Tag Archives: Climate Crisis

Beware, The Culture Warriors Have New Strawmen: Dangers of “ESG” and “Woke Capitalism”

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End of February 2023

by Hank Boerner – Chair & Chief Strategist – G&A Institute

New threats to ESG detected in America’s Red-controlled states:  The internal culture wars now include an unlikely frontal assault on the alleged “dangers” posed to institutional investors (state and city pension funds and the states; public financing) by professional asset managers who embrace sustainable investing approaches and who factor ESG analysis for their portfolio decision-making (in the management of client assets).  

Corporate sustainability leaders and savvy investment managers are asking, “huh?  “why”?

The threat of “ESG” joins such current strawmen as Critical Race Theory, “Woke” Capitalism, Don’t Say Gay (in the State of Florida), the allegations of certain “grooming” books being found in school libraries, and other specious arguments set up by political conservatives and Red state public sector leaders to gain points with the Republican base.  And with right-wing media outlets. 

The assault on ESG is mainly focused on the prominent asset management firms that serve state and city public employee pension plans and healthcare plans. These asset management firms are told to abandon ESG principles (and their focus on the risks brought by the climate change crisis to investments) and related portfolio management approaches — or lose the state and/or city investment and capital raising client.

Political leaders in such states as Florida, Texas, West Virginia, Louisiana, and Missouri are openly opposed to “woke capitalism” as they see it and have targeted BlackRock, State Street, Vanguard, and other large asset management firms embracing sustainable investment.  (Consider that these three organizations have significant levels of investments in many publicly-traded companies.)

The leading ESG ratings firms are also in the cross hairs; 20-plus Republican state attorneys general also challenged ISS and Glass Lewis as both advisory firms expanded their traditional governance work to including “S” and “E” issues through a more comprehensive ESG lens. (These firms advise and provide services to public sector pension plans.)

Some Red state leaders are cutting ties with BlackRock and other firms and moving to prohibit the Wall Street organizations from management of state monies (such as their public employee pension systems).

BlackRock CEO Larry Fink fired back at the annual Davos gathering to say that his firm, while losing about $4 billion in the public sector pullback of funds to be managed, has seen the flow of new money into BlackRock to manage dwarfing that – new funds to be managed by BlackRock topped $200 billion in year 2022, he told the Davos crowd.

In his annual letter to corporate CEOs, Larry Fink wrote in 2022 that “stakeholder capitalism is not about politics, it is not ‘woke’, it is capitalism….” Helping clients transition their investments toward a lower-carbon economy is helping BlackRock (with $9 trillion-plus AUM) to attract new assets to manage, CEO Fink explained.

The underlying concern of the Red state officials is really about protecting fossil fuels interests  – like their home states” oil, natural gas, and coal assets. Texas and Louisiana economics are heavily dependent on production of fossil fuels and that no doubt leads to  the political opposition to ESG and minimizing recognition of the dangers posed by the climate crisis.

While BlackRock and other asset managers may not yet eliminating fossil fuels from the assets managed, or in products offered to investors, there is trimming going on (at other major asset management firms and in a number of state investment funds).  There is also pressure being applied to traditional oil & gas firms to innovate and invest in renewable energy production. 

Consider:  in 2022, renewable sources accounted for 22 percent of energy production while coal accounted for 20%. 

Responding to the misguided opposition to ESG in nine states, Democrats in the House of Representatives formed a sustainable investment caucus to advocate for ESG policies and actions.

Said caucus chair Sean Casten of Illinois to The Hill editors: “Given the significant growth of AUM in funds that prioritize ESG factors, Congress has a duty to craft policies that provide investor protection and transparency ofd information to market participants.”

In an opposition move, House Republicans at month’s end moved to block the Biden Administration action on “allowing” pension plan administrator’s to consider ESG factors in their management of fiduciary funds.  The Republicans passed a resolution that would reverse the U.S. Labor Department rule that allows such consideration.  

