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Investment firms pursuing climate, social agendas are getting no help from Republicans

By Sarah May
|
December 28, 2022

In an unusual shift from D.C. norms, major Wall Street firms and other corporate powerhouses are discovering that GOP lawmakers' efforts to push back on the woke social and climate agendas being foisted on shareholders are not encountering the type of resistance often marshaled by the business lobby or moderate Republicans, thereby threatening Democrats' ability to control investment capital, as Politico reports.

The change in attitude comes amid something of a backlash among financial firms and others to the so-called “environmental, social or governance” priorities (ESG) championed by Democrats and imposed by a large number of companies in recent years on their business activities and overall conduct, with many raising concerns about the detrimental impact of such policies on investor returns, as Reuters notes.

Anti-ESG crackdown

As Politico reports, a cadre of Republican lawmakers has begun something of a crackdown on the sweeping social and climate agendas implemented by large investment firms such as Vanguard and State Street, arguing that insistence on “woke” policies in the business context will take a serious toll on investors' bottom lines.

House Republicans, poised to reclaim the majority in the lower chamber next month, have hinted at plans to hold hearings and potentially even pass legislation aimed at tamping down the ESG movement.

In their estimation, adherence to ESG standards by large money managers subordinates investor returns to other – often controversial and highly politicized – priorities, inflicts damage on the energy industry, and puts the overall U.S. economy at risk.

As Rep. Bill Huizenga (R-MI) explained to Politico, he and his like-minded colleagues view the virtue-signaling initiatives of major firms as being “more about people feeling good at cocktail parties and flying out to their place in Tahoe and whatever else,” but that they do exact a substantial cost from real people.

One example of changes potentially afoot after the new Congress is seated comes in the form of legislation proposed by Sen. Dan Sullivan (R-AK) and Rep. Blaine Luetkemeyer (R-MO), which would compel passive investment fund managers to vote on shareholder proposals according to investor instructions so as to prevent financial firms from unilaterally imposing woke agendas on companies.

Standing their ground

The lawmakers' initiatives stand in direct conflict to the commitment to ESG initiatives touted by the leaders of financial management giants BlackRock, Vanguard, and State Street, several of whom have doubled down on the approach many decry as too “woke.”

BlackRock CEO Larry Fink, for his part, has continued to mount a vocal defense of ESG principles, declaring at the start of 2022 that his firm is committed to what he called “stakeholder capitalism” in which the interests of everyone connected to its endeavors are served – perhaps not just the interests of investors.

Fink has also expressed frustration with the pace of energy transition away from fossil fuels, asserting that such a goal can only be reached with “a combination of government and private sector and that's just not happening.”

As a result of that stance, BlackRock was banned from winning business from the state of West Virginia and received word that the state of Florida would yank $2 billion in investments placed with the firm due to its climate change agenda, and opposition to the firm's positions at the federal level also continues to grow.

Help proves elusive

Whereas folks like Fink could typically rely on the helping hands of moderate Republicans and conservative-leaning business lobbying groups to defend against the anti-woke onslaught mounted by some in the GOP, such assistance simply has not materialized, as Politico notes.

The outlet cited interviews with numerous lawmakers, industry groups and climate advocates to explain that “little resistance” is being mounted by, for example, the U.S. Chamber of Commerce, an entity whose reluctance to counter hardline Republican efforts against ESG has taken some by surprise.

Tom Quaadman of the Chamber's Center for Capital Markets Competitiveness said with an air of intentional neutrality, “It has been a long-standing policy of the Chamber that investing should be objective, directly linked with economic return and that policymakers on either side should not put a thumb on the scale.”

Notably, the Investment Company Institute, a key trade group for the money management industry, has also declined to go toe-to-toe with Republican efforts to combat agendas such as Fink's, saying generically that it works with Democrats and the GOP to facilitate long-term investor interests.

Assistance declined

Resistance among lawmakers to the woke agendas permeating corporate boardrooms has extended beyond the realm of BlackRock, Vanguard and the like, with a recently proposed mega-merger between grocery giants Kroger and Albertson's further underscoring the broader debate.

During a recent hearing of the Senate Judiciary Committee's Subcommittee on Competition Policy, Kroger CEO Rodney McMullen looked to Republicans for help in convincing Democrats that the merger should be approved and would not cause undue harm to unionized workers, as CNBC noted.

Sen. Tom Cotton (R-MO) was visibly irritated by that request and suggested that Kroger – a company that has been accused of discriminating against employees with religious objections to promoting LBGTQ agendas – should look elsewhere for aid. “I've cautioned them for years that if they silence conservatives and center-right voters...they probably shouldn't come and ask Republican senators to carry the water for them,” he said, giving voice to a stance that appears to be gaining real traction.