‘Freedom to Invest’ Is Latest Rallying Cry for Supporters of ESG
As the political backlash against sustainable investing continues, a coalition of more than 250 investors and businesses are calling on policy makers to protect their freedom to invest responsibly.
“Building profitable businesses and portfolios demands an analysis of all major financial risks—— from inflation to climate change——and policies to limit that simply defy responsible investing and business practices,” wrote the group in a joint statement released Thursday.
The growing list of signatories includes asset manager
(ticker: BEN), the nation’s second-largest pension fund California State Teachers’ Retirement System,
company
(AKAM), and many more.
Ceres, a nonprofit focusing on sustainability challenges in the capital markets, and the We Mean Business Coalition coordinated the statement and are calling on investors and companies to sign the pledge. “Give us the freedom to do our jobs,” Ceres CEO and President Mindy Lubber said at a media briefing on Thursday.
The statement comes as politicians debate whether environmental, social, and governance considerations are beneficial or harmful for investment results. Once a specialized field of the financial industry, ESG investing has become a new front in the ideological confrontation between the political left and right.
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Last year, the Labor Department made a rule eliminating Trump-era restrictions that required retirement plans to consider only “pecuniary” factors when making investment decisions. Proponents of the DOL rule argue that ESG factors——such as companies’ use or sale of fossil fuels, and how they manage their staffs——could affect a firm’s long-term value, and therefore should be taken into account.
Republicans opposing the DOL rule, on the other hand, believe that it allows money managers to pursue a liberal political agenda through the back door at the price of investor returns. Earlier this month, Congress passed a Republican-sponsored bill to block the DOL rule, and President Joe Biden vetoed the legislation this week.
The political backlash against ESG isn’t limited to the DOL rule. There has been a series of coordinated legislative efforts aimed at restricting sustainable investment across many U.S. states, where conservative lawmakers proposed or passed bills asking public entities to divest from ESG-friendly investment firms.
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Lubber called such political efforts “insanity,” noting that for decades, investors and companies shared the vision that being sustainable adds to shareholder value rather than subtracts from it. “Shockingly, there are some who want to suggest that this is no longer a viable mission,” she said during Thursday’s briefing.
Attacks on ESG investing are part of the larger “anti-woke” movement pushed by the GOP since last year. ‘Woke,” coined by the Black community to indicate that someone is informed about social injustice, has been used by conservatives as a pejorative term to dismiss many progressive policies on issues like racial equity, gender education, and climate change.
U.S. companies and financial institutions shouldn’t let “woke” political agendas affect their business and investing decisions, the argument goes. But some industry leaders argue that looking at ESG issues is part of the entire risk-analysis process, and failing to do so would be irresponsible to investors.
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“We’re not woke, we’re awake, paying attention,” said Anne Simpson, Franklin Templeton’s global head of sustainability, at the briefing event, “There is no situation in which we can say, oh, somebody told me to ignore something that might be relevant to risk. It would not be prudent.”
Despite the large number of signatories and some recognizable names, some of the financial industry’s biggest players aren’t on the list. Caught in the middle of the political tug of war about ESG, many companies appear to be trying not to alienate people on either side of the argument.
Since companies vocal about their focusing on sustainability might face a backlash or lose business, many have chosen to go silent or turn down the volume in a recent phenomenon known as “green hushing.”
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Still, almost every company and investor that has committed to sustainability is continuing to do so, said Lubber. What’s missing is the willingness to stand up and speak out, and push back against the “unfortunate argument that’s not based in fact, or in science or in economics,” she said.
Ceres is in talks with many institutions and expects to see more jump on board, she said.
Write to Evie Liu at evie.liu@barrons.com