This is a see-saw event; depending on which party is in the White House, under ERISA rules, fund managers have been allowed to consider ESG/and prevented from using ESG considerations in fund management.  

The House Republicans claim that using ESG would results in higher fees for “less-diversified” investments in “lower-performing” fund portfolios. (Read:  less fossil fuel investments in sustainable funds.)  

The Securities & Exchange Commission has a rule under consideration to mandate disclosure of GHG emissions by publicly-traded companies. It is expected that the Final Rule could be issued sometime in Q1 2023.

This move no doubt will set off a firestorm in Red state territory, and among the congressional delegations from those states. For public companies operating in those states that have, with sizeable operations in the European Union, new ESG disclosure rules are also being put in place in the EU.  

This year we will see significant conflict in the culture wars over climate change measures at the national, state and even city levels. 

The Federal government leads now in addressing the climate crisis, and Red state congressional leaders could challenge to the SEC’s legislative authority (to enact corporate ESG disclosure rules) when the Final Rule is issued (bringing legislative and judicial action).

The G&A team selected the Top Stories (below) on these conflicts.  We’ll keep you updated throughout 2023 on the culture war battles focused on climate change.

We are at an important inflection point in the effort to seriously address the climate crisis, and in ultra-partisan power circles now, the question posed is: which side are you on?

Top Story/Stories

• This group is sharpening the GOP attack on ‘woke’ Wall Street (The Washington Post) https://www.washingtonpost.com/climate-environment/2023/01/30/climate-change-sustainable-investing/
• House Democrats launch sustainable investing caucus (The Hill)  https://thehill.com/policy/equilibrium-sustainability/3830314-house-democrats-launch-sustainable-investing-caucus/
• Disclosure Rules On Track for Issuance by June (Thomson Reuters) https://tax.thomsonreuters.com/news/new-climate-and-sustainability-disclosure-rules-on-track-for-issuance-by-june/
• Politicians Want to Keep Money Out of E.S.G. Funds. Could It Backfire? (The New York Times – subscription required)  https://www.nytimes.com/2023/01/30/your-money/red-states-esg-funds-blackrock.html
• What’s Behind The ESG Investment Backlash (Forbes)  https://www.forbes.com/sites/christinero/2023/01/29/whats-behind-the-esg-investment-backlash/?sh=5929816c3158
• Davos 2023: BlackRock U.S. inflows dwarf $4 bln lost in ESG backlash -CEO (Reuters)  https://www.reuters.com/business/finance/davos-2023-blackrock-us-inflows-dwarf-4-bln-lost-esg-backlash-ceo-2023-01-17/

It’s 2023 – What Will We See in Climate Crisis Action in the Public Sector? Stay Tuned!

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January 2023

by Hank Boerner – Chair and Chief Strategist – G&A Institute

Here we are weeks into Year 2023 – and so as we plunge into the new year, we could ask, what is in store for public sector action to address critical climate change challenges?

To remind us, we are now in year three of the Biden-Harris Administration’s “Whole of Government” strategies (they took office January 2021).

Upon settling in the Oval Office President Joseph Biden quickly returned to the historic Paris Agreement that was abandoned by his predecessor.

In just a few more days, the president’s Executive Order (issued January 27 2021) created a sweeping approach to aligning Federal government strategies, action, finances and more — formalized in an Executive Order titled, “Tackling the Climate Crisis at Home and Abroad”.

Main sections with volumes of details for actions included:

• “Putting the Climate Crisis at the Center of US Foreign Policy and National Security”;
• “Taking a Government-Wide Approach to the Climate Crisis;
• “Use of the Federal Government Buying Power and Real Property and Asset Management”;
• “Empowering Workers Through Rebuilding Our Infrastructure for a Sustainable Economy”;
• “Empowering Workers by Advancing Conservation, Agriculture, and Reforestation”;
• “Empowering Workers Through Vitalizing Energy Communities”;
• “Securing Environmental Justice and Spurring Economic Opportunity”.

