AMAC Exclusive – By Katie Sullivan
As woke investing and so-called “ESG” policies have taken the corporate world by storm in recent years, and with little pushback from the few conservatives left in the executive class, Republican state treasurers and attorneys general have stepped up to defend the interests of shareholders – and have been rewarded by voters in turn.
In brief, “ESG” refers to corporate decisions supposedly made in the interests of serving “environmental, social, and governance” goals – which are invariably left-wing in nature. Investment banks divesting from fossil fuels companies, even when they remain highly profitable, are an example of the “environmental” part of the equation. Credit card companies refusing to process transactions from gun manufacturers is one popular “social” policy. “Governance” includes “equity” initiatives, like setting arbitrary quotas for the number of LGBTQ people, women, and minorities on corporate boards, regardless of whether they are actually the most qualified candidates for the job.
The force behind the massive ESG wave rocking corporate America is a wholesale redefinition of a time-tested principle. Traditionally, companies act in order to maximize returns for “shareholders” – or those with an actual financial investment in the company. According to ESG philosophy, however, companies should now act to benefit “stakeholders,” defined as anyone who may directly or indirectly be affected by the actions of a company.
This definition is intentionally broad to encompass as many people as possible. In effect, “stakeholder capitalism” allows woke executives to disregard the interests of actual shareholders in pursuit of their own ideological agenda by claiming that policies like blacklisting conservatives and providing company funds for employees to travel to receive abortions are in the interests of “stakeholders,” even if they are diametrically opposed to the interests of shareholders.
CEOs and corporate boards – often under pressure from left-wing activists – are then free to pick and choose which stakeholders’ interests they wish to prioritize. In light of this fundamental change to how companies operate, it is perhaps no surprise that a group of nearly 200 CEOs of the world’s most powerful companies felt a need to issue a statement on the “purpose of a corporation” outlining this new woke era of business.
This model is clearly bad news for investors, not to mention family values, stable economic growth, and conservatism as a whole. But after years of this woke virus infecting corporate America, some Republicans are starting to go on offense.
State treasurers in particular have been leaders in opposing ESG investing and restore political neutrality to investment and business decisions. In January, West Virginia Treasurer Riley became the first to divest his state’s pension plan from BlackRock over the company’s anti-coal stance.
Since then, South Carolina, Louisiana, Texas, West Virginia, Kentucky, Oklahoma, Florida, South Carolina, Arizona, Idaho, Utah, Wyoming, Arkansas, North Dakota, and Missouri have also taken similar bold measures to push back against the ESG principles guiding BlackRock. States have publicly divested a total of over $4 billion from BlackRock, citing their ESG policies. That figure does not even include the more than $20 billion that BlackRock stands to lose in Texas if it loses an appeal in a lawsuit claiming that the firm violated a Texas law prohibiting banks and asset managers from boycotting essential energy providers like oil and gas companies.
Some states like North Carolina have also used their investments to place additional pressure on woke investors. Earlier this month, North Carolina State Treasurer Dale Folwell publicly called on BlackRock CEO Larry Fink – one of the chief proponents of ESG – to resign, citing a “loss of confidence.”
“Unfortunately, Mr. Fink’s political agenda has gotten in the way of his same fiduciary duty,” Folwell said. “A focus on ESG is not a focus on returns, and potentially could force us to violate our own fiduciary duty of loyalty.”
The results of such policies speak for themselves. Republican state financial officers (treasurers and auditors) successfully defended every seat and even flipped five additional seats in November – an impressive record of success hardly seen anywhere else this cycle.
State attorneys general have also played a vital role in leading the anti-ESG movement. In a November 29 letter, 13 GOP attorneys general accused investment giant Vanguard of “breaching its promises” to investors, further calling on a federal agency to prevent the firm from investing in public utility companies given its public ESG stance. A few days later, on December 7, Vanguard became the first major firm to pull out of the Net Zero Asset Managers initiative. This dealt a major blow to the alliance, which has since backed down from some of its more controversial policies in order to avoid legal ramifications for its members.
Missouri Attorney General Eric Schmitt – who recently won election to the U.S. Senate – has also led a 19-state coalition into investment banks over ESG policies. Just this month, Nebraska Attorney General Doug Peterson released a scathing report on ESG, claiming that it violates fiduciary duty to impose ESG standards upon investments instead of focusing on maximizing financial returns.
Organizations like the State Financial Officers Foundation (SFOF) and the American Legislative Exchange Council (ALEC) – both of which were founded in part through efforts by Republican state officials – are also working to push back on ESG and raise awareness about the perils of far-left ideology in financial policy. A survey from October of this year found that 85% of Americans still do not know what ESG stands for, not to mention what all it entails for their hard-earned retirement savings. Activists have exploited this information gap for years to advance their ideological agenda without much public backlash. This year, SFOF launched a new website and campaign called “Our Money Our Values” to explain what ESG is in plain terms so everyday Americans can understand the impact ESG has on them and how they can stand up against it, especially to protect their own savings.
Republicans raising the alarm about woke corporatism have already been more than vindicated. According to Bloomberg, this year the largest ESG funds are down more than 15% on average, lagging the S&P. This includes BlackRock’s ESG fund. By contrast, funds that have not divested from oil and gas among other investments, such as the MAGA fund run by Point Bridge Capital out of Fort Worth, Texas, are doing 15% better than these ESG funds.
State Republican officials, often with little media fanfare, have led the way in protecting the interests of consumers and ordinary investors from the dangerous path of ESG. Republican elected officials elsewhere and those with sway in the industry could learn a great deal from their courage.
Katharine “Katie” Sullivan was as an Acting Assistant Attorney General and a senior advisor to the White House Domestic Policy Council under President Trump. She previously served 11 years as a state trial court judge in Colorado.
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