Republicans Plan Wave of Attacks on ‘Awakened’ Investments Post-Midterms – POLITICO | NutSocia

“This is going to escalate,” said West Virginia Treasurer Riley Moore, a Republican who leads a coalition of 15 state treasurers working to punish financial firms they say are boycotting fossil fuels. “We’re going full throttle as soon as we get to 2023. We’re going to see a lot more movement on this at the state level. They’re really going to start to reach critical mass in terms of assets under management and capital that can be deployed against the ESG movement.”

BlackRock and other big financial firms have long come under attack from environmental activists for refusing to divest themselves of oil and gas companies, but they have been caught off guard by a wave of hostility from a political party long viewed as an ally. And the fact that the attacks are coming despite remaining big supporters of the fossil fuel industry suggests the fight is more about politics than money.

In Congress, House Republicans will focus on ESG if the party wins the majority, Rep said. Andy Barr from Kentucky, who is a member of the House Financial Services Committee and the Republican Study Committee. That would mean more aggressive oversight of the SEC’s proposed climate disclosure rule and emphasis on climate risk by the Federal Reserve and other banking regulators.

“BlackRock and State Street and Vanguard and Invesco and Fidelity — these are great companies,” Barr said in an interview. “All we want is for them to live up to their history as great American companies and achieve retirement savings for Americans and stop this nonsense of ESG politicizing capital allocation.”

The wealth management firms – which have a fiduciary duty to provide the best returns for their clients – say they are responding to investor demand for information about potential risks from climate change and other business threats.

Perhaps there is no more famous example of ESG acceptance than BlackRock CEO Larry Fink’s declaration in 2020 that “climate risk is investment risk.” But Republican Treasury officials are preparing to use the public coffers more broadly to thwart what they call political interference.

Arizona Treasurer Kimberly Yee (R) withdrew state funds from Ben & Jerry’s parent company Unilever last year after the ice cream maker ceased operations in Israel. She said she plans to implement her office’s new anti-ESG investment policy if re-elected, and the issue is the central focus of her debate with challenger Martín Quezada, a Democratic state senator.

“I will continue to fight against a political agenda that undermines a free market,” Yee said in an interview. “We cannot mess with taxpayer dollars. ESG policies take a dangerous path because they prioritize politics over a financial scorecard.”

The anti-ESG campaign poses no existential threat to big financial firms. Louisiana’s divestment of $794 million from BlackRock, by far the largest of any state, is just a small blip in the bottom line for the world’s largest wealth manager, which ended June 8th $.5 trillion under management. And many of the divestitures don’t include public pension funds, most of which are state-regulated capital.

But that doesn’t stop companies from fighting back. BlackRock has launched a nationwide advertising campaign and website highlighting its approach to energy investing and the climate, noting that the company continues to invest more than $100 billion in Texas energy companies and $310 billion in energy companies worldwide.

“We are concerned by the emerging trend of policy initiatives that sacrifice pension plans’ access to quality investments — thereby jeopardizing retirees’ financial returns,” wrote BlackRock, in response to attorneys general questioning the company’s involvement generate returns for customers.

Supporting the claim that taxpayer and employee funds are at stake is a study by University of Pennsylvania finance professor Daniel Garrett, who found that Texas companies owe an additional $303 million to $532 million in interest on the loans they borrowed of $32 billion in the first eight months after the implementation of two laws that prevent municipalities from entering into contracts with banks that limit funding to oil, gas or firearms companies.

“The sad thing is that the citizens of the Red States will pay the price for political theater in the form of inflated interest rates on their bonds and high risk for their pension funds,” said Andrew Behar, CEO of As You Sow, a non-profit shareholder advocacy. “Any State Treasurer who conducts an anti-risk assessment declares that he has no intention of doing his job.”

Meanwhile, proponents of the anti-ESG push are calling for more powers for treasurers and auditors from state legislatures. Will Hild is CEO of Consumers Research, a nonprofit that supports a group of Republican Treasurers opposed to ESG funding. He said in an interview that he expects 12 to 20 states to consider legislation targeting financial firms’ ESG approaches in the next six to nine months.

Such bills could limit pension fund managers to considering only financial returns in their decision-making, much like Gov. Ron DeSantis (R) made in Florida. States could also pass “energy boycott” laws, similar to laws in Texas, Kentucky, Oklahoma and West Virginia, that would require state agencies to divest themselves of companies accused of boycotting fossil fuels.

The Heartland Institute, a nonprofit that denies mainstream climate science, cites South Dakota, Mississippi and Nebraska as likely states for new anti-ESG measures. The Energy Boycott Act, a model policy draft by the American Legislative Exchange Council, has been introduced in recent legislatures in states like Idaho and Indiana.

Moore, from West Virginia, said state and federal officials can investigate whether companies are violating antitrust laws by collaborating on “net zero” and ESG policies, citing Climate Action 100+, an investor-led initiative to combat greenhouse gas emissions , as a prime example . They already have targeted involvement of the banks in the Net-Zero Banking Alliance, an industry-led, United Nations-backed group committed to achieving net-zero in its lending and investment portfolios by 2050.

The financial sector will weather the storm, but the impact on taxpayers remains to be seen.

“It’s a disaster for our markets when politicians demand that financial institutions ignore entire classes of risks and opportunities because they don’t align with their ideology,” said Dave Wallack, executive director of For The Long Term, a nonprofit that advocates for Treasurers to support their beneficiaries. “It’s even worse when they blacklist and scare the market. These states are killing America’s golden goose – free markets – simply because the market doesn’t align with their ideology.”

Zachary Warmbrodt contributed to this story.

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