The introduction to this sweeping Executive Order stated: “The U.S. and the world face a profound climate crisis. We have a narrow moment to pursue action at home and abroad in order to avoid the most catastrophic impacts of that crisis and to seize the opportunity that tackling climate change presents.”

President Biden enlisted all of the cabinet agencies and many important organs of the Federal government in the effort, and instructed that “the buying power of Federal procurement and real property, public lands and waters, and financial programs” be aligned to support robust climate action. 

Keep in mind the Federal government of the United States of America is the largest buyers of goods & services in the nation.  Just think about all of the government vehicles on the road today – and the EV’s that could replace them.  And the many buildings that the Federal agencies lease, rent or own.  (These will have to meet new climate resilience measures.)  Think about the huge purchases by the Department of Defense.  And on and on!

The President explained in 2021:  An “immediate, clear, and stable source of product demand, increased transparency and data, and robust standards for the market…will help to catalyze private sector investment into, and accelerate the advancement of America’s industrial capacity to supply, domestic energy, buildings, vehicles, and other [necessary] products and materials.”  The stuff of the American nation’s sustainability efforts. 

The power and prestige of the United States would be a priority in relations with other nations and such multilateral organizations as the G7, the G20, and other forums on climate change actions. In focus: clean energy, aviation, shipping, the oceans, the Arctic, sustainable development, and migration (a 2023 critical issue for sure).

How are we doing?  We’ve selected for you a few timely updates on “how we’re doing” with the very comprehensive Biden climate crisis plan.

The recent storms battering California, the Heartland states, and coastal areas, are constant reminders of how serious the climate crisis has become. Snow, volumes of rainfall, floods, tornadoes, hurricanes (cyclones), high winds, fires and more fires — all signs the climate is changing (for the worse). 

We are seeing public sector action increasing along the same lines on the European continent as well, and European Union climate change actions that will affect many U.S. multinational companies,

As we think about all of this, despite political pushback in 2032 we should not lose sight the sweep of the January 2021 Executive Order issued as the very first days of the Biden Administration.

Here’s the document for you: https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/27/executive-order-on-tackling-the-climate-crisis-at-home-and-abroad/

And here is a brief example of the kinds of follow up f- rom July 2021:
https://www.whitehouse.gov/briefing-room/statements-releases/2022/07/20/fact-sheetpresident-bidens-executive-actions-on-climate-to-address-extreme-heat-and-boost-offshore-wind/

Top Stories – Focus on the U.S.

Biden-Harris administration releases first-ever blueprint to decarbonize America’s transportation sector (US Department of Transportation)

What to expect on climate change from the New US Congress (Brookings Institution)

Inflation Reduction Act will see US get serious on climate action in 2023 (New Scientist)

Davos 2023: EU to counter U.S. climate game changer with own green deal (Reuters)


More Details Roll Out – Biden-Harris Administration’s “Whole of Government” Climate Policies & Actions

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June 2021  – This is a biggie!

by Hank Boerner – Chair & Chief Strategist, G&A Institute

The Biden-Harris Administration continues to roll out details of new or proposed or adjusted policies, rules, programs, Federal government financing and various actions to address what the leaders characterize as “the climate crisis”.

What we have now more details of the “Whole of Government” approach for these United States in addressing a widening range of climate change issues. 

In most crisis situations for large organizations, dramatic changes-of-course are always necessary – new paths must be followed.  And so we see…

President Joe Biden certainly being ambitious in navigating the way forward for the public sector in meeting the many climate change challenges (for actions by Federal, state, region, local governments).

President Biden signed yet another order for policy changes and various actions by the many agencies of the national government: “Executive Order #14030 on Climate-Related Financial Risk”.

The new EO #14030 sets out policy and actions to be taken by the whole of America’s public sector, a number of actions intended to be implemented in partnership with state & local governments and financial services sector institutions, and corporate and business interests…”designed to “better protect workers’ hard-earned savings, create good paying jobs, and position America to lead the global economy”.

