Sunday September 25th, 2022 4:18AM

GOP directs culture war outrage toward green investing craze

By The Associated Press
Related Articles
  Contact Editor

SALT LAKE CITY (AP) — Republicans are coming out swinging against Wall Street's growing efforts to consider factors like long-term environmental risk in investment decisions, the latest indication that the GOP is willing to damage its relationship with big business to score culture war points.

Many are targeting a concept known as ESG — which stands for environmental, social and governance — a sustainable investment trend sweeping the financial world. Red state officials deride it as politically correct and woke and are trying to stop investors who contract with states from adopting it on any level.

For right-wing activists who previously brought criticisms of critical race theory (CRT), diversity, equity and inclusion (DEI) and social emotional learning (SEL) to the forefront, it's the latest acronym-based source of outrage to find a home at rallies, in conservative media and in legislatures.

ESG has yet to take hold as mainstream political messaging, but backlash against it is gaining steam. This week, former Vice President Mike Pence attacked the concept during a speech in Houston. And on Wednesday, the same day he said on Twitter he planned to vote Republican, Elon Musk attacked it after Tesla lost its place on the S&P 500′s ESG Index. He called it a scam “weaponized by phony social justice warriors.”

The concept calls on investors to consider criteria such as environmental risk, pay equity or how transparent companies are in their accounting practices. Aided by recently proposed disclosure requirements and analysis from ratings agencies, they have adopted the principles to such an extent that those who use them control $16.6 trillion in investments held in the U.S.

In response, Republicans — historically known for supporting fewer regulations — are in many places attempting to impose new rules on investors. Their efforts reflect how members of the party are willing to distance themselves from big business to push back against those they see as ideological foes.

“I don’t think we’re the party of big business anymore. We’re the party of people — more specifically, we’re the party of working people. And the problem that we have is with big banks and corporations right now trying to dictate how we’re going to live our lives,” West Virginia Treasurer Riley Moore said.

Opponents criticize ESG as politicized and a potentially costly diversion from purely financial investment principles, while advocates say considering the criteria more accurately accounts for risk and promises steadier returns.

“We focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients,” Larry Fink, CEO of investment firm BlackRock and a leading proponent, told clients in a letter this year.

But Moore and others including Utah’s Republican state treasurer Marlo Oaks argue favoring green investment over fossil fuels denies key industries access to the financial system and capital. They have targeted S&P Global Ratings for appending ESG scores to their traditional state credit ratings. They worry that without changes, their scores could make borrowing for projects like schools or roads costlier.

In an April letter, Oaks demanded S&P retract analysis that rated Utah as “moderately negative” in terms of environmental risk due to “long-term challenges regarding water supply, which could remain a constraint for its economy ... given pervasive drought conditions in the western U.S.”

The letter was co-signed by the governor, legislative leaders and the state’s congressional delegation, including Sen. Mitt Romney, whose former firm Bain Capital calls ESG factors “strategic, fact-based and diligence-driven.” It said ratings system “attempts to legitimize a dubious and unproven exercise” and attacks the "unreliability and inherently political nature of ESG factors in investment decisions.”

Though he likened ESG to critical race theory, Oaks said he was mostly concerned with capital markets and what he called attempts by fossil fuel opponents to manipulate them by pressuring investors to pick businesses with high ESG scores.

“DEI, CRT, SEL. It can be hard to keep up with the acronyms,” he wrote on an economics blog last month, “but there’s a relatively new one you need to know: ESG.”

Investors making carbon neutral or net zero criteria common were, in effect, Oaks said, limiting access to capital for oil and gas businesses, hurting their returns and potentially contributing to gas price spikes.

In more than a dozen red states, officials dispute the idea that the energy transition underway could make fossil fuel-related investments riskier in the long term. They argue employing asset managers with a preference for green investments uses state funds to further agendas out of sync with constituents.

In statehouses, anti-green investing efforts are backed by conservative groups such as the American Legislative Exchange Council and the Heartland Institute, a think-tank skeptical of scientific consensus on human-caused climate change that has backed bills that either divest state funds from financial institutions that use ESG or forbid them from using it to score businesses or individuals.

In Texas, West Virginia and Kentucky, lawmakers have passed bills requiring state funds limit transactions with companies that shun fossil fuels. Wyoming considered banning “social credit scores” that evaluate businesses using criteria that differ from accounting and other financial metrics, like ESG

After conservative talk show host Glenn Beck visited the Idaho Statehouse and referred to ESG as critical race theory “on steroids,” the Legislature passed a law in March prohibiting investment of state funds in companies that prioritize commitments to ESG over returns.

The American Legislative Exchange Council recently published model policy that would subject banks managing state pensions to new regulations limiting investments driven by what it calls “social, political and ideological” goals.

Though the policy doesn't mention it outright, Jonathan Williams, the group's chief economist, said ESG's mainstreaming amid broader trends of political correctness was a driving force. He said his research shows that incorporating factors beyond traditional financial metrics can lower the rate of return for already underfunded state pensions.

Sustainable investing advocates deny that charge and say considering the risks and realities of climate change amounts to responsible investing.

West Virginia and Arkansas recently divested their pension funds from BlackRock in response to the asset manager adding businesses with smaller carbon footprints to its portfolios. Moore, West Virginia's treasurer, hopes more will follow.

Though it's drawing enthusiasm, the green investment discourse differs from recurring debates over gender and sexuality or how history is taught. Both proponents and detractors acknowledged they’re surprised pensions, credit ratings and investment decisions have become campaign rally fodder.

Last month at the Utah state party’s convention, thousands of Republicans roared when Sen. Mike Lee described green investment in similar terms to critical race theory — another acronym-based foil: “Between CRT and ESG and MSNBC, we get way too much B.S.,” Lee said.

