Why are Republicans having trouble with ESG?
The Environmental, Social, and Governance Principles acronym is little known outside the investment community, but it’s becoming a hot topic for Republicans heading into the 2024 presidential election.
Republicans say the nation’s top money managers violate their fiduciary duty by pursuing an ideological agenda at the expense of financial gain.
To discourage public pension funds from taking ESG into account when making investment decisions, red states from Texas to West Virginia have raised concerns that they could be financially hurt by doing so. Nevertheless, it has withdrawn billions of dollars from BlackRock and other asset managers.
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They also launched research into the impact of big money managers on everything from reducing emissions to racial justice.
“Those goals may be worthwhile, but they are not goals that are entirely motivated by value maximization, which is not consistent with the view of many Americans who invest in those asset managers,” he said. Woke, Inc.: Inside Corporate America’s Social Justice Scam,” the co-founder of new investment firm Strive Asset Management told USA TODAY.
Big money managers disagree. “We have one prejudice,” BlackRock Managing Director Dahlia Blas said at a hearing last week before the Texas Senate State Committee, stating that “it gives clients the best risk-adjusted returns. for the sake of it,” he said.
What does ESG stand for?
ESG is an abbreviation for Environmental, Social and Governance Principles.
What is ESG investment?
ESG is an investment strategy that considers environmental, social and governance factors in addition to financial analysis.
Asset managers like BlackRock are signatories to the United Nations Principles for Responsible Investment. Environmental, social and governance factors are increasingly being used when making investment decisions.
Who are the key players in ESG?
The top three investment firms are BlackRock, Vanguard and State Street. Together, they manage $22 trillion in assets.
Why are ESG controversial?
For years, BlackRock, America’s largest asset manager, and its CEO, Larry Fink, have championed ESG investment strategies. Today, more and more asset managers are asking companies to calculate environmental and social risks such as climate change and board diversity.
“Businesses need to ask themselves: What role do we play in our communities? How are we managing our environmental impact? Are we working to create a diverse workforce? ’” Fink wrote in his 2018 annual letter to the CEO.
Republican lawmakers across the country say BlackRock and other asset managers use their influence to push for liberal policies and put undue pressure on companies to cut emissions or hire more diverse boards. I am accusing you of wearing it.
Fink denies political motives. “Stakeholder capitalism is not about politics. It’s not a social or ideological agenda. It’s not ‘happening,'” he wrote to his CEO in January. .
It’s not just about political rights. Money managers are embroiled in political conflict.
Democrats and environmentalists criticize BlackRock for not doing enough on the ESG front and maintaining large stakes in fossil fuel companies and gun makers.
Growing ESG backlash against oil and gas
This latest front in the culture wars is intensifying as Republicans prepare to take over the House. is regarded.
The Securities and Exchange Commission is proposing to require companies to disclose the risks climate change poses to their businesses when filing regulatory statements.
A company’s environmental efforts often include reducing its carbon footprint and moving away from fossil fuels. Investors are now considering these initiatives when deciding which companies to invest in, and the trend is gaining momentum.
What is your relationship with ExxonMobil?
In 2021, Big Money Manager endorses activist investor Engine No. 1 for a seat on ExxonMobil’s board of directors. This is part of Proxy’s campaign to make the oil giants better prepared for the financial realities of climate change.
Exxon’s vote showed Republicans just how much influence the top three asset managers – BlackRock, Vanguard and State Street – have over public companies.
In his energy policy speech in Houston in May, former Vice President Mike Pence criticized setting “leftist” goals over the interests of companies and their employees.
Bills and Boycotts: How the GOP Addresses ESG
A group of 19 state attorneys general is investigating the role of banks in a coalition to reduce greenhouse gas emissions. They say banks are backing companies that follow an “awakened climate agenda.”
Republicans are pushing bills in many states to boycott companies that embrace sustainability. And House Republicans say he plans to look into ESG in a congressional hearing next year.
Florida and DeSantis lead the fight against ESG
The leader of the anti-ESG movement is Florida Governor Ron DeSantis, a likely 2024 Republican presidential candidate, who has earned political points by waging a battle against the corporate “awakening.” From laws restricting how private employers offer diversity training to feuds with Walt Disney over their opposition to state laws banning classroom discussions about gender identity and sexual orientation.
The “awakening,” once a call for systemic racism and injustice, is being used by conservatives to denounce “political correctness” and progressive issues.
Earlier this month, Florida withdrew $2 billion worth of state assets managed by BlackRock.
Florida is considering sweeping the law next year and withdrawing more state money from BlackRock, state chief financial officer Jimmy Patronis and state representative Bob Rommel said last week. told Bloomberg.
Is Republican Pressure Working?
Money manager Vanguard recently withdrew from an investment industry initiative on climate change. The Net Zero Asset Manager Coalition consists of companies committed to portfolios that achieve net zero emissions by 2050.
A Republican white paper on the Senate Committee on Banking, Housing, and Urban Affairs raised questions about BlackRock, Vanguard, and State Street’s involvement in the coalition.
“Climate change and the ongoing global response have far-reaching economic implications for businesses, financial markets and investors, and present a clear example of significant and multifaceted financial risks,” Vanguard said in a statement.
Vanguard said it was withdrawing from the coalition to “make it clear that Vanguard has an independent voice on issues that matter to investors.”
At a public hearing on ESG practices held in Texas last week, financial executives were waived from questioning. Blackrock and State Street were not.
What do voters think about ESG?
So far, ESG has not resonated with voters on either side, for a variety of reasons, according to research by Penn State University’s Center for Sustainability Business and telecom firm ROKK Solutions.
About 63% of voters surveyed said the government should not put limits on ESG investing, with Democrats saying ESG investing is a social good and Republicans saying it would hinder the free market. I said yes.
“Our survey found that neither Republican nor Democratic voters support potential legislative efforts by policymakers to curb ESG initiatives,” the researchers found. “The consensus of polled voters was that companies should be able to exercise discretion to invest in ESG initiatives that benefit society without government interference.”