EO  #14030 builds on the framework for climate change policies and actions set out in President Biden’s January 27th action: “Tackling the Climate Crisis at Home and Abroad” (that is EO #14008).

This and other execute branch orders are designed to “…spur creation of well-paying jobs and achieve a net-zero emissions economy no later than 2050”.

The new EO is intended to “…bolster the resilience of financial institutions and rural and urban communities, States, Tribes, territories…by marshalling the creativity, courage and capital of the United States…and address the climate crisis and not exacerbate its causes to position the U.S. to lead the global economy to a more prosperous and sustainable future…”

The latest order addresses the need for greater financial transparency of the Financial Services Sector — addressing banking, insurance, fiduciary duties of those managing assets — as well as addressing the aspects of Federal financing for business, governments and institutions, and Federal government budgeting both short- and long-term.

For example, the Secretary of the Treasury as chair is instructed to work with the other members of the Financial Stability Oversight Council (FSOC) to assess climate-related risk to the stability of the U.S. financial system; to facilitate sharing of climate-related financial risk data among the members of FSOC; to publish a report in six months on actions / recommendations related to oversight of Financial Institutions.

FSOC members are the influential of Financial Services regulation and oversight:  Treasury Department; the Office of Comptroller of the Currency (inside Treasury, overseeing national banks and foreign banks operating in the USA); chair of Securities & Exchange Commission; chair of the Federal Reserve System; head of FDIC; head of Commodity Futures Trading Commission; as well as a state insurance commissioner; a state banking commissioner; a state securities commissioner.

Addressed in the Executive Order:

  • disclosure and reporting by publicly-traded entities;
  • insurance industry “gaps” of climate-change issues that need to be addressed at Federal and state levels for private insurance;
  • the protection of “worker savings and pensions” (with ERISA and the Department of Labor in focus);
  • Federal level lending and underwriting, including financial aid, loans, grants of such agencies as the Department of Agriculture (farm aid);, and
  • Housing and Urban Development (funneling funds to local and state agencies as well as Federal level financial transactions); and,
  • Department of Veterans Affairs.

For companies providing services and products to the Federal government (largest buyer in the United States), there are numerous policy changes and actions to be taken by agencies that will affect many businesses in the U.S. and abroad.

For many companies this will mean much more disclosure on GHG emissions data, adoption of Science-based Emissions Reduction Targets, and disclosure of ESG policies and actions.

Federal agencies will be guided by policies to look more favorably on companies that bid on contracts [and have] more robust climate change policies and targets in place.

We are bringing here you news coverage and shared perspectives on the important new order and a link to the White House Executive Order in our Top Stories (below).

G&A Institute Perspective:  This EO builds on standing orders of recent years by prior presidents and the orders issued “since Day One” of the Biden-Harris Administration to address what is characterized as the “climate crisis” by President Joe Biden in his campaigning and since taking office.

There are announcements of actions taken and new and proposed policy changes just about every day now, following out of cabinet departments and other agencies of the Federal government.

This is all of the “Whole of Government Approach” to addressing climate change challenges, short- and long-term.

We’re seeing both significant and subtle changes taking place throughout the public sector, at Federal, State and local levels, actions that will increase the pressure on the corporate sector and capital market players to start or to enhance their “sustainability journey” and greatly increase the flow of ESG data and information out to both shareholders and stakeholders/constituencies.

The disclosure and reporting practices of publicly-traded and privately owned/managed corporate entities will be addressed through a variety of Federal agencies, including of course the Securities & Exchange Commission.

SEC has an invitation out to individual and organizations to suggest ways to enhance reporting of the corporate sustainability journey (or lack thereof).

The instructions to Federal agencies in the latest EO will result in stepped up demands by Federal agencies for companies to disclosure more ESG information, such as in bidding on projects and contracts, or seeking financing of various types.

There are many more details in the G&A Institute’s Resource Paper, click here to download a copy.

Let our team know what questions you have!

Top Stories

And related information:  The International Energy Agency (IEA) Report coverage: