An anti-ESG chill pill

Nov 11, 2022 View in browser   By Debra Kahn THE WEEK THAT WAS Rep. Patrick McHenry (R-N.C.) will likely have an anti-ESG pulpit, but not much else. A RED BUMP — Republicans are going to ramp up their attacks on ESG investing after the midterms, but it'll mostly be sound and fury, financial experts say. Rep. Patrick McHenry (R-N.C.), a foe of the Securities and Exchange Commission's proposal to make companies disclose more climate-related information, will likely helm the House Financial Services Committee. Besides lots of oversight hearings, the likeliest GOP gambit is an attempt to attach a rider to draft appropriations bills that would prohibit the agency from using any funds to work on climate-related issues. But Democrats' better-than-anticipated performance in the midterms could have a chilling effect on their efforts, as Avery Ellfeldt and Adam Aton report for POLITICO's E&E News . "What's interesting about the exit polls from my perspective is that voters said they trust Democrats on three key issues: one of them is climate," Cynthia Hanawalt, a securities litigator and senior fellow at the Columbia University Sabin Center for Climate Change Law, said in an email. "If Republicans win the House, it will be with a slim majority, so they would be taking a political risk to hold up the budget over an issue where their position with the electorate is already weak." One place to watch is the courts. Six of the 19 attorneys general who sent a letter this summer to BlackRock Inc. arguing that the firm's embrace of net-zero principles runs counter to its fiduciary duties are leaving office, but don't expect much change in tactics. Republicans are fully expected to challenge the SEC's climate risk disclosure rule when it's finalized. Bottom line: The private sector is going to keep on ESGing. "The only reason why businesses would mess with this kind of stuff at all is because they see that it can add value to the business over the long run," said Jon Hale, who directs sustainability research at Sustainalytics, a sustainable finance and corporate governance research and ratings firm. "Politicians who are not investment experts are not going to be able to legislate that away," Hale added. WHAT WE'VE LEARNED DEMOCRATS' VERY GOOD WEEK — The midterms subverted expectations in a big way: Democrats didn't get punished for inflation, or crime or tackling climate change. In the aftermath of passing the biggest climate bill in U.S. history, Democrats this year held a half-dozen competitive governorships, won two others and wrestled legislative control away from Republicans in Michigan and Minnesota. It's a marked change from 2010, when Democrats were drubbed after trying and failing to pass a nationwide carbon-trading system. Lesson learned? Carrots are better than sticks. "Whether or not voters *rewarded* Ds for passing IRA or not, there's clearly no evidence they were *punished* for it, as they almost certainly would have been if they'd managed to pass a carbon pricing centered climate policy," Princeton University professor Jesse Jenkins wrote on Twitter. Read more from POLITICO's E&E News' Benjamin Storrow. SUSTAINABLE FINANCE STOP TRYING TO MAKE OFFSETS HAPPEN — The U.S. is proposing letting companies pay developing countries to reduce their reliance on fossil fuels, E&E News' Jean Chemnick reports from U.N. climate talks in Sharm El-Sheikh, Egypt. From the reaction, some find the concept as stinky as COP's sewage issues and potentially malicious conference app . U.S. climate envoy John Kerry proposed a voluntary market in which companies would purchase carbon credits to offset their greenhouse gas emissions and meet corporate climate targets. Those credits would be generated when developing countries or their subnational governments transition their power grids away from fossil fuels. The point is to marshal private finance. "We have to accelerate the clean energy transition and, my friends, it takes money to do that," Kerry said, adding that not enough public funding exists to keep global warming from surpassing the 1.5 degrees Celsius — the goal set by the 2015 Paris climate agreement. "No government in the world has enough money to get the job done." But it comes after decades of attempts in other U.N. venues and in the private sector to figure out how to limit incentives to those projects that wouldn't have happened if not for the investments. Germany's not on board, for one. "It's just not enough," a senior Latin American negotiator told Jean while speaking on condition of anonymity. "They come with like these grand schemes, grand intentions, and they're like, 'Now we are saving the world.'" Bloomberg's Jennifer A. Dlouhy and Akshat Rathi quoted an unidentified European official worried about the idea. Demand for offsets is rising despite the jeers. Switzerland is experimenting with paying Peru, Ghana, Senegal, Georgia, Vanuatu, Dominica, Thailand and Ukraine to reduce emissions, and Japan and Sweden are planning to follow suit, the New York Times reported this week . And some developing countries like the idea. Nigeria is backing Kerry's plan, and Gabon is trying the private market directly with a plan to sell credits from reduced deforestation, the WSJ reports . SHAREHOLDER SCOREBOARD TWITTER VS. LETTUCE — Some sustainability-related fallout from Elon Musk's poor steering of Twitter: A California air regulator with authority over Tesla's Bay Area factory said he won't tour the facility as planned because Twitter has turned into such a cesspool. "I will be reclaiming the time I had intended for learning more about Tesla and better understanding the challenges you currently face with the permitting process and reallocating it to building community instead," Emeryville Mayor John Bauters wrote Thursday on...you guessed it, Twitter. Bauters is chair of the Bay Area Air Quality Management District, which oversees regional air pollution. He said Tesla officials had requested a meeting next month to discuss permitting issues but that Musk's handling of Twitter has increased "the time local officials like me spend publicly correcting disinformation, addressing or responding to inaccurate information, and supporting the smaller businesses and community members harmed by inadequate controls." YOU TELL US  Happy Friday! Team Sustainability is editor Greg Mott , deputy editor Debra Kahn , and reporters Jordan Wolman and Allison Prang. Reach us at gmott@politico.com , dkahn@politico.com , jwolman@politico.com and aprang@politico.com . Want more? You can have it. Sign up for the Long Game . Four days a week and still free. That's sustainability! WHAT WE'RE CLICKING — Nepal has increased its forest cover 22 percent since 1988 through community management, the NYT reports . — Elon Musk is courting regulatory and political fights but doesn't seem to care. "Good luck," a former FCC chair says . — Whitmer, Walz, Lujan Grisham: These are the governors who won reelection that climate advocates are most excited about .   Follow us on Twitter Debra Kahn @debra_kahn Greg Mott @gwmott Jordan Wolman @jordanwolman Allison Prang @AllisonPrang   Follow us

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