Tag: ESG

Illinois Bill Would Give State Treasurer Voting Control On Pension Assets – Wirepoints

Mary Pat Campbell

Link: https://wirepoints.org/illinois-bill-would-give-state-treasurer-voting-control-on-pension-assets-wirepoints/

Excerpt:

Count on the Illinois legislature to find a way to further maim its crippled pension system.

Senate Bill 2152 would strip pension trustees of control over how to vote shareholder matters and vest the power in the state treasurer, currently, Michael Frerichs.

Still worse, the treasurer would then be bound to comply with the Illinois Sustainable Investing Act on how he votes on behalf of stocks owned by the pensions. That law requires officials like the treasurer to include “sustainability” considerations in how public money is invested. It’s basically a progressive policy agenda also known as ESG (Environmental, Social, Governance). It’s often ridiculed as “woke capitalism,” and includes the goals of zero fossil fuels, “equity,” gender and identity politics, and pretty much any other social justice fad in vogue.

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Shareholders, including pensions, usually have the right to vote on key corporate issues such as board of director elections, rights offerings, mergers and acquisitions. For interests in private investment partnerships, which pensions also hold, voting powers include other major matters. If the bill becomes law, Frerichs, or whoever is treasurer, would hold a proxy for all those votes and execute ballots, voting as he alone decides — a huge concentration of power in one individual.

The bill would eliminate any fiduciary obligation to vote shares in a way that maximizes their value, diluting that goal with progressive’s political agenda. Today, pension managers are fiduciaries for pensioners – a strict, legal standard — but the treasurer would not be if the bill becomes law.

Author(s): Mark Glennon

Publication Date: 17 Mar 2023

Publication Site: Wirepoints

GOP-led House committee launches working group to combat ESG proposals

Mary Pat Campbell

Link: https://www.pionline.com/washington/republican-led-house-committee-launches-anti-esg-working-group

Excerpt:

Congressional Republicans on Friday took another step in their quest to dismantle the Biden administration’s environmental, social and governance rule-making initiatives.

The House Financial Services Committee has formed a working group to “combat the threat to our capital markets posed by those on the far-left pushing environmental, social and governance proposals,” the committee’s Chairman Patrick McHenry, R-N.C., announced.

The group will be led by Rep. Bill Huizenga, R-Mich., and include eight other Republican committee members.

Among its priorities, the group will examine ways to “rein in the SEC’s regulatory overreach;” reinforce the materiality “standard as a pillar of the nation’s disclosure regime;” and hold to account market participants who “misuse the proxy process or their outsized influence to impose ideological preferences in ways that circumvent democratic lawmaking,” according to a news release.

“This group will develop a comprehensive approach to ESG that protects the financial interests of everyday investors and ensures our capital markets remain the envy of the world,” Mr. McHenry said in the news release. “Financial Services Committee Republicans as a whole will continue our work to expand capital formation, hold Biden’s rogue regulators accountable, and support American job creators.”

Author(s): Brian Croce

Publication Date: 3 Feb 2023

Publication Site: Pensions & Investments

Panel on “Central Bank Independence and the Mandate—Evolving Views”

Mary Pat Campbell

Link: https://www.federalreserve.gov/newsevents/speech/powell20230110a.htm

Excerpt:

It is essential that we stick to our statutory goals and authorities, and that we resist the temptation to broaden our scope to address other important social issues of the day.4 Taking on new goals, however worthy, without a clear statutory mandate would undermine the case for our independence.

In the area of bank regulation, too, the Fed has a degree of independence, as do the other federal bank regulators. Independence in this area helps ensure that the public can be confident that our supervisory decisions are not influenced by political considerations.5 Today, some analysts ask whether incorporating into bank supervision the perceived risks associated with climate change is appropriate, wise, and consistent with our existing mandates.

Addressing climate change seems likely to require policies that would have significant distributional and other effects on companies, industries, regions, and nations. Decisions about policies to directly address climate change should be made by the elected branches of government and thus reflect the public’s will as expressed through elections.

At the same time, in my view, the Fed does have narrow, but important, responsibilities regarding climate-related financial risks. These responsibilities are tightly linked to our responsibilities for bank supervision.6 The public reasonably expects supervisors to require that banks understand, and appropriately manage, their material risks, including the financial risks of climate change.

