Conservative Backlash Mounting Over Woke Investing

AMAC Exclusive – By Andrew Abbott

In a letter to BlackRock, the world’s largest asset manager, earlier this month, 19 Republican state attorneys general, led by Mark Brnovich of Arizona, demanded answers from the firm on how it is investing state employee pension funds. The move was the latest attempt by conservative leaders to counter the rise of so-called “Environmental, Social, and Governance” investing, or ESG, which has taken over the world of investment banking in recent years.

In the letter, the state attorneys general assert that “BlackRock appears to use the hard-earned money of our states’ citizens to circumvent the best possible return on investment, as well as their vote,” alleging that the firm is making investment decisions based on how well companies comply with the left’s agenda on climate change and “equity,” not on the actual strength and profitability of the company. “BlackRock’s commitment to the financial return of state pensions should be undivided,” the letter continues. “The stated reasons for your actions… indicate rampant violations of this duty.”

Notably, almost every state pension fund has a significant amount of taxpayer money invested with BlackRock. The top ten investing states have a combined nearly $65 billion actively managed by the firm. As a fiduciary, BlackRock, as well as other investment giants like JPMorgan Chase and Goldman Sachs, have a legal obligation to make investment decisions solely according to their clients’ financial best interests. Yet, as the Republican attorneys general point out, ESG investing flies directly in the face of this responsibility, and BlackRock’s public statements indicate that its clients’ financial best interests are far from their top priority.

BlackRock has, for instance, repeatedly stated that “net zero” carbon emissions are an explicit objective of their investment strategy, immediately disqualifying fossil fuels enterprises – many of them immensely profitable – from investment. BlackRock has even joined the “Net Zero Asset Managers Initiative,” an “international group of asset managers committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner in line with global efforts to limit warming.” One objective of this initiative is to support the climate goals outlined by the Paris Climate Accord, making clear that it is an expressly political enterprise.

The letter is just the latest effort by conservatives to rein in investment giants who are pursing far-left political agendas divorced from their fiduciary duties. Last spring, the Republican-controlled Kentucky legislature voted to “empower state officials to stop doing business with any firm that says it won’t invest in fossil fuels.” In West Virginia, Treasurer Riley Moore threatened six of the world’s largest financial institutions, including BlackRock, that they may no longer be allowed to do business with the state of West Virginia over their stance on working with fossil fuel companies. In Louisiana, Treasurer John Schroder has barred JPMorgan Chase from taking part in a $700 million bond offering because of the bank’s refusal to work with firearms manufacturers.

In the private sector, new alternatives to woke investing are also emerging that may soon threaten the stranglehold that companies like BlackRock have long held on the corporate world. Last week, for example, the Wall Street Journal reported that Strive Asset Management, a relative newcomer to the investment world, had launched “a passively managed energy index fund designed to mimic BlackRock’s passive U.S. energy index fund.” But instead of using its stake in companies to bully them into pursuing the left’s ESG agenda, Strive says it will “use proxy measures to persuade companies to pursue the overriding goal of maximizing return to shareholders.” As AMAC Newsline has previously reported, business leader Andy Pudzer has also founded an organization, 2ndVote, to ensure that investors know how companies are using their investment dollars.

But amid these positive developments for conservatives and anyone who would prefer investment banks to keep their focus on making money, the Biden administration is working to mandate ESG industry-wide. Last year, the U.S. Department of Labor proposed a regulation that would tell retirement-fund managers to consider ESG factors such as “climate change” and “collateral benefits other than investment returns” when investing employees’ money. According to the rule change, certified fiduciaries would actually be encouraged to break their financial responsibilities and instead invest in companies that support the woke agenda.

The Securities and Exchange Commission, despite being the federal entity that is ostensibly in charge of ensuring investment banks fulfill their fiduciary responsibilities to their clients, is also making moves to back woke investing. In March, the agency proposed its “rules to enhance and standardize climate-related disclosures for investors” – requiring companies to report their greenhouse gas emissions in SEC filings and reports. Conservatives have warned that the move is the first step in taking the ESG measures that banks now claim are voluntary and making them mandatory industry-wide.

The investment world is fast becoming a new and vitally important front in the Culture Wars. Gearing up to fight and win this battle should be a top priority for every conservative, particularly as the economic and financial outlook for the country remains so uncertain.

Andrew Abbott is the pen name of a writer and public affairs consultant with over a decade of experience in DC at the intersection of politics and culture.