Red state officials are coming out swinging against growing Wall Street efforts to consider 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. 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.
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. 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.
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.
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.
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