Democratic state treasurers blast anti-ESG counterparts

Sustainable investing has become a politically divisive issue


Emile Hallez

A group of 13 Democratic state treasurers issued an open letter today refuting the stances of their counterparts in other states who are opposing ESG.

The statement calls out moves against ESG criteria being used in investing public money as politically motivated.

“Several states in our country have started blacklisting financial firms that don’t agree with their political views. West Virginia, Idaho, Oklahoma, Texas and Florida have created new policies and laws that restrict who they will do business with, reducing competition and restricting access to many high-quality managers,” the letter stated. “This strategy has real costs that ultimately impact their taxpayers.”

The latter sentence appears to reference the first academic study of the consequences of a recent Texas law that prevents the state starting contracts with financial firms that allegedly boycott the fossil fuel industry. That report, published by the Wharton School, found that Texas is paying as much as $532m more in interest on $32bn borrowed as a result of the biggest banks exiting the muni bond market in the state this year.

Signers of the recent letter point to the same potential benefits of sustainable investing that ESG proponents have long put forward — that such factors can be used to assess material financial risks.

“The blacklisting states apparently believe, despite ample evidence and scientific consensus to the contrary, that poor working conditions, unfair compensation, discrimination and harassment, and even poor governance practices do not represent material threats to the companies in which they invest,” the letter read. “They refuse to acknowledge, in the face of sweltering heat, floods, tornadoes, snowstorms and other extreme weather, that climate change is real and is a true business threat to all of us.”

The letter was signed by treasurers from Maine, Nevada, Delaware, New Mexico, Illinois, Wisconsin, Massachusetts, California, Rhode Island, Vermont, Washington, Oregon and Colorado. New York City Comptroller Brad Lander was also a signer.

ESG has become an unlikely hot-button political topic in this election year, with politicians in many states taking sides that appear to go neatly down party lines.

Earlier this year, 19 attorneys general in Republican-leaning states sent a letter to BlackRock, one of the largest oil and gas industry investors, asking it numerous questions about whether it boycotts fossil fuels. That firm, whose CEO Larry Fink has been outspoken about the potential benefits of considering ESG, has since been clear that BlackRock does not avoid investments in the energy business.

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