Once-obscure investing principles are quickly becoming a political flashpoint that Republicans hope to use to their advantage in the 2024 presidential election.
In recent years, corporations and investors have increasingly prioritized environmental, social, and governance practices, known as ESG . Now, though, Republicans have mounted an organized pushback to ESG on the grounds that they constitute "woke" and anti-energy policies — a political counteroffensive likely only to gain strength.
“It’s gonna be part of this national conversation, I think. If you’re at the national level, they are talking about this issue,” West Virginia Treasurer Riley Moore told the Washington Examiner during an interview on the sidelines of the State Financial Officers Foundation’s national meeting.
The media-accessible parts of the SFOF meeting held on Tuesday in Washington, D.C., centered on GOP efforts to combat ESG.
The message from the top financial officials in multiple red states was clear: Aggressive and coordinated pushback against ESG and so-called woke capitalism is going to be the dominant issue for them in the approaching year and beyond.
ESG has made a quick entrance into the national lexicon and political rhetoric.
Florida Gov. Ron DeSantis, seen as a likely GOP primary opponent to former President Donald Trump, has publicly worked to combat ESG. The State Board of Administration this summer adopted his proposal to ban the consideration of “social, political or ideological interests” when making decisions about investing for the state’s pension fund.
“Corporate power has increasingly been utilized to impose an ideological agenda on the American people through the perversion of financial investment priorities under the euphemistic banners of environmental, social and corporate governance and diversity, inclusion and equity,” DeSantis said in a statement.
Some Republican state treasurers, traditionally a low-profile role, have risen to prominence and courted nationwide media attention with their forays against Wall Street giants, including BlackRock, the world’s largest money manager.
BlackRock has been the biggest target in the GOP crusade against ESG.
Earlier this month, South Carolina Treasurer Curtis Loftis’s office confirmed it will be divesting all its BlackRock holdings . His office told the Washington Examiner that Loftis has been removing BlackRock-managed funds over the past five years and will be divesting the final $200 million in BlackRock holdings by the end of the year.
Louisiana Treasurer John Schroder also announced that the state has divested $560 million, which will increase to $794 million over the coming months as Louisiana exits BlackRock money market funds, mutual funds, and exchange-traded fund holdings.
Utah Treasurer Marlo Oaks said he has yanked about $100 million in state funds from BlackRock, and Arkansas Treasurer Dennis Milligan divested some $125 million out of money market accounts managed by the firm. Missouri Treasurer Scott Fitzpatrick announced his state is pulling some $500 million in pension funds
During one media briefing, Moore was awarded the “consumers’ champion” award from Consumers’ Research, a conservative nonprofit organization that has worked to cast BlackRock and its CEO, Larry Fink, as bad actors for the company’s ventures in China and for its embrace of ESG.
For his part, Moore’s office was empowered by the state legislature to deem five financial institutions ineligible for state banking contracts on the grounds that they “boycott” fossil fuel companies. The restricted financial institutions are BlackRock, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo.
And some of the pressure campaign against ESG has borne results. The pressure was enough to change course for one firm, U.S. Bancorp, according to Moore. He said U.S. Bank changed its no-lending policy to the fossil fuel industry so that it was removed from the list, something he described on Tuesday as a “huge win.”
The treasurers’ constituents are also beginning to take notice of corporate ESG and the GOP’s pushback. Kentucky Treasurer Allison Ball told the Washington Examiner that she is fielding more questions about it from residents in the Bluegrass State.
The ESG pushback has also been growing at the federal level.
This month a group of Republican senators sent letters to 51 law firms warning that their clients may be violating antitrust laws through the pursuit of their ESG endeavors. They also raised the specter of congressional investigations and told the firms to preserve documents for that eventuality.
The lawmakers hinted that the investigations and oversight could occur as soon as next year or further down the road if they don’t regain control, perhaps after the 2024 elections.
“Over the coming months and years, Congress will increasingly use its oversight powers to scrutinize the institutionalized antitrust violations being committed in the name of ESG, and refer those violations to the FTC and the Department of Justice,” the group wrote.