Republicans in the capitals of all 50 states are targeting an investment concept known as ESG, or environmental, social, and corporate governance criteria.
These investment criteria can be described as “woke” “misguided activism”” GOP officials argue that by taking these factors into account when making investment choices, financial institutions are putting ideology ahead of making money. Experts on this investment criteria say that it’s the other way around, and that Republicans are losing money for their constituents by unnecessarily narrowing the options of the financial institutions the state does business with.
Nineteen Republican general attorneys in state I wrote a letter to BlackRock, the world’s largest asset manager, which manages $10 trillion, According toIn August, Insider. BlackRock is accused of making decisions that are more about its political agenda than the welfare of state pensions.
“A governance engagement strategy primarily focused on BlackRock’s climate agenda necessarily overlays ESG factors on the core index portfolios that comprise a substantial part of many state pension funds,”The state attorneys general stated this in their letter. They added: “BlackRock’s commitment to the financial return of state pensions should be undivided.”
The Aug. 4 letter was signed by the state attorneys general of Arizona, Arkansas and Georgia, Idaho, Indiana. Kansas, Louisiana, Missouri. Montana, Nebraska, and Ohio.
In its ResponseBlackRock called the statements of the attorneys general untrue and wrote “we are disturbed by the emerging trend of political initiatives that sacrifice pension plans’ access to high-quality investments – and thereby jeopardize pensioners’ financial returns.”
The same group of attorneys general along with Virginia’s AG have joined an investigationMissouri Attorney General investigated whether Morningstar, an investment company, violated consumer law when it evaluated its performance on ESG issues.
Florida Republican Governor Ron DeSantis Also, the issue has been addressed. He was able to successfully complete the task on Aug. 23. Push throughBan on ESG criteria being considered in investments by state pension funds
DeSantis His victory against ESG investing “We are reasserting the authority of republican governance over corporate dominance and we are prioritizing the financial security of the people of Florida over whimsical notions of a utopian tomorrow.”
Witold Hnisz, vice-dean and faculty director of the ESG Initiative, at the Wharton School of the University of Pennsylvania said that such policy changes are bad news for taxpayers living in these states.
“When states say they can’t do business with financial institutions that take climate risk and other ESG factors into account, that means they’re not doing business with the largest and most sophisticated financial institutions in the U.S. and in the world, which means they have to issue bonds and interact with smaller financial institutions which have less economies of scale and economies of scope and as a result, charge higher fees,”He said.
According to DeloitteBy 2024, half of all professionally managed assets will have investments in companies that account for ESG issues. BlackRock holds seven of the top 10 ESG funds. According to BarronsAccording to its data, its ESG-integrated portfolios had assets worth $2.9 trillion. 2020 sustainability disclosure report.
A 2021 SurveyNuveen, an investment manager, found that 75% to 75% of employees agree or somewhat agree that responsible investing is important for their retirement.
The Securities and Exchange Commission’s Investor resourceNotes that these investment strategies include an environmental component “might focus on a company’s impact on the environment or the risks and opportunities associated with the impacts of climate change on the company, its business and its industry.”Social criteria can be related to labor rights or human rights. Governance refers to how the company conducts its business.
Alison Taylor, executive Director of Ethical Systems at New York University, stated that climate issues, which Republicans have been the most critical of when discussing ESG investing are actually one of many important factors to consider when making investment decisions.
“Depending on the issue, there is more or less a ‘business case,’ more or less evidence showing that this issue will affect the bottom line of the organization,”She spoke. “Now where everybody has landed is climate change. I think that that’s problematic for the Republican position because there are some of these issues where there’s mixed evidence or there’s not that much evidence that the issue will have a dramatic impact on the bottom line over the long term. But climate is certainly an issue where there’s plenty of evidence that if you don’t manage climate risk now, that will have a detrimental financial impact over the long term.”
Texas and North Carolina politicians have also spoken out about ESG investing. Texas Comptroller Glenn Hegar (R) Prohibited several financial firmsHegar has no contracts with the state. This means that Texas pension funds cannot work with large companies like Credit Suisse Group AG, UBS Group AG, and BlackRock. Hegar stated that he focused on firms that take into account the effects of climate change.
Hegar stated that the state government entities would need to notify his office within 30 days of receiving the list of financial companies banned from their holdings. They must also submit an annual reporting “to the presiding officer of each house of the Legislature and the attorney general that identifies all securities sold, redeemed, divested or withdrawn in compliance with the Texas Government Code.”
Texas has been investing in ESG since a long time. Wayne Christian, a Republican who sits on the Texas Railroad Commission which regulates oil & gas, has criticized ESG for potentially causing harm to the employment of the energy industry in January 2021. According to Bloomberg. Bloomberg. reported. The Texas Governor. Greg Abbott (R) signed a bill into law that says the state’s pension funds must divest, sell, withdraw, and redeem from companies that it characterizes as boycotting energy companies.
North Carolina State Treasurer Dale Folwell, who manages the state’s pension fund, has also criticized ESG investing and Submittedtop1000funds.com has announced that the pension fund will take a different approach when it comes to environmental factors. Instead of proxy voting by asset managers, shareholders will vote.
“We don’t want our proxy to be used to promote policies that don’t have anything to do with our fiduciary responsibility; to use these assets and vote these assets in a way that is contrary to our fiduciary responsibilities is not something we are going to do anymore,”Folwell, who was Criticized for his financial shortcomingsDecisions from the past
Taylor stated that she sees Republican efforts at attacking ESG investing as being similar to the Republican focus. Critical race theory in the sense that policymakers took a concept that many Americans weren’t familiar with and used that to their advantage to meet certain political goals.
“You can think about ESG as an attempt to sort of bring critical race theory to the private sector,”She spoke.
Taylor added: “This stuff is wonky and it’s technical and it’s really disputed and a lot of people use the term in different ways. It’s the exploitation of a level of misunderstanding and I think they hope that people will be like, ‘Well, Disney really overstepped the mark.’ ”