Displaying items by tag: esg

ESG is increasingly becoming another front in the political battle between Democrats and Republicans. Over the last decade, ESG has been embraced by many asset managers and has been used to encourage corporations to evaluate decisions beyond just finances and consider environmental, social justice, and governance implications. This has led to a pushback among conservatives who are opposed to corporate activism and want a return to when investors and companies focused on financials.

It culminated with legislation passing in many red states that bars asset managers from considering ESG factors when making investment decisions with state funds. The same battle has raged at the federal level. In a Reuters article, Daniel Wiessner covers the Biden Administration’s filing to toss a lawsuit from a consortium of 25 Republican-led states which is looking to uphold the Trump Administration's ban on socially conscious investing by employee retirement plans. 

The ruling would impact retirement plans of nearly 150 million Americans, representing $12 trillion in assets. According to the Department of Justice and the Biden Administration, retirement plans should consider ESG factors in addition to financial information due to their impact on a company’s long-term health.   

Finsum: Republicans are looking to fight back against ESG investing. In turn, the Biden Administration is looking to toss a lawsuit from Republican states which would ban ESG investing for employee retirement plans.

In an article for Bloomberg, Anchalee Worrachate covered a recent note from Goldman Sachs’ Della Vigna who was critical of the ESG movement and said that it is leading to underinvestment in energy production. In turn, this would lead to higher prices down the road and hurt the energy security of developed countries as was briefly experienced in the months following Russia’s invasion of Ukraine.

He believes ESG has focused too much on divesting from fossil fuels rather than investing in renewable energy. Over the last 10 years, capital expenditures on energy production have fallen short of what’s necessary. Vigna notes that spending on renewables is rising, but it’s not close to enough to make up the gap.

Another criticism of ESG is the focus on absolute emissions rather than the carbon footprint of emissions. Vigna says this is misguided, because it simply means less energy production rather than boosting zero emission energy production.

Vigna is worried that the US and Europe have lost the urgency that they felt in the spring of 2021 to expedite the energy transition process given its numerous secondary effects. He warns that the equilibrium remains very tight, and there is the risk of another surge in prices. Despite this threat, the momentum to transition has slowed, and ESG proponents have gone back to a focus on emissions rather than new sources of energy. 

Finsum: Goldman Sachs’ Della Vigna believes that the energy transition to renewable sources needs to be expedited, in part, due to ESG’s focus on reducing emissions.

In an article for Forbes, Jon McGowan discusses how five out of the eight insurance companies, who were among the early signers of the agreement, are leaving the United Nations’ Net-Zero Insurance Alliance due to antitrust concerns and a backlash regarding ESG. 

The alliance was formed in 2021 to encourage the insurance industry to proactively work on solutions towards climate change. The goal was to get to net-zero emissions by 2050 by promoting change of internal practices and to use investment decisions to encourage other stakeholders to reduce their emissions as well. It also mandates disclosures of decisions related to climate change and is modeled on financial disclosures that are required by the SEC. 

This has raised antitrust concerns given the coordination of companies within an industry. It also has led to opposition due to the recent, heated pushback against ESG investing which has intensified with Republicans taking over Congress. At the statehouse level, Republicans have also mobilized to ban use of state funds from using ESG factors in investment decisions. 

Finsum: Insurers are leaving the UN Net-Zero Insurance Alliance due to antitrust concerns and the backlash over ESG investing. 

Going….going…..gone.

Nope; no precious four baggers here. Instead, ESG recently took something of a hit as the United Nations convened a climate alliance for insurers, according to reuters.com. A minimum of three additional departures – including the chair of the group – took place. What had them heading for the exits? Opposition from U.S. Republicans pols.

As of the time of this report, on May 25, that meant at least seven members of the Net-Zero Insurance Alliance had bid the group adieu, with five of the eight founding signatories included. NZIA was founded in 2021.

Over the past year, in terms of reaching decisions evolving around investments, negativity stemming from the contemplation of EGS factors has dominated the landscape, according to weforum.org.

The invasion of Ukraine, inflation and, in some parts of the world, a spike in populism, have aroused criticism surrounding ESG.

The caveat: integral to abetting the swing to a greener, more sustainable future hinges on investing that’s truly sustainable and, consequently, shouldn’t be shucked aside.

Even so, the period of negative scrutiny in so much as arriving at investment decisions generated by ESG factors, has been unprecedented.

Over the last decade, ESG investing has grown increasingly popular among asset managers as a way to evaluate investments and reward corporations for considering environmental, social, and governance factors when making decisions. 

Like any trend, there has been a backlash as many conservatives believe that corporations should focus on financial metrics. And, there has been a wave of legislation from Republican governors and state legislatures banning the use of ESG factors by asset managers, managing state funds, when making investment decisions.

Given its prevalence in institutions and rising salience as a political issue, it’s interesting to look at recent Gallup polling which shows that the issue has had little impact on most Americans regardless of their political affiliation.

Even though the issue has entered the political arena in the last couple of years, only 38% of Americans are familiar with the term which is unchanged from 2021, the last time that Gallup conducted a poll on the issue.  In addition, 40% of Americans were not aware of ESG at all, while 22% were somewhat familiar with the concept.

Clearly, ESG investing is a big deal for institutions and politicians, it’s failed to break through to the public.

Finsum: ESG investing has grown in prominence among investors and politicians. However, Gallup polling shows that it’s not on the radar of most Americans.