GOP Intensifies Backlash Against BlackRock Policies

GOP Intensifies Backlash Against BlackRock Policies

Major investment firms like BlackRock are now facing an intensifying conservative backlash as red-state politicians rally against “woke capitalism” and punish companies for moves to expand environmental, social, and governance (ESG) standards to account for climate-related risks.

Bloomberg: BlackRock CEO Larry Fink on Inflation and ESG Investing, June 2, 2022.

Florida Governor Ron DeSantis moved to bar state pension funds from screening for ESG risks, despite 90% of pension funds voting in favor of key ESG resolutions. Meanwhile, Texas Comptroller Glenn Hegar announced that the state would no longer do business with 10 companies and 348 investment funds that “boycott energy companies.” In a statement, Hegar writes:

The environmental, social, and corporate governance (ESG) movement has produced an opaque and perverse system in which some financial companies no longer make decisions in the best interest of their shareholders or their clients, but instead use their financial clout to push a social and political agenda shrouded in secrecy.

CNBC: Sen. Tom Cotton Targets ESG Investing |BlackRock is a climate cartel, July 14, 2022.

Fox Business: This Wall Street 'scam' must be investigated | Ramaswamy, July 17, 2022.

Why This Matters

The movement against ESG investment is just one wing of a larger culture war targeting “woke” company policies. This year, conservative groups filed 43 shareholder proposals aimed to advance the party’s ideological agenda. Though GOP officials claim to have the well-being of stakeholders in mind, the campaign’s agenda is more likely a move to secure Republican votes ahead of the midterm elections. If companies concede to Republican pushback, it could spell disaster for the country’s emissions reduction targets, making the SEC's proposed emissions reporting even more important.

MSNBC: Republicans Need to Wake Up to the Climate Crises, July 22, 2022.

CBS NEWS: Inside the Republican Party’s Generational Divide Over Climate Change, February 1, 2021.

The ESG Agenda

Though ESG investing represents a critical step in the right direction, they’re far from comprehensive solutions, nor can they move the needle in ways that policy reform could. According to Jon Hale, director of ESG Research for the Americas at Sustainalytics, ESGs are simply a proxy for a broader idea. “The Republican view on ESG is political hyperbole that seeks to marginalize and vilify the ideas that companies should focus on creating value for all stakeholders … take steps to alleviate the risks of climate change to their businesses,” he writes.

Investment firms like BlackRock maintain climate risks are financial risks. "We are a fiduciary to our clients, helping them navigate investment risks and opportunities so they can reach their long-term financial goals, not engineering specific decarbonization outcomes in the real economy,” BlackRock told Axios. “The money we manage is not our own -- it belongs to our clients, many of whom make their own asset allocation and portfolio construction decisions.”

FINANCE MARK: BlackRock CEO Larry Fink | We are not the environmental police, June 5, 2022.

FII Institute: FII ESG London - S010 | How Asset Managers / Sovereign Wealth Funds Are Financing the Future of ESG, May 22, 2022.