Bryan McGannon, a lobbyist with US SIF: The Forum for Sustainable and Responsible Investment, said opponents were wrong in framing sustainable investing trends as political. If states refuse to reckon with how the future will likely rely less on fossil fuels and limit how environmental risk can be considered, he said, they're making decisions with incomplete information.

“If a state’s not considering those risks, it may be a signal to an investor that this might not be a wise government to be putting our money with," McGannon said. "Investors use a huge swath of information, and ESG is a piece of that mosaic.”


Associated Press writers Stan Choe in New York and Lindsay Whitehurst in Salt Lake City contributed to this report.

  • Associated Categories: Associated Press (AP), AP National News, AP Online Headlines - Washington, AP Business, AP Business - Industries, AP Business - Utilities, AP Business - Personal Finance, AP Technology News
© Copyright 2022
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Live updates | Biden hails Sweden, Finland NATO applications
President Joe Biden has hailed the “momentous” applications of once-neutral Sweden and Finland to join the North Atlantic Treaty Organization in response to Russia’s invasion of Ukraine
2:11PM ( 10 minutes ago )
GOP directs culture war outrage toward green investing craze
Red state officials are coming out swinging against growing Wall Street efforts to consider environmental risk in investment decisions
2:11PM ( 11 minutes ago )
Stocks waver on Wall Street, hover close to bear market
Stocks wavered in afternoon trading on Wall Street Thursday as persistently high inflation continues to weigh on the economy and keeps major indexes mired in a deep slump
2:06PM ( 16 minutes ago )
Associated Press (AP)
Inflation, Russia-Ukraine war draw G7 finance leaders' focus
Finance ministers for the Group of Seven leading economies are grappling with deepening inflation concerns and the immediate effects of Russia’s war in Ukraine, with U_S_ Treasury Secretary Janet Yellen warning that it all adds up to a “very difficult economic situation.”
1:46PM ( 36 minutes ago )
House approves bill to take aim at gasoline 'price gouging'
A closely divided House has approved legislation to crack down on alleged price gouging by oil companies as prices at the pump continue to soar
1:38PM ( 45 minutes ago )
Senate votes final congressional OK for $40B Ukraine aid
A $40 billion infusion of military and economic aid for Ukraine and its allies has cleared the Senate and will head to President Joe Biden for his signature
1:17PM ( 1 hour ago )
AP Business
Live updates | Macron warns war in Ukraine could spread
French President Emmanuel Macron has reiterated concerns about the risk of the war in Ukraine spreading to surrounding countries, as he hosted the president of Moldova, Ukraine’s neighbor
11:34AM ( 2 hours ago )
Ivey, challengers race to right in Alabama GOP primary
Alabama’s Republican primary has become a race to the right, with candidates staking out extreme positions on abortion, immigration and LGBTQ issues
10:21AM ( 4 hours ago )
Live updates | G-7 to tackle food security amid Ukraine war
The Group of Seven countries are launching a new global food security alliance that is aimed in part at addressing the impact of Russia’s war in Ukraine
10:18AM ( 4 hours ago )
AP Business - Industries
World shares sink after inflation driven retreat on Wall St
Shares have declined in Europe and Asia after a broad retreat on Wall Street driven by worries over the impact of persistent high inflation on corporate profits and consumer spending
4:10AM ( 10 hours ago )
Asian shares track Wall Street's inflation-fueled retreat
Shares are sharply lower in Asia after a broad retreat on Wall Street
2:48AM ( 11 hours ago )
Japan records trade deficit as imports surge on energy costs
Japan has recorded a trade deficit in April as imports ballooned 28% as energy prices soared while the yen remained weak
10:27PM ( 15 hours ago )
AP Business - Utilities
Home sales tumble again as mortgage rates surge
Sales of previously occupied U.S. homes slowed in April for the third month in a row as mortgage rates surged, driving up borrowing costs for would-be homebuyers as home prices soared to new highs
10:38AM ( 3 hours ago )
Green options transforming a wedding industry prone to waste
Brides and grooms who want more sustainable options for their weddings are transforming an industry traditionally fraught with waste
9:18AM ( 1 day ago )
Obama, Airbnb's Brian Chesky launch $100M in scholarships
The co-founder and CEO of Airbnb, Brian Chesky, has donated $100 million to the Obama Foundation to fund scholarships for students pursuing careers in public service and includes multiple stipends for travel
1:05PM ( 3 days ago )
AP Business - Personal Finance
Live updates | Biden hails Sweden, Finland NATO applications
President Joe Biden has hailed the “momentous” applications of once-neutral Sweden and Finland to join the North Atlantic Treaty Organization in response to Russia’s invasion of Ukraine
2:11PM ( 11 minutes ago )
Stocks waver on Wall Street, hover close to bear market
Stocks wavered in afternoon trading on Wall Street Thursday as persistently high inflation continues to weigh on the economy and keeps major indexes mired in a deep slump
2:06PM ( 17 minutes ago )
FDA head: Baby formula factory could reopen by next week
The Food and Drug Administration's commissioner says a shuttered baby formula factory could be up and running by next week
1:57PM ( 26 minutes ago )
Prosecutors debunk Colorado clerk's 2020 election claims
Prosecutors in a western Colorado county say they found no evidence of tampering in the 2020 presidential election as alleged by a clerk who has become a prominent voice among those promoting former President Donald Trump’s false claims of a stolen election
1:52PM ( 30 minutes ago )
New York's hasty redistricting rewrite draws ire of locals
New York’s political landscape for the next decade is being quickly retooled by a rural judge and out-of-state expert after a court ruled Democrats controlling New York's legislature bungled the job
1:50PM ( 32 minutes ago )