Author(s): Jerome Powell

Publication Date: 10 Jan 2023

Publication Site: Federal Reserve

The great anti-ESG backlash

Mary Pat Campbell

Link: https://thespectator.com/topic/great-anti-esg-backlash/

Excerpt:

The ESG story starts in 2004, when the three-letter acronym appeared in a UN report arguing for environmental, social and governance considerations to be hardwired into financial systems. Since then the term has been on a long but rapidly accelerating journey from NGO-world obscurity into the financial mainstream and subsequently the political limelight, prompting strong reactions from a chorus of prominent figures. Elon Musk calls it “a scam.” Peter Thiel says it’s a “hate factory.” Warren Buffett describes it as “asinine.”

Unsurprisingly for a piece of UN jargon that has become part of the political cut and thrust, “ESG” is often used to mean different things. Properly defined, it refers to an investment strategy that factors in environmental, social and corporate governance considerations. That might mean not investing in oil and gas companies, for example. Or it might mean only investing in companies that have a stated commitment to diversity, equity and inclusion. As it has grown in infamy, the acronym has also come to refer not only to investment products billed as ESG, but to other practices through which investment firms use their customers’ money to push political ends. For example, your pension may not be invested in an ESG fund, but the manager of that money may still be using stocks owned on your behalf to pursue political goals. A third, even broader, meaning is as a synonym for woke capitalism: a broad catch-all for big business’s embrace of bien pensant opinion, particularly on the environment.

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This win-win rhetoric has been the rallying cry of the ESG crowd on what has looked like an unstoppable march. Make money and do good: who could possibly object? Millions have bought into this seductive logic. Globally, more than $35 trillion of assets are invested according to ESG considerations, an increase of more than 50 percent since 2016. From 2020 to 2022, the size of ESG assets in the United States grew by 40 percent. According to an analysis by the asset manager Pimco, ESG was mentioned on just 1 percent of earnings calls between 2005 and 2018. By 2021, that figure had risen to 20 percent.

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If the anti-ESG movement has the wind in its sails, that’s in large part thanks to last year’s tumultuous geopolitical events and economic trends, foremost among them the war in Ukraine. The Russian invasion has transformed the ESG debate in two ways.

First, it has underscored the ethical dilemmas ESG champions would rather ignore. For example, many ESG funds rule out investment in weapons manufacturers. Is it really ethical to deny capital to the firms producing the material Ukraine needs to survive? Indeed, the socially responsible position is arguably the exact opposite.

Second, it has transformed the energy conversation in a way that has made many more of us acutely aware of the importance of cheap, abundant and reliable energy — and conscious that it cannot be taken for granted. In other words, each of us is a little more like Riley Moore’s West Virginia constituents, who don’t have much time for net-zero grandstanding given that they will be the ones who pay a heavy price for someone else’s pursuit of feel-good goals. What has always been true is becoming clearer: a financial system that starves domestic energy producers of capital not only hurts those whose savings are being used to pursue political ends, but ends up as a de facto tax on US consumers in the form of higher energy costs. ESG, says Goldman Sachs’s Michele Della Vigna, “creates affordability problems which could generate political backlash. That is the risk — political instability and the consumer effectively suffering from this cost inflation.”

Author(s): Oliver Wiseman

Publication Date: 22 Dec 2022

Publication Site: The Spectator

Arizona divesting funds from BlackRock over ESG push

Mary Pat Campbell

Link: https://www.foxbusiness.com/markets/arizona-divesting-funds-from-blackrock-over-esg-push

Excerpt:

Arizona is forging ahead with its plan to pull the state’s funds from BlackRock due to concerns over the massive investment firm’s push for environmental, social, and governance (ESG) policies that have led other states to take similar actions.

Arizona Treasurer Kimberly Yee said in a statement released Thursday that the state treasury’s Investment Risk Management Committee (IRMC) began to assess the relationship between the state’s trust fund and BlackRock in late 2021. 

