Red States Hurt Themselves by Rejecting Climate-Conscious Investment Policies, by Daily Editorials
Big investment firms, including those that manage billions of dollars in public workers’ retirement accounts, face punishment by various state legislatures simply for declining to put their investments in fossil fuel companies that contribute to global warming. The investment firms accurately portray such companies as a long-term economic risk. But legislatures in politically red states with fossil-fuel-heavy economies are fighting back, refusing to let such investment firms handle their state workers’ portfolios.
In essence, those states are moving to boycott investment firms that acknowledge the realities of climate change. They claim that climate-conscious investing is just “woke” virtual signaling that puts their clients at a financial disadvantage. “It’s for the pop culture,” was the dismissive assessment of Sen. Kevin Cramer, R-North Dakota, Politico reported earlier this year. “From a fiduciary standpoint, it has nothing to do with markets or market viability.”
Wrong. What happens to the climate is intrinsically important to the future of financial markets. The irony is, it’s those conservative politicians who are introducing ideological sparring where it doesn’t belong, and doing it at the expense of sound investment decisions. That’s because, whether they acknowledge it or not, climate change is real and is already having major economic impacts on coastal regions and other areas. To fail to consider that fact is the height of irresponsibility, with potential downsides not just for the planet, but for the firms’ investment returns.
Higher sea levels, increased flooding and droughts, and less predictable hurricane seasons have direct impacts on real estate markets and commodity prices. Steering investment away from industries that contribute to those issues is a wise long-term strategy. Further, society is moving inexorably (if too slowly) toward alternative energy sources like solar and wind, making fossil fuels an iffy long-term investment in and of itself.
Yet Texas, Oklahoma, West Virginia and other red states have moved or are moving to cut ties with investment firms that have divested from fossil fuels. The conservative politicians behind that trend invariably present themselves as clear-eyed fiscal realists breaking with starry-eyed entities that are just pandering to liberal sensibilities. Never mind that the science — and, ultimately, the economics — is entirely on the side of those who are pulling back from fossil fuels.
Those on the other side include entities like the Heartland Institute, a fossil-fuel industry front organization that has for years been a top purveyor of climate misinformation aimed at preventing policies that mitigate global warming. The involvement of Heartland and other groups like it in pushing these red state policies to punish climate-conscious investment firms speaks volumes about what’s really going on.
Ultimately, Texas and the rest can choose whatever investment firms they want, based on whatever criteria they want. But in betting on fossil fuels, they’re betting against the planet — and, in the end, hurting their own portfolios.
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