'Woke' investing braces for midterms

Nov 01, 2022 View in browser   By Debra Kahn and Jordan Wolman THE BIG IDEA BlackRock is facing heat from all sides. | Yuki Iwamura/AP Photo ESG WARS: THE PHANTOM MENACE — Tired of hearing about ESG? Sorry! Environmental, social and governance investing is only getting hotter — and so is the GOP backlash. We still can't fully explain why Republicans decided to open a new culture-war front against Wall Street's embrace of accounting for the risks of climate change. It doesn't seem to be resonating with voters or influencing investors. But candidates for financial offices in Arizona, Florida, Illinois, Minnesota and Kansas have all taken anti-ESG positions. After the midterms, Republicans are planning to build on the momentum they've established in states like Texas, Louisiana and West Virginia, where officials have pulled millions of dollars out of BlackRock Inc. and other financial firms. "We are going full throttle once we get into 2023," said West Virginia Treasurer Riley Moore , a Republican leading a coalition of 15 state treasurers working to punish financial firms they say are boycotting fossil fuels. "We are going to see a lot more movement on this at the state level. You're really going to start to reach critical mass as it relates to assets under management and capital that can be leveraged against the ESG movement." In Congress, the beatings will continue until morale improves. If Republicans win a majority in the House next week, expect more aggressive oversight of the Securities and Exchange Commission's proposed climate disclosure rule and the emphasis on climate risk at the Federal Reserve and other financial regulators. And more pressure on banks and asset managers. "BlackRock and State Street and Vanguard and Invesco and Fidelity — these are great companies," House Financial Services Committee member Rep. Andy Barr (D-Ky.) said. "All we want is for them to live up to their history of being great American companies and achieving retirement security for Americans and stop this nonsense of politicizing capital allocation through ESG." Read more from Jordan here .   NEW AND IMPROVED POLITICO APP: Stay up to speed with the newly updated POLITICO mobile app, featuring timely political news, insights and analysis from the best journalists in the business. With a fresh look and improved features, the sleek and navigable design offers a convenient way to access POLITICO's scoops and groundbreaking reporting. Don't miss out on the app you can rely on for the news you need, reimagined. Already a POLITICO app user? Upgrade today! DOWNLOAD FOR iOS  – DOWNLOAD FOR ANDROID .     BUILDING BLOCKS The Salton Sea is home to a huge lithium deposit. | Marcio Jose Sanchez/AP Photo LITHIUM CHICKEN — California is sitting on what Gov. Gavin Newsom (D) has called the "Saudi Arabia of lithium." But two of the three major companies looking to take lithium out of the Salton Sea are balking at a new extraction tax Newsom signed into law earlier this year. The tax charges an increasing rate for every metric ton, while the tax that some in industry would prefer is a percentage based on actual sales, which would account for fluctuations in market prices. "This new tax would be far more than this new industry could possibly absorb," Rod Colwell , CEO of General Motors Co.-backed Controlled Thermal Resources, said in an email. CEO Eric Spomer of EnergySource Minerals, a geothermal producer aiming to begin lithium production at the Salton Sea in 2025, also said he prefers the percentage tax. California is sticking to its guns, balancing the desire to lure industry to a region that could supply one-third of the world's lithium demand — a $7.2 billion annual value — against the goal of ensuring that local communities benefit from the extraction of a key ingredient to the green transition. The state Department of Tax and Fee Administration is conducting a year-long study of which tax to implement for the long term. Lawmakers and environmental activists in the region are unbothered by industry pressure to speed up the timeline and go with the percentage-based tax. They point out that the third big company with designs on Salton Sea lithium, Berkshire Hathaway Inc.'s BHE Renewables, is on board with the per-ton tax. "If they walk away, they walk away. If these people aren't selling us the American dream, then maybe they got to go somewhere else," said Luis Olmedo, executive director of Comite Civico Del Valle Inc., a nonprofit in Imperial County, just south of the lake. The region's resources are likely too rich for companies to pass up, said Ian Lange , an associate professor of economics and business at the Colorado School of Mines. The Salton Sea dwarfs other domestic lithium supplies both in terms of size and ease of extraction. "It seems likely they're bluffing," Lange said. "None of your other options are good. It's the quality of the deposit that matters." WASHINGTON WATCH PRIMING THE PUMP — President Joe Biden is paying attention to oil company profits a week before the midterms, calling out ExxonMobil Corp. and Shell PLC on Monday for making more than $28 billion in the third quarter alone. He suggested a windfall tax if energy companies don't boost domestic production and refining capacity instead of returning excess profits to shareholders and stock buybacks. (California Gov. Gavin Newsom (D) proposed the same thing on Thursday, notably without the call for increased production.) But Biden didn't endorse any specific proposal, which, as Josh Siegel writes , could frustrate Democrats in Congress who proposed windfall-tax legislation months ago. It's also happened before, Carlos Anchondo and Mike Lee report for POLITICO's E&E News. For most of the 1980s, the U.S. had an excise tax on oil that functioned as a windfall tax. It was applied to domestic oil producers when the price of oil rose above a pre-set price, according to a 2006 report from the Congressional Research Service . But the tax may have reduced domestic production by as much as 8 percent, and it made the U.S. more dependent on foreign imports, the report said. YOU TELL US  GAME ON — Welcome to the Long Game, where we tell you about the latest on efforts to shape our future. We deliver data-driven storytelling, compelling interviews with industry and political leaders, and news Tuesday through Friday to keep you in the loop on sustainability. A very warm welcome to our newest team member, Allison Prang, who starts today! Allison joins us from the Wall Street Journal and will be helping us expand our finance, business and banking coverage. Send her tips at aprang@politico.com and give her a Twitter follow @AllisonPrang . Team Sustainability is editor Greg Mott , deputy editor Debra Kahn and reporters Jordan Wolman and Allison Prang . Reach us all at gmott@politico.com , dkahn@politico.com , jwolman@politico.com and aprang@politico.com . Want more? Don't we all. Sign up for the Long Game . Four days a week and still free! WHAT WE'RE CLICKING — A UC Davis agricultural researcher known for defending meat's carbon footprint gets most of his funding from the livestock industry, the New York Times finds . (Researcher responds : "Who is supposed to pay for sustainability research in animal agriculture, if not the livestock sector?") — A U.K. electric van company is shifting its manufacturing to the U.S. to get those sweet Inflation Reduction Act tax credits. — Elon Musk owning Twitter "is like putting the fox in charge of the henhouse when it comes to political misinformation," the Post reports .   DON'T MISS A THING FROM THE MILKEN INSTITUTE'S MIDDLE EAST AND AFRICA SUMMIT: POLITICO is partnering with the Milken Institute to produce a special edition "Digital Future Daily" newsletter with insider reporting and insights from the Milken Institute's Middle East and Africa Summit happening November 17-18. Hundreds of global leaders will convene, highlighting the important role connection plays in advancing global well-being. Whether you're in-person at the event or following online, sign up for this special edition newsletter for daily coverage of the event. SUBSCRIBE TODAY .       Follow us on Twitter Debra Kahn @debra_kahn Greg Mott @gwmott Jordan Wolman @jordanwolman   Follow us

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