“Part of the review by IRMC involved reading the annual letters by CEO Larry Fink, which in recent years, began dictating to businesses in the United States to follow his personal political beliefs,” Yee wrote. “In short, BlackRock moved from a traditional asset manager to a political action committee. Our internal investment team believed this moved the firm away from its fiduciary duty in general as an asset manager.”

In response to those findings, Yee noted that Arizona began to divest over $543 million from BlackRock money market funds in February 2022 and “reduced our direct exposure to BlackRock by 97%” over the course of the year. Yee added that Arizona “will continue to reduce our remaining exposure in BlackRock over time in a phased in approach that takes into consideration safe and prudent investment strategy that protects the taxpayers.”

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Florida’s chief financial officer announced recently that the state’s treasury is taking action to remove about $2 billion in assets from BlackRock’s stewardship before the end of this year. In October, Louisiana and Missouri announced they would reallocate state pension funds away from BlackRock, which amounted to roughly $1.3 billion in combined assets. Taken together with Arizona’s divestment, roughly $3.8 billion in state funds have been divested from BlackRock by those four states alone.

Additionally, North Carolina’s state treasurer has called for BlackRock CEO Larry Fink’s resignation and the Texas legislature has subpoenaed BlackRock for financial documents.

The investment firm has also taken heat from activists who argue BlackRock isn’t doing enough to follow through with its ESG commitments. New York City Comptroller Brad Lander wrote to Fink in September citing an “alarming” contradiction between the company’s words and its deeds. Lander wrote, “BlackRock cannot simultaneously declare that climate risk is a systemic financial risk and argue that BlackRock has no role in mitigating the risks that climate change poses to its investments by supporting decarbonization in the real economy.”

Author(s): Eric Revell

Publication Date: 11 Dec 2022

Publication Site: Fox Business

(Updated) New Hong Kong Watch report finds that MSCI investors are at risk of passively funding crimes against humanity in Xinjiang

Mary Pat Campbell

Link: https://www.hongkongwatch.org/all-posts/2022/12/5/updated-new-hkw-report-finds-that-msci-investors-are-at-risk-of-passively-funding-crimes-against-humanity-in-xinjiang

Report PDF: https://static1.squarespace.com/static/58ecfa82e3df284d3a13dd41/t/638e318e6697c029da8e5c38/1670263209080/EDITED+REPORT+5+DEC.pdf

Graphic:

Excerpt:

A new report by Hong Kong Watch have found that a number of pension funds may be passively invested in at least 13 China based companies where there is credible evidence of involvement in Uyghur forced labour programs and construction of internment camps in Xinjiang.

 As part of the report, Hong Kong Watch found that major asset managers are exposed passively to these companies as a result of their inclusion on Morgan Stanley Capital International’s Emerging Markets Index, China Index and All World Index ex-USA.  

….

Commenting on the release of the report, Johnny Patterson, co-founder and a research fellow at Hong Kong Watch, said:

“13 companies on MSCI’s emerging markets index are either known to have directly used forced labour through China’s forcible transfer of Uyghurs, or been involved in the construction of camps. Given this Index is the most widely tracked Emerging Markets index in the world, it raises serious questions about how seriously international financial institutions take their international human rights obligations or the ‘S’ in ESG.

Our view is that firms known to use modern slavery or known to be complicit in crimes against humanity should be classed alongside tobacco as ‘sin stocks’, or stocks which investors do not touch. Governments have a duty to signal which firms are unacceptable, but international financial institutions must also be doing their full due diligence. It is unacceptable that enormous amounts of the money of ordinary pensioners and retail investors is being passively channelled into firms that are known to use forced labour.” 

Publication Date: 5 Dec 2022

Publication Site: Hong Kong Watch

BlackRock’s Red-State Woes Continue as Florida Divests

Mary Pat Campbell

Link: https://www.ai-cio.com/news/blackrocks-red-state-woes-continue-as-florida-divests/

Excerpt:

State Chief Financial Officer Jimmy Patronis announced Thursday that the Florida Treasury will begin divesting $2 billion worth of assets currently under management by BlackRock.

BlackRock managed $1.43 billion of Florida’s long duration portfolio, which includes investments such as corporate bonds, asset-backed securities and municipal bonds. Additionally, BlackRock managed $600 million of Florida funds in a short-term treasury fund, which invests in short-term and overnight investments.

