Anti-ESG takes a leap across the pond

Oct 31, 2023

By Jordan Wolman, Charlie Cooper and Allison Prang

THE BIG IDEA

Vivek Ramaswamy speaks.

Republican presidential candidate Vivek Ramaswamy hyped up the anti-ESG train across the pond. | Kevin Wolf/AP Photo

TEA TIME — Leaders of the U.S. campaign against environmental, social and governance investing descended on London this week looking to spread their “anti-woke” gospel and spur a similar movement on the other side of the Atlantic.

Republican presidential candidate Vivek Ramaswamy and State Financial Officers Foundation CEO Derek Kreifels were among those gathered for the inaugural conference of the newly-formed Alliance for Responsible Citizenship, along with other U.S. conservative luminaries including House Speaker Mike Johnson, former Speaker Kevin McCarthy and Sen. Mike Lee (R-Utah), some of whom appeared virtually.

Kreifels said in an interview that he hopes the gathering of anti-ESG advocates helps nudge folks in the U.K. to “pick up the mantle” and lay the groundwork for a strategy pushing back on this kind of investing.

“Absolutely, this is about sharing what’s working. We’re winning. We’re creating pause in the industry,” Kreifels said in an interview. “There's already a lot of leaders who have already figured this out — that ESG is a losing proposition. This is going to be an opportunity to give voice and cover to those who may have felt like they were on an island believing that.”

The London conference comes at a pivotal moment for U.K. climate and energy policy — one that anti-ESG crusaders see as presenting a path to grow their movement.

U.K. Defense Secretary Grant Shapps warned in September that ESG considerations were undermining investment in the nation’s defense sector at a time of heightened security concerns. That same month, Prime Minister Rishi Sunak rolled back key climate targets ahead of next year’s elections. And in July, the private bank and wealth manager Coutts was accused of pursuing a “woke” capitalist agenda after it decided to close an account belonging to former Brexit campaigner Nigel Farage.

Ramaswamy, who appeared virtually, told the London audience that European companies have suffered financially from not focusing solely on maximizing shareholder returns — and cast the issue as one in which a few corporations undermine democracy by imposing their market power to achieve societal changes not approved by the government.

“My impression is that they are as thirsty for pushback on the ESG movement as here in the United States,” said Will Hild, the head of the Leonard Leo-supported anti-ESG group Consumers’ Research.

If that is the case, it’s not so clear to those on the ground.

Emma Wall, head of investment analytics and research at U.K. financial services firm Hargreaves Lansdown, said that even though the country has seen a recent trend of money being pulled out of ESG funds, it doesn’t yet indicate a backlash. And even as ESG has seeped into politics, “the language is far less inflammatory” than in the U.S.

With U.K. elections looming, the next two years “will be key in identifying whether there has been a backlash as has happened in the U.S. or whether what we are seeing is just that frothy money leaving,” Wall said.

It’s even less clear whether an anti-ESG movement would spread across Europe given the U.K.’s relative isolation from the continent after Brexit. Brussels is on a regulatory tear, going full steam ahead on thorny issues such as green bond issuance and requiring businesses to disclose their climate, biodiversity and water impacts, ensure their supply chains aren’t contributing to deforestation and make more of their packaging recyclable.

Some advocates, like Jason Isaac, founder and CEO of the American Energy Institute and a distinguished fellow at the conservative Texas Public Policy Foundation, concede that the European context offers plenty of hurdles for those hoping for an anti-ESG wave. But Kreifels said he was energized by the audience's enthusiasm, saying he received 30 or 40 private messages after his session from inspired conference attendees hailing from Britain, Poland, Germany and Brazil.

"We're going to continue to foster model policies that will be hopefully seen into legislation," he said. "We'll work with our partners like ALEC and the Heritage Foundation and other friends to continue to push together, and we'll give support now to other little organizations that are popping up around Europe that are starting to push back against the ESG movement."

AROUND THE NATION

OKLAHOMA IRE — The food fight over Oklahoma’s effort to blacklist Wall Street firms over their ESG efforts is getting messier.

Tony DeSha, executive director of the Oklahoma Public Employees Association, took his case to … the Pawhuska Journal-Capital — Pawhuska’s population is just shy of 3,000. He published an op-ed in the newspaper admonishing Oklahoma Treasurer Todd Russ over a state law requiring pension funds to stop doing business with financial firms accused of boycotting the oil and gas industry, our Allison Prang reports.

We “refuse to stand idly by as Treasurer Russ diminishes our members’ hard-earned retirement funds, and the promises made by the state to public-sector employees, in the name of political activism,” DeSha wrote in the column, which was also published on OPEA’s website.

DeSha’s comments come after the Oklahoma Public Employees Retirement System’s board of directors voted to keep its current roster of financial firms, triggering criticism from Russ — who is a member of the board.

Russ also pushed back against DeSha’s assertions, saying he’s just asking pensions to follow the spirit of the law.

“Their organization represents all of the pension holders in that organization and…I’m pretty sure most of the pension holders are concerned about the ESG conversation and do want” money supporting the state’s energy sector, he said in an interview.

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WASHINGTON WATCH

CLEAN CONFLICT — President Joe Biden’s clean energy agenda is facing threats from his own banking regulators, Jasper Goodman reports.

Impending rules intended to bolster America’s big banks against risk would make it much more expensive for them to provide a key type of investment in things like wind and solar power. Renewable energy developers warn the push could derail Biden’s attempts to curb greenhouse gas emissions.

The new rules would quadruple the capital that banks must have to back up investments involving the renewable energy tax credits, decreasing the financial benefit.

Democrats are now scrambling to prevent a conflict between their goals of fighting climate change and shoring up big banks.

“The implication is a massive reduction in the amount of capital that’s available to decarbonize our energy system and make investments in cheaper energy assets,” Rep. Sean Casten (D-Ill.) said.

DATA DIVE

DIVERSITY DATA — Companies are increasingly disclosing their directors’ sexual orientation, but corporate boards’ racial and ethnic diversity may be plateauing, according to a new report from The Conference Board, a nonprofit think tank.

The findings, shared first with Long Game, are based on corporate data collected as of mid-August.

Almost 3 in 10 companies in the S&P 500 are now disclosing directors’ sexual orientation, up from 7 percent in 2021. The same trend appears among companies in the Russell 3000, with 4 in 10 disclosing this information compared to 3 percent in 2021.

Smaller companies are more inclined to make this information public, compared with larger corporations. The fact that smaller companies are also more likely to have younger directors indicates a generational divide on willingness to disclose this data.

Meanwhile, 32 percent of directors in the S&P 500 are now female, up from 23 percent in 2018. And most companies in both the S&P 500 and Russell 3000 now have three or more female directors, though the share of new female directors is declining.

The reported level of racial and ethnic diversity on boards has stayed flat at 21 percent among Russell 3000 companies since 2018 — which “may be driven by directors’ reluctance to self-identify as being part of a demographic group,” 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. Join us every Tuesday as we keep you in the loop on the world of sustainability.

Team Sustainability is editor Greg Mott and reporters Jordan Wolman and Allison Prang. Reach us all at gmott@politico.com, jwolman@politico.com and aprang@politico.com.

WHAT WE'RE CLICKING

— Toyota has indicated that it is close to a battery manufacturing breakthrough that could lead to production of EVs that can drive 1,200 kilometres on a single charge, the Financial Times reports.

— The FT also has a deep-dive look at the global travails of the offshore wind industry.

— Architects are experimenting with ways to construct high-rise buildings from wood, which could reduce greenhouse gas emissions and store carbon. The Washington Post has that story.

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