So. Much. ESG. News!

Greetings readers…we’re baaack!?

Apologies for the hiatus and thank you to all who have reached out. Starting a new job kept me from publishing for the last few weeks, but I am excited to be back at the keyboard and looking forward to continuing the dialogue with you. Look for some changes in format and delivery, but - as always - expect an accessible summary of ESG and Climate News.?

During the hiatus there was so much ESG news! Since it’s not practical to cover it all, we will cover the latest and largest changes.??

And Happy St. Patrick’s Day! ??

ESG The Lightning Rod

It’s a sign of the times when our favorite abbreviation - ESG - made it to the headline of the March 13 episode of top rated Podcast The Daily. Host Michael Barbaro characterized ESG as a “relatively unknown term” that has leapt into the headlines because it’s the reason for President Biden’s anticipated first veto.

The promised veto is on a resolution that would nullify a Labor Department rule allowing retirement plans to consider environmental, social and governance factors in their investment decisions. The resolution and likely veto continue a tit-for-tat battle that started with a Trump administration rule outlawing ESG considerations in regulated retirement plans.?

After the passage to the resolution, The White House issued a statement saying: "The rule reflects what successful marketplace investors already know — there is an extensive body of evidence that environmental, social, and governance factors can have material impacts on certain markets, industries, and companies"

BlackRock Stays the Course

Among the tallest of the ESG lightning rods is BlackRock. In what has become a much anticipated event, BlackRock CEO Larry FInk’s annual letter to CEOs has become required reading for the climate and ESG community.??

These annual letters contributed to BlackRock being targeted by the anti-ESG movement in US states - many of which have policies to boycott the asset management company over climate policies they believe discriminate against the fossil fuel industry.?

While this years’ letter is notably more muted on the ESG and climate topics, the company reinforced its past positions - a few notable excerpts from the letter:?

• For years now, we have viewed climate risk as an investment risk. That’s still the case.
• The transition to a low-carbon economy is top of mind for many of our clients.
• …clients also want access to data to ensure that material sustainability risk factors that could impact long-term asset returns are incorporated into their investment decisions.
• I wrote last year that the next 1,000 unicorns won’t be search engines or social media companies. Many of them will be sustainable, scalable innovators – startups that help the world decarbonize and make the energy transition affordable for all consumers. I still believe that.

The message is clear - BlackRock doesn’t consider climate change risk as an ideological issue, it's a material economic issue.?Mr. Fink emphasizes the point in the closing to the energy transition section:

“...investing in the transition is the same as our approach across our platform: we provide choice to our clients; we seek the best risk-adjusted returns within the mandate they give us.”

States Ally Against ESG

But the ideological genie may be out of the bottle. As the US election cycle heats up, ESG will be a political issue at the federal and state level. This week 18 governors, led by likely GOP Presidential contender - Florida Governor Ron DeSantis, formed an alliance to “protect individuals from the ESG movement” with actions including banning the use of ESG considerations in state and local pension funds.?

The ESG Backlash faces its own Backlash

As state legislatures start to implement anti-ESG policies, state pension fund managers are pushing back. The Kentucky County Employees Retirement System stated that boycotting BlackRock, JPMorgan Chase & Co., and Citigroup, among others, was “inconsistent” with the pension’s fiduciary obligations, concluding the divestment policy would violate its own legal obligations.

The Indiana Office of Fiscal and Management Analysis estimated that the state's ESG divestment bill would cost $6.7 billion over the next decade — lowering returns for the defined benefit pensions from 6.25 percent to 5.05 percent annually and “likely result in increased expenditures for state employers for pension contributions.” The Indiana Chamber of Commerce described the bill as “anti-free market,” indicating that it failed to take into account the “best interests of state pensioners.”?

Kansas lawmakers also rejected an anti-ESG bill after Kansas Public Employees Retirement System executive director Alan Conroy estimated that a law banning it from hiring certain firms would cost the pension as much as $82 million a year.

North Dakota rejected an anti-ESG bill by a 90-3 vote that would have named financial institutions that are “engaged in a boycott of energy companies.” The rejected bill was similar to laws that were enacted in Kentucky, Texas and West Virginia.

“These state legislators are playing politics with our pension plans,” said Brandon Rees, of the AFL-CIO Office of Investment.

SVB and ESG

Reinforcing the politicization of ESG, some politicians are blaming it for the failure of Silicon Valley Bank (SVB). Florida Gov. Ron DeSantis, said that SVB’s diversity, equity and inclusion requirements “diverted from them focusing on their core mission.”?

The Washington Post reported that “There’s no evidence that SVB’s sustainable investing or diversity initiatives contributed to its collapse. Experts have instead pointed to a perfect storm of SVB’s significant holdings in U.S. Treasurys and the Federal Reserve’s interest rate hikes. As the Fed raised interest rates, SVB’s bond holdings became less valuable, and the bank sold Treasurys and mortgage-backed securities at a $1.8 billion loss. The disclosure sparked panic, with depositors pulling $42 billion from the bank on [March 9].”

ESG Fight Club?

Greenbiz founder Joel Makower’s weekly article used the famous line from the 1999 movie “Fight Club'' to describe how companies are managing in this hyper-political environment. Titled “The first rule of ESG: Don’t talk about ESG” - Joel concludes that most companies will stay the course on ESG, but be less vocal about their efforts. Excerpts from the article:

• Few companies seem to be paring back their ESG commitments and goals.
• Indeed, U.S. companies have signaled overwhelmingly that they’re planning to comply with the expected climate-risk disclosure requirements.
• Companies seem to be further muzzling themselves when it comes to touting such activities.
• “…if this isn't strictly from an economic ROI perspective, then we don't want to talk about it. Saying that it's the right thing to do comes across as woke."

An Ocean Apart: Europe Ramps Up Climate Commitments

The European Parliament adopted a requirement for all EU member states to reduce greenhouse gas emissions by 2030 - raising the EU’s overall 2030 emissions reduction target to 40% compared to 2005 levels, up from its prior 30% goal. The measure passed by 486 – 132.

Part of the European Commission’s “Fit for 55” roadmap - where the EU plans to cut emissions by 55% by 2030, compared to 1990 levels - this policy would, for the first time, require all member states to cut emissions by 2030 compared to 2005 levels, with targets ranging from 10% – 50% and goals based on GDP per capita and cost-effectiveness.

“This allows us to send a clear signal that the EU is serious about being the global champion for a competitive and efficient climate agenda.” Said Swedish MEP Jessica Polfj?rd.

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.?

Notable News

Corporate Sustainability Becomes a Team Sport

SVB Took the Wrong Risks

U.S. Corporate Boards Boosted Sustainability Experience in 2022

Robert Reich: Republicans Are Right About ESG, But For The Wrong Reason – OpEd

Values-Driven 2V TrueESG?: A Right-Wing ESG Rating Methodology For Taking Down ESG

Biden approves controversial Willow oil drilling project in Alaska

India: Temperature hits record high in Mumbai, for second time in March

G20 Call for Global Common Framework to Finance Sustainable Development Goals

New Zealand's cyclone death toll at 11, thousands still missing

UK confirms nukes as green technology?

U.S. Nominates Ajay Banga to Lead World