SALT LAKE CITY (AP) — Republicans are teetering against Wall Street’s increased efforts to consider factors such as long-term environmental risks in investment decisions, the latest indication that the Republican Party is willing to damage its relationship with big business to score culture war points.
Many target a concept known as ESG – which stands for Environmental, Social and Governance – a sustainable investment trend sweeping the financial world.. Red state officials scoff at it as politically correct and have woken up and are trying to prevent investors who contract with states from adopting it at any level.
For right-wing activists who previously criticized Critical Race Theory (CRT), Diversity, Equity, and Inclusion (DEI) and Social Emotional Learning (SEL) at the fore, this is the latest acronym-based source of outrage to find a home at rallies, in conservative media and in legislatures .
ESG has not yet taken hold as a major policy message, but the backlash against it is gaining strength. Last week, former Vice President Mike Pence attacked the concept during a speech in Houston. And on Wednesday, the same day he said on Twitter that he intended to vote Republican, Elon Musk attacked him after Tesla lost its spot in the ESG 500. He called it a scam “armed by pseudo-social justice warriors.”
The concept invites investors to consider criteria such as environmental risk, equity in pay, or how transparent companies are in their accounting practices. With the help of recently proposed disclosure requirements and analysis from rating agencies, they have embraced the principles so much that those who use them control $16.6 trillion of investments owned in the United States.
In response, Republicans – historically known to support fewer regulations – are trying in many places to impose new rules on investors. Their efforts reflect the willingness of party members to distance themselves from big business in response to what they see as ideological enemies.
“I don’t think we’re the party of big business anymore. We’re the people’s party — and more specifically, we’re the Labor Party. The problem we have is with banks and big companies now trying to dictate how we live our lives,” said Riley Moore, Treasurer of West Virginia.
Opponents criticize ESG as politicizing and a potentially costly diversion from purely financial investment principles, while advocates say a more nuanced consideration of standards considers risks and promises more stable returns.
“We focus on sustainability not because we are environmentalists, but because we are capitalists and custodians of our customers,” Larry Fink, CEO of investment firm BlackRock and a major proponent, told clients in a letter this year.
But Moore and others, including Utah Republican Treasurer Marlowe Oakes, argue that green investment is favored over fossil fuels, which deprives major industries of access to the financial system and capital. It has targeted S&P Global Ratings to append ESG scores to its traditional country credit ratings. They worry that without changes, their findings could make borrowing for projects like schools or roads more expensive.
in April letterOaks, called for an analysis of the decline in Standard & Poor’s rating Utah as “fairly negative” in terms of environmental risk due to “long-term challenges to water supply, which could remain a constraint on its economy … given the drought conditions prevailing in the western United States.” “
The letter was signed by the governor, legislative leaders and the state’s congressional delegation, including Senator Mitt Romney, who was contacted by his former company Bain Capital ESG factors are “strategic, fact-based and judgment-driven.” It said the rating system “attempts to legitimize questionable and unproven practice” and attacks the “unreliability and inherent political nature of ESG factors in investment decisions.”
Although he likened ESG to critical race theory, Oakes said he was mostly interested in capital markets and what he called attempts by fossil fuel opponents to manipulate them by pressuring 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 there is a relatively new blog that you need to know about: ESG.”
Oakes said that investors who made carbon-neutral or net-zero standards popular were, in effect, limiting access to capital for oil and gas companies, hurting their returns and potentially contributing to higher gas prices.
In more than a dozen red states, officials question the idea that the ongoing energy transition may make fossil-fuel investments more risky in the long run. They argue that hiring asset managers with a preference for green investments uses state money for more asynchronous agendas with voters.
In the role of the state, anti-green investment efforts are backed by conservative groups such as the American Legislative Exchange Council and the Heartland Institute, a think-tank that questions the scientific consensus on human-caused climate change and that has supported bills to either strip state funds of cash. Organizations that use or prohibit ESG from using it to register companies or individuals.
at TexasAnd West Virginia And Kentucky, lawmakers passed bills requiring state funds that limit transactions with companies that avoid fossil fuels. Wyoming Considered Ban “social credit scores” that evaluate businesses using criteria that differ from other accounting and financial standards, such as ESG
After conservative talk show host Glenn Beck visited the Idaho state building and referred to ESG as a critical race theory “on steroids,” the legislature passed a law In March, it banned investment of state funds in companies that prioritize commitments to environmental, social and corporate governance over returns.
The US Legislative Exchange Council recently published a model policy that would subject banks that administer state pensions to new regulations that limit investments paid to what it calls “social, political, and ideological” goals.
Although the policy does not explicitly state it, Jonathan Williams, the group’s chief economist, said the popularization of ESG amid broader trends in political health has been a driving force. He said his research shows that incorporating factors outside of traditional financial measures can lower the rate of return for already underfunded state pensions.
Advocates of sustainable investment deny this charge and say that looking at the risks and realities of climate change amounts to responsible investing.
West Virginia And Arkansas He recently pulled their pension money from BlackRock in response to the asset manager’s adding companies with smaller carbon footprints to its portfolios. Moore, West Virginia’s treasurer, hopes more will follow.
Although it attracts enthusiasm, green investment discourse differs from frequent discussions of gender and sexuality or how history is taught. Both supporters and detractors acknowledged that surprise pensions, credit ratings and investment decisions became campaign fodder.
Last month at the Utah state party convention, thousands of Republicans cheered when Senator Mike Lee described green investing in terms similar to monetary race theory — another acronym-based paper: “Between CRT, ESG, and MSNBC, we get a lot of BS,” Lee told me.
Brian McGannon, a lobbyist for the US Social Investment Fund: Sustainable and Responsible Investment Forum, said opponents were wrong to frame sustainable investment trends as political. If countries refuse to take into account how the future is likely to depend less on fossil fuels and limit how they consider environmental risks, he said, they are making decisions with incomplete information.
“If the state is not considering these risks, it could be a signal to the investor that this government may not be a wise government to put our money in,” McGannon said. “Investors use a tremendous amount of information, and ESG is part of that mosaic.”
Associated Press writers Stan Choi in New York and Lindsey Whitehurst in Salt Lake City contributed to this report.