As green investments increase by $1 trillion since 2020, some Republicans now claim banks are promoting sustainable investment strategies to push liberal left-wing agenda, favoring democrats ahead of the midterm elections
October 18, 2022
Against an all too familiar backdrop of disinformation, political posturing, and climate change-denial, Republicans have started boycotting sustainable investing, labeling environment, social and governance (ESG) backed investment strategies as “Woke Capitalism.”
In an attempt to black-list banks like BlackRock and JP Morgan that promote ESG based policies, opposers of climate science are now opposing the incorporation of climate change into corporate investment models, risk assessments and strategies.
Over the past few weeks and months, some Republican governors, treasurers and attorney generals have increasingly been fueling the narrative that the green shift towards prioritizing ESG-based sustainable investing is unfairly tipping the scale in favor of the Democrats, claiming that big banks are unfairly abusing their power to push liberal agenda.
Their rhetoric has now escalated to action, as some Republican state laws have been changed to ban business with investors prioritizing sustainable investment portfolios, billions of dollars has been withdrawn from banks with green policies and sustainable investing strategies, and threats have been made to implement federal legislation to ban ESG investing all together.
With the US midterms just around the corner, it was only a matter of time before the climate crisis was once again embroiled in congressional politics.
What is ESG?
ESG investment policies incorporate environmental, social and governance factors into their opportunity/risk assessments and investment strategies, that wouldn’t otherwise be considered in traditional economic models.
A great example of why climate change should be factored into economic predictionswas seen earlier this year in Europe, when the German Rhine river dried up after months of relentless heatwaves and drought. This caused severe shipping lanes blockages and delays that raised freight costs five-fold, and experts predicted the German economy might take as much as a 0.5% drop in growth this year.
BlackRock, one of the main targets of the Republican anti-ESG campaigns, is the world’s largest financial asset manager – handling a total of 8.5 trillion U.S. dollars of clients money – and like many other banks, has an explicit commitment to sustainable investing and a net-zero economy woven throughout their corporate values, mission and purpose.
Therefore, it stands to reason that to uphold the principles set out in their manifesto, BlackRock has taken strict measures to promote green ESG investments over less climate-conscious alternatives. Its safe to say that their sustainable investing is snowballing – with ESG investments having increased by $1tn since 2020.
Drawing a hardline on making “sustainability the standard,” BlackRock pushes companies to provide “Paris agreement”-aligned net-zero business plans, offering them help in achieving their corporate climate goals, but also threatening to drop those that don’t fit into the net-zero economy of the future.
BlackRock also endeavors to provide their clients with a green point of view, providing full transparency on each of their portfolio’s sustainability efforts and ranking, publishing temperature alignment metrics and climate risk scrutiny models for all of the different investment options.
In a world plagued by a variety of escalating crises, it stands to reason that the companies helping to solve the biggest ESG – environmental, social and governance – challenges, are most likely best placed to weather the storm and generate resilient financial returns in the long-term – as well as a clean conscience.
However, in many Republican-led southern states where the coal, oil and gas industry play a large part in state economy, BlackRock’s unwavering climate resolve has not gone down well, and increasingly has some Republican feathers well and truly ruffled.
“Woke Capitalism”
Some Republicans are now claiming that the green shift in investment priority – aka “Woke Capitalism” – is a politicized, partisan and ineffective leftist strategy that favors democratic priorities, leaving the fossil fuel industries such as coal, oil and gas firms lacking the financial backing they require to meet demands.
In a move to block ESG sustainable investments, Florida’s Governor Ron DeSantis made changes to state policy banning “social, political, or ideological” interests to be factored into investment decisions.
In Texas and West Virginia, state retirement and investment funds are now banned from working with climate-conscious firms that consider global warming in financial risk assessments.
There has even been talk amongst some Republicans of signing in anti-ESG federal legislation should their party ever regain their place in the oval office.
Republican state treasurers have also jumped on the “Woke Capitalism” bandwagon, as the Financial Times recently reported that 4 states have announced plans to collectively pull over $1 billion worth of funds from BlackRock because of its promotion of sustainable ESG investment policies.
Utah’s treasurer, Marlo Oaks, as well as Arkansas’ counterpart Dennis Milligan, have recently liquidated $100 million and $125 million in BlackRock assets respectively.
“We need to ensure that the money is not being used to drive a separate agenda different from our fiduciary obligation,” says Oaks as a justification for his back-off from BlackRock.
What’s more, Louisiana’s treasurer, John Schroder, also announced plans to withdraw $794 million, much like Curtis Loftis, treasurer of South Carolina, also disclosing his own plans to pull out $200 million from the investment giant.
Between them, these GOP treasurers are entrusted with the safety and security of tens of billions of dollars of state investment and public taxpayer funds, yet as the elections loom, some claim they are prioritizing their own political primacy over the people.
When it comes to investment strategy, investors are historically quite transparent in their interest in seeking financial opportunity, so in a world where society, the planet and the economy are profoundly impacted by ESG factors, incorporating this data into financial analysis is mostly considered prudent, rather than partisan.
As the US Forum for Sustainable and Responsible Investment (SIF) says, “ESG considerations are about investment results, not politics.”
Many are hailing the Republican led anti-ESG crusade as another disinformation campaign, denouncing the GOP claims and allegations as polarizing propaganda, a deep-rooted concern for many given that misleading narrative has too often been shown to drastically destabilize the American political landscape.
Recent research published in Nature now sheds light on how disinformation has actually affected the holistic American perspective. Scientists have found that climate-denying propaganda and “fake news” have created a “false social reality,” in which 80-90% of the population believe climate change is not considered a matter of national concern by the majority, even in cases where they themselves were concerned about the planet.
The truth of the matter: Will you go the way of the dodo or will you be a phoenix?
The motivation behind this latest boycott of ESG-backed investments is up for debate, whether it is in fact an orchestrated attempt to earn political points ahead of the midterms, or simply a symptom of the catalytic implementation of corporate climate policy over the past few years, making changes to industries at a rate faster than most are comfortable with.
Amidst some Republican claims that banks are “boycotting” the fossil fuel industry, BlackRock stands at the top of the leaderboard of shareholders in many coal, oil and gas companies. In fact, Larry Fink has publicly discouraged divesting shares in fossil fuel companies, encouraging engagement and evolution rather than avoidance.
What’s more, claims that BlackRock’s ESG sustainable investment policies might be compromising their fiduciary responsibilities to clients has been shown to be a rather short-sighted view of financial return predictions, as a new study from economists as NYU shows that ESG integration into investment strategy not only future proofs ventures, but could also lead to higher and more resilient financial gains in the long term.
There have however been claims of greenwashing and concerns that ESG sustainable investment packages promoted by banks that target climate-conscious millennials are not as green as they should be, but like any market that explodes in a short period of time – as more players join the game, you’ve got to be more selective about who and what you’re engaging with.
But, as Larry Fink asks in his annual letter to the CEO’s of the companies his clients invest their money in, “as your industry gets transformed by the energy transition, will you go the way of the dodo, or will you be a phoenix?”
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This article was originally published on IMPAKTER. Read the original article.
