ESG | May 31, 2023

The mounting costs of the attacks on ESG investing

Ryon Harms

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Guest Author

Ryon Harms

Where politics and finance collide, the crusade against ESG is a rollercoaster ride filled with intrigue, backroom deals, and unforeseen consequences. From politicians funneling pension investments to personal donors, to lawsuits against divestment efforts, to impeachments of anti-ESG crusaders, the battleground of environmental, social, and governance risk factors has never been so entertaining (or exhausting!). In the first of a monthly update, here’s a recap of the month in ESG. 

Turns out anti-ESG ringleader Ron DeSantis fueled his oversized political ambitions by funneling massive state pension investments to his personal donors. These backroom deals funded his personal political ambitions, but ultimately cost public employees like teachers and firefighters about $10 billion from their retirement funds. 

“It certainly seems like it raises the distinct possibility that the decisions that the pension board is making may be serving DeSantis’ political interests and not the pensioners’ interest.” – Kathleen Clark, ethics expert and professor at the Washington University in Saint Louis School of Law

Meanwhile, the state-chartered insurance associations for Florida and Louisiana, two states passing anti-ESG laws that limit the insurance industry’s ability to price in climate, were forced to borrow a combined $1.35 billion to pay the climate-fueled hurricane claims of insolvent insurers. Homeowners, not climate-denying politicians like DeSantis, will ultimately foot ballooning bills as ESG’s impact on insurance emerges as the canary in the climate coal mine.

DeSantis’ circus of the absurd, fueled by the “woke mind virus,” aren’t just costing homeowners, pensioners and municipalities. Chief Mouseketeer, Bob Iger, waited for the week before DeSantis announced his presidential bid to pull the plug on a billion dollar office complex that was scheduled for construction in Orlando. Thanks to DeSantis, Florida will now lose 2,000 jobs with an average salary of $120,000, with additional losses to neighboring projects.

As costs associated with red state attacks on the free market hurt businesses and local communities, new evidence shows how the fossil fuel industry inspired anti-ESG laws. Leading the charge for Big Oil was Ken Paxton, the high-profile Attorney General from Texas that received $3.9 million in donations from the fossil fuels industry. Even as Paxton led a posse of red state AGs accusing asset managers of “potentially illegal” use of ESG, he was accepting bribes and shamelessly placing the interests of donors before constituents.

Normally conservative local business groups that understand ESG serves pecuniary interests are fighting back against costly and legally dubious anti-ESG laws entangling businesses in red tape. Included are influential members of Alabama’s business community that successfully stalled all of that state’s anti-ESG bills (at least for this year’s legislative session). Even in many states where anti-ESG laws passed, local business groups successfully watered them down.

Corporations shrugging off anti-ESG attacks, might agree with former Dow Chemical exec Peter Molinaro and former FMC Corp. exec Jerry Prout who playfully argue being ‘woke’ is a precondition for being a successful capitalist. Adding, “In places where “woke goes to die,” so too does capitalism and the freedom it thrives on.” Are you listening, Ron?

Now Oklahoma Governor Kevin Stitt is under fire for the mounting costs of the state’s misguided anti-ESG laws. Blacklisted JP Morgan had this to say: “Our business practices are not in conflict with this anti-free market decision.” Still, Oklahoma continues to bite its nose to spite its face by banning these otherwise mission-critical big banks and asset managers from their developing economies.

Undaunted by the costs to taxpayers and opposition from local business groups, the “anti-business” wing of the GOP is openly coordinating a new pressure campaign against JPMorgan. And let’s not forget about the lawsuit against three New York City pension funds for divesting from fossil fuels coordinated by experienced conservative operatives.

How long before a new wave of lawsuits arrives in states like Florida and Texas where investors are now mandated to invest in fossil fuels?

Paradoxically, some of the same governors on the “you shouldn’t mix politics with investments” bandwagon asked their newly favored asset manager, Vanguard, to create a China-free fund. Apparently, there are exceptions for ESG when it aligns with our politics.

Let’s end on a high note as the ever-entertaining Professor Robert Eccles cleverly dissected the recent dazed and confused hearing from the GOP led Oversight Committee. The Soviet-esque inquiry revealed the stark contrast between the unhinged majority and the minority’s refreshing focus on the facts. Watch for yourself. Or, just watch this clip from minority witness Mike Frerich, Illinois State Treasurer.