Patronis cited efforts by BlackRock and its CEO, Larry Fink, to embrace environmental, social and governance investment principles as the reason Florida will pull the funds from the manager.. In the wake of the announcement, the state will freeze the $1.43 billion in long-term securities at its custodial bank.

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“It’s my responsibility to get the best returns possible for taxpayers,” Patronis said in the statement. “The more effective we are in investing dollars to generate a return, the more effective we’ll be in funding priorities like schools, hospitals and roads. As major banking institutions and economists predict a recession in the coming year, and as the Fed increases interest rates to combat the inflation crisis, I need partners within the financial services industry who are as committed to the bottom line as we are – and I don’t trust BlackRock’s ability to deliver. As Larry Fink stated to CEOs, ‘Access to capital is not a right. It is a privilege.’ As Florida’s CFO, I agree wholeheartedly, so we’ll be taking Larry up on his offer.”

Author(s): Dusty Hagedorn

Publication Date: 2 December 2022

Publication Site: ai-CIO

Hong Kong Watch gives evidence to the Canada-China Relationship Committee on ESG investment & country risk analysis

Mary Pat Campbell

Link: https://www.hongkongwatch.org/all-posts/2022/12/1/hong-kong-watch-gives-evidence-to-the-canada-china-relationship-committee-on-esg-investment-amp-country-risk-analysis

Excerpt:

On Tuesday, Hong Kong Watch’s co-founder and trustee, Aileen Calverley, and Director of Policy and Advocacy, Sam Goodman, gave evidence to the Special Committee on the Canada–People’s Republic of China Relationship on the exposure of Canadian pension funds to Chinese stocks and bonds.

Hong Kong Watch has previously written extensively on the question of ESG, business, human rights, and Canadian pension funds exposure to Chinese companies linked to gross human rights violations, including the internment camps in Xinjiang.

In his remarks, Sam Goodman, discussed why China should be considered an ESG investment risk, recommending that:

  • Lawmakers consider sensible regulations to define ESG, label China as an ESG risk, and introduce a blacklist like the USA to restrict investment in Chinese firms with questionable human rights, environmental, and governance credentials.

In her remarks, Aileen Calverley discussed the risk of pension fund investments in China in the event of sanctions, recommending that the Government:

  • Include a China Country Risk Analysis in the Indo-Pacific Strategy.
  • Encourage publicly controlled pension funds to avoid exposure in China.

The full committee hearing can be watched here.

Publication Date: 1 Dec 2022

Publication Site: Hong Kong Watch

Analysis: Money before climate; market downturn spurs ESG fund exodus

Mary Pat Campbell

Link: https://www.reuters.com/business/cop/money-before-climate-market-downturn-spurs-esg-fund-exodus-2022-11-11/

Graphic:

Excerpt:

Funds adhering to environmental, social, and corporate governance (ESG) principles have been hit by unprecedented outflows in the market downturn, as investors prioritize capital preservation over goals such as tackling climate change.

ESG, a classification applied to fund assets currently worth an estimated $6.5 trillion, is being tested by a drop in market values fuelled by concerns that central banks hiking interest rates to fight rampant inflation will trigger an economic recession.

Investors souring on ESG funds could pose a challenge to governments seeking to enlist them in the fight against climate change. Policymakers at the COP27 climate talks in Egypt are trying this week to secure more financing from the private sector to help lower carbon emissions.

Data from research service Refinitiv Lipper shows that funds of equities, debt and other asset types dedicated to responsible investing posted net outflows globally of $108 billion this year to the end of September, the first time investors withdrew money from them over such a long period since Refinitiv started tracking them in late 2017.

Author(s): Isla Bennie, Ross Kerber

Publication Date: 11 Nov 2022

Publication Site: Reuters

Chicago Teachers’ Pension Fund to Reorientate Portfolio to Fully Offset Fossil Fuel Investments

Mary Pat Campbell

Link: https://www.ai-cio.com/news/chicago-teachers-pension-fund-to-reorientate-portfolio-to-fully-offset-fossil-fuel-investments/

Excerpt:

The Chicago Teachers’ Pension Fund trustees in October voted to engage with fossil fuel companies to encourage them towards clean renewable energy sources and investing in viable clean and renewable energy sources to offset the fund’s fossil fuel investments. The fund plans to achieve this goal by the end of 2027.

In a statement shared to Chief Investment Officer, the fund’s CIO Fernando Vinzons wrote, “the fund will approach divestiture from a multi-pronged approach, engaging with current companies to encourage them toward a path of clean renewable energy sources, while working toward the longer-term goal of divesting from publicly traded fossil fuel holdings and investing. Divestment does not attract consensus among institutional investors. Many public pension funds are engaging with companies that produce fossil fuels, some are divesting those companies, and some, as the case with state funds from the state of such as Louisiana, are allocating away from managers perceived to be harming the domestic energy sector by endorsing programs like the Net Zero campaign.

According to a press release from the Chicago Teachers’ pension fund, Carlton W. Lenoir, Sr., executive director at CTPF, commented on the vote saying, “as fiduciaries, our trustees must invest consistent with our mission to protect and enhance the present and future economic well-being of members, pensioners, and beneficiaries, and we are confident that this action fulfills that responsibility.”

Author(s): Dusty Hagedorn

Publication Date: 7 Nov 2022

Publication Site: ai-CIO

Republicans ride ESG backlash to state financial offices

Mary Pat Campbell

Link: https://rollcall.com/2022/11/17/republicans-ride-esg-backlash-to-state-financial-offices/

Excerpt:

Republicans picked up state financial officer positions during the midterm elections amid a campaign against environmental, social and governance investing.

Five positions — in Kansas, Iowa, Missouri, Nevada and Wisconsin — flipped from Democratic to Republican in races for state auditor, controller or treasurer. Of the 50 directly elected positions, Republicans won 29 and Democrats won 19, according to an analysis from Ballotpedia. Two races remain uncalled.

A handful of Republicans’ campaigns for state financial officers focused on ESG, echoing sentiments from GOP officials at statehouses across the country and in Congress who say ESG investing is harming capital markets and domestic energy production and reject the case made by Democrats, major investors and other proponents.

At stake is a suite of legislation and rules that would curb ESG as a material consideration, along with other financial factors, for investors. The proposals include policies for states’ pension funds to divest hundreds of millions of dollars from financial institutions that incorporate ESG — and especially climate — in their investment decisions.

Author(s): Ellen Meyers

Publication Date: 17 Nov 2022

Publication Site: Roll Call

Backlash Against ESG Investment Of Taxpayer Money Grows, But Illinois And Chicago Carry On – Wirepoints

Mary Pat Campbell

Link: https://wirepoints.org/backlash-against-esg-investment-of-taxpayer-money-grows-but-illinois-and-chicago-carry-on-wirepoints/

Excerpt:

But those scorned sectors have been the better investments this year, and tech companies have been hammered. Only 31% of actively managed ESG equity funds beat their benchmarks in the first half of 2022, compared to 41% of conventional funds, according to Refinitiv Lipper, as Reuters recently reported. So far this year, 19 of the 20 best-performing companies in the S&P 500 are either fossil-fuel producers or otherwise connected with fossil fuels.

Consequently, ESG funds “have been hit by unprecedented outflows in the market downturn, as investors prioritize capital preservation over goals such as tackling climate change,” wrote Reuters.

Predictably, the issue has become political since state and local officials invest trillions of dollars owned by taxpayers. Republican candidates generally oppose ESG investment of public funds, and five positions — in Kansas, Iowa, Missouri, Nevada and Wisconsin — flipped from Democratic to Republican in recent races for state auditor, controller or treasurer. Of the 50 directly elected positions, Republicans won 29 and Democrats won 19, according to a recent Roll Call report.

Illinois Treasurer Michael Frerichs, however, is among the Democratic officials not backing off on ESG. “We are in it for the long term” is the title of an open letter he recently signed along with 13 other Democratic state financial officers criticizing efforts to stop ESG use of taxpayer money. The letter is astonishingly hypocritical. It says those who want to ban ESG investment of public money are “blacklisting financial firms that don’t agree with their political views.” That, of course, is precisely what ESG does.

Author(s): Mark Glennon

Publication Date:19 Nov 2022

Publication Site: Wirepoints