Republicans are coming out swinging against Wall Street’s growing efforts to consider factors like environmental risk in investment decisions.
The Utah State Capitol, rear, is shown behind an oil refinery on Thursday, May 12, 2022, in Salt Lake City. A growing number of Republican-led states with economies that rely heavily on fossil fuels are pushing back against shifts in the financial industry to consider new factors such as environmental risk in their investment decisions.
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.”Alaska Gov.
“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. 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.
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.
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.
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