By Sam Metz in Salt Lake City
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. 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 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.
COP27 – Playing the fiddle while Rome burns
In case you missed the (mainstream) media frenzy, the 27th Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) just wrapped up in Egypt.
This is the annual conference that highlights just how completely out of touch the elites, environmentalists and world leaders truly are, including our own prime minister.
In the weeks leading up to COP, the media was full of hysterical statements from politicians, UN bureaucrats, and activists. In October, the British newspaper The Guardian quoted UN Secretary General Antonio Gutteres: “The fossil fuel industry is killing us.” In the same piece the “co-founder” of a “change agency” (whatever that is) says we’re facing “Armageddon”. Gutteres told the delegates we’re on a “highway to climate hell”. Celebrities fly in on their private jets and pose for pictures. Politicians make more hysterical speeches.
There were lots of meetings and negotiations. It always turns out that the last round of green plans and “climate” policies didn’t quite work, and the solution is always, well, more plans and policies. Then they do it all again the next year.
And it would be funny if it weren’t so damaging. If ever the expression ‘playing the fiddle while Rome burns’ applied, this is it.
Domestically, Canadians are struggling to pay for food, heat, and housing. Inflation is driving up the cost of everything and Canadians are feeling it. Food banks across the country are sounding the alarm on record breaking visits. They note that it is no longer the unemployed that are primarily visiting them, it is the ‘working poor’ those who are employed but simply cannot make ends meet. Many Canadians are choosing between heating their homes or feeding their families. The situation is bad. And it’s even worse in Europe, but that’s another story.
In the midst of this, the Trudeau government is focusing their time and our resources on what? Greenhouse gases that might raise temperatures very slightly over the next quarter-century. And they are doing this at enormous expense. The cost of this climate cult to Canadians is mind-boggling. Since 2015, Trudeau has spent 60 billion dollars trying to get our tiny contribution to global greenhouse emissions – around 1.5 percent – even lower.
Over the next thirty years, the total cost of the government’s climate initiatives will be around 2 trillion.
Let that number sink in.
But that’s just what they’re spending. In addition, we should think about rising carbon taxes and energy costs, which make everything more expensive. We should think about the jobs we’ll lose, and the massive profits we could be making if the government would let our resource sector operate normally.
And have the last 26 COP conferences slowed the warming trend? Of course not. While according to Canadian Minister of Environment and Climate Change Steven Guilbeault“progress on commitments was at the forefront of this COP,” you can be sure there will need to be a 28th, and a 29th and a 35th COP conference. At some point, Einstein’s definition of insanity might apply – doing the same thing over and over again and expecting a different result.
It goes to show just how out of touch the Trudeau government is. It is an insult to have Canadians pay for politicians and bureaucrats to be “COP delegates” and to fly halfway around the world for another pointless conference. We’re on a highway to hell, alright, but not because the world may be a little warmer in 2050.
Bank of Canada lost $522 million in third quarter, marking first loss in its history
By Nojoud Al Mallees in Ottawa
The Bank of Canada lost $522 million in the third quarter of this year, marking the first loss in its 87-year history.
In the central bank’s latest quarterly financial report, it says revenue from interest on its assets did not keep pace with interest charges on deposits at the bank, which have grown amid rapidly rising interest rates.
The Bank of Canada’s aggressive interest rate hikes this year have raised the cost of interest charges it pays on settlement balances deposited in the accounts of big banks.
That’s while the income the central bank receives from government bonds it holds remains fixed.
The Bank of Canada dramatically expanded its assets during the pandemic as part of its government bond purchasing program. Also known as quantitative easing, the policy was part of the central bank’s efforts to stimulate the economy.
That expansion in assets is now costing the central bank, as it paid for the government bonds with the creation of settlement balances.
Speaking before the House of Commons finance committee last week, Bank of Canada governor Tiff Macklem addressed the expected losses.
He said losses don’t affect the central bank’s ability to conduct monetary policy.
He noted the size and duration of the losses will depend on the path of interest rates and the evolution of the economy.
“Following a period of losses, the Bank of Canada will return to positive net earnings,” he said.
The Bank of Canada is looking to the federal government for a solution to balance its books.
While there are a few options available, some economists say the problem before the central bank is largely an accounting one rather than a monetary policy concern.
This report by The Canadian Press was first published Nov. 29, 2022.
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