research fellow at the watchdog group Documented, in an interview. “It’s really a concerted effort.”

Dozens of recordings shared by Coleman’s group show how the move to eliminate ESG was made. Invest I took off from an investment company.

ESG backlash as part of broader conservative agenda

A Kansas-based nonprofit called the State Financial Officers Foundation has taken a leading role in the state’s campaign against ESG investing with the help of strategic public relations firm CRC Advisors, which was retained in the spring of 2022. I was. Records show that most Republican-led states in the United States participated.

The CRC Advisors are chaired by Leonard Leo, an influential Republican activist and fundraiser and co-chair of the conservative legal non-profit Federalist Society. Leo is focused on the nonprofit trust he founded in 2020 after receiving a $1.6 billion donation to influence U.S. Supreme Court nominations and other conservative priorities. new york times Reported in August 2022.

CRC Advisors has weekly Zoom calls with state treasurers to keep abreast of new ESG developments, according to emails obtained by Documented.

Groups such as the American Petroleum Institute and the American Legislative Trade Council, which lobby the oil and gas industry, have sometimes joined such calls.

“Treasurers, auditors, CFOs, commissioners, auditors, please do all you can to answer this call.” State Treasurer Foundation CEO Derek Kreifels said in a May 2022 email about the SEC’s API briefing on climate risk disclosure rules.

API has also been coordinating directly with states. For example, in March 2022, the head of API’s Ohio division issued a warning to the state attorney’s office. wall street journal Opinions alleging that ESG investing may violate antitrust laws.

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A winter storm in 2021 caused massive power outages and fuel shortages in Texas. Extreme weather poses an increasing risk to investors, according to financial firms that use ESG to screen for climate change and other risks.
Source: Ron Jenkins/Getty Images News via Getty Images

policy makers of National Treasury Officers Foundation Jonathan Williams is also the Chief Economist and Executive Vice President of the American Legislative Exchange Council (ALEC). ALEC has long battled climate and environmental regulations, and has faced high-profile departures from its members as a result. This group is best known for producing many exemplary state laws.

States, interest groups gearing up for 2023 action

Efforts to exclude ESG considerations from investment decisions have been building for over a year.

Former fast food executive and Trump Labor Secretary nominee Andy Puzder will draft a state law from a Florida think tank in fall 2021 to bar asset managers with ESG policies from managing state pension funds. said he was asked to

A large asset manager with shareholder voting powers ESG to advance a left-wing political agenda that violates the firm’s fiduciary duty to act in the best economic interests of public pensioners. It uses policy as a guise. For example, in the oil-rich state of Texas, the reasoning concludes that moving away from fossil fuels is against the economic interests and values ​​of people in the state.

Puzder quickly drafted the text of the bill and the idea took off.

“ALEC and the people of Heritage [Foundation] “The idea was to take a fiduciary duty provision and let states enact it,” Puzder said in an interview.

A few months later, Puzder’s bill became an official ALEC model policy known as the State Employee Retirement Protection Act.

Williams briefing State Treasurer Foundation Members on model policy at the April 2022 conference call. Legislators then worked on the bill over the summer, but “it wasn’t until this year that the state was set to consider it,” Puzder said. “ALEC and the people at Heritage are really pushing this, as are other organizations.”

Arriving in a western state where he was meeting with lawmakers in early January, Williams said his group only wanted to protect the retirement savings of state employees.

“At the state level, the rules are really all over the place,” Williams told Commodity Insights. “An exemplary policy idea is, hopefully, to raise awareness and educate about this issue. Politics-based investments should be stopped and investments should be made with the recipient’s sole beneficiary in mind.” is needed.”

West Virginia Treasurer Riley Moore explained the scope of the campaign in a broader sense. ESG-based investing is “a combination of regulation, anti-competitive cultural and social manipulations aimed at crippling free markets.” moore “If we win the battle for America’s energy, we can end this attack,” he said in a September 2022 speech at the National Conservative Congress in Miami.

‘The market will stop working’

At the same time, anti-ESG investment campaigns were not confined to asset managers and banks.

In April 2022 — shortly after the ALEC model policy was published — Utah Treasurer Marlo Oaks sent a brief letter to S&P Global regarding the state’s ESG credit metrics report card. API was assisting the treasurer with the media headlines the day before, email exchanges show, referring to S&P Global, the parent company of Commodity Insights, a leading provider of ESG data, ratings and analytics.

Oakes alleged that the company may have engaged in conflicts of interest when it published such valuations while participating in the Net Zero Financial Services Providers Alliance. The alliance supports the global goal of net zero greenhouse gas emissions by 2050.

“Markets don’t work properly when politics imposes an agenda and participants behave in one direction,” Oakes said.

A spokesperson for S&P Global Ratings said the company’s ESG credit metrics offer more transparency to investors. The index “reflects our opinion on its impact. [ESG] factors impact our credit rating analysis,” the spokesperson said in a statement.

Shortly after sending the letter, a Utah state treasurer appeared on Tucker Carlson’s Fox News show, saying that ESG policies were also responsible for higher gasoline prices and economy-wide inflation.

“It’s a supply issue,” Oakes said. “ESG people have decided they don’t want to be in the fossil fuel industry, so they are cutting capital.”

In reality, oil and gas companies will report record profits in 2022, leaving cash plentiful as demand recovers dramatically as pandemic restrictions are lifted and war in Ukraine pushes market prices higher. Kevin Roberts, chairman of the Heritage Foundation and critic of the “anti-energy elite,” nevertheless congratulated the treasurer in an interview with Tucker Carlson two days after the show aired. .

“We appreciate how you are achieving your goals at ESG. Keep up the good fight!” said Roberts.

S&P Global Commodity Insights creates content for distribution on S&P Capital IQ Pro.

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