AMAC Exclusive – By Shane Harris
Republican state officials throughout the country are taking aim at little-known Wall Street entities known as “proxy advisory firms” as part of their effort to push back against so-called “environmental, social, and governance” (ESG) investing and the left-wing takeover of the U.S. financial sector.
While major investment firms like BlackRock, Wells Fargo, and JPMorgan Chase have received plenty of well-deserved scrutiny and criticism over their politicized banking practices, far less attention has been paid to proxy advisory firms, which have also played a vital role in the rise of woke banking.
Proxy advisory firms are companies that provide services to companies or organizations that invest money on behalf of others, such as mutual funds and pension funds, to help them make informed decisions when voting on corporate governance issues at publicly traded companies’ shareholder meetings. In theory, proxy voting firms are supposed to conduct in-depth research so they can advise shareholders how to vote according to their financial best interests.
In practice, however, proxy voting firms have, much like the rest of Wall Street, become another vehicle to inject a liberal political agenda into the banking world. Glass Lewis and ISS now advise their clients to vote according to the left’s ESG agenda, rather than what will provide the best return on investment.
In two letters last week, more than a dozen GOP state financial officers demanded answers from Glass Lewis and Institutional Shareholder Services (ISS) about both firms’ record of supporting liberal initiatives while recommending against conservative-backed investments. In total, Glass Lewis and ISS control a shocking 97 percent of the proxy advisory market, making them two of the most influential players on Wall Street despite the fact that most Americans have likely never heard of either company.
Marlo Oaks and Todd Russ, the state treasurers of Utah and Oklahoma, respectively and two co-signers of the letters sent last week, penned a joint op-ed in The Wall Street Journal in May warning about just how politicized proxy voting firms have become. “For both the 2022 and 2023 annual meeting seasons,” they wrote, “activists have introduced hundreds of shareholder resolutions demanding that companies sacrifice growth and competitiveness to pursue political agendas.”
“With the explicit support of the Securities and Exchange Commission, a wink and a nod from global investment firms, and help from proxy advisory firms, activists can even oust and replace board members who don’t support their political goals.”
New data cited in the letters sent to Glass Lewis and ISS last week further confirmed the allegations levied by Oaks and Russ. “Given the discussion earlier about conservative proponents… for the most recent year for which data is available (2022), you supported approximately 53% of Social Shareholder proposals and 60% of Environmental Shareholder Proposals, but 0% of shareholder proposals from conservative groups,” the letter to Glass Lewis reads. “This does not appear to be even-handed treatment.”
The Republican officials similarly found “no support for proposals from conservative groups in 2023” by ISS. That letter also notes that ISS’s parent company, Deutsche Borse, has previously stated that it is “committed to supporting the sustainable transformation of our economy with the constant development of our ESG offering.”
Both Glass Lewis and ISS have countered that ESG investing is not inherently political. But as the GOP officials note, “the last Republican president issued rulemaking to weaken [ESG investing], and the current Democratic president used his first veto to defend it after Congressional Republicans passed legislation against it on a party-line vote.”
Both letters conclude with calls for Glass Lewis and ISS to address the phenomenon of “debanking,” or the practice of banks severing ties with individuals or organizations over their political views – a threat conservatives have become acutely aware of in recent years.
The Republican officials suggest that, if the proxy voting firms are actually interested in demonstrating that they aren’t influenced by political bias, they could start with introducing a shareholder resolution to firms with a record of political debanking like Chase and Bank of America requesting that they produce a report on the “risks related to discrimination against individuals based on their race, color, religion (including religious views), sex, national origin, or political views, and whether such discrimination may impact individuals’ exercise of their constitutionally protected civil rights.”
The letters to Glass Lewis and ISS follow other actions by state GOP officials to hold woke banks accountable, including several states pulling out billions of dollars in state pension funds. At least some evidence suggests this effort is making progress, with BlackRock CEO Larry Fink’s most recent annual letter to shareholders making no mention of ESG after heavily promoting the policy in previous years.
For conservatives, GOP officials exposing and attempting to dismantle another part of the left’s ESG schemes offers more promise that woke banking may be in serious trouble.
Shane Harris is a writer and political consultant from Southwest Ohio. You can follow him on Twitter @ShaneHarris513.