Written by: Jai Jhaveri
Edited by: Marvin Kimwon
Environmental, Social and Corporate Governance (ESG) is a framework companies use to ensure that they are making eco-friendly and socially responsible decisions as a company. This school of thought has become especially prevalent in how investors decide what to invest in. ESG has led to the rise of the popular field of sustainable finance.
The GOP is a strong opponent of ESG. The party, made up of several individuals that deny the existence of climate change and oppose progressive social policy, is trying to legally prevent investors from allowing ESG principles to guide their investment decisions. Republicans see ESG as a part of “woke capitalism” and are determined to see an end to it (Wilkie).
A group of Republicans, some tied to Donald Trump, have formed a group entitled State Financial Officers Foundation (Schwartz). This group is advocating against ESG investing. They are targeting large companies like Blackrock and Vanguard that are famous for sustainable investing (Schwartz). The foundation is hosting events and seminars that openly criticize the aforementioned companies (Schwartz).
In Florida, the Republican governor Ron DeSantis is proposing a bill that would prevent the state and local Floridian governments from using ESG principles when issuing municipal bonds (Smith, Moran, and Bloomberg). Municipal bonds are bonds issued by public institutions to raise capital. This new policy is predicted to cost the taxpayers of the state about $361 million more in the form of interest rates because the law would prevent governments from working with bond brokers that consider ESG (Schweers).
Currently, the Labor Department allows retirement fund managers to take ESG principles into consideration when making investment decisions (Wilkie). Fund managers are not absolutely required to keep ESG principles in mind, they can if they choose to do so. A bill is being circulated in Congress that will ban fund managers from using ESG criteria. The bill passed in the House and easily moved to the Senate for a vote. President Biden is determined to veto the bill, which would be the first veto of his presidency. The bill passed in the Senate, quite easily, with a vote ratio of 50-46 (Wilkie).
ESG investing is important in helping the planet transition towards a greener future. Many large investment banks such as Bank of America and JP Morgan are also launching extremely strong missions to ensure that their respective companies are making environmentally and socially safe financial maneuvers. The recent conservative uprising against ESG will make it more difficult for investors to pitch in on the move to green and socially mindful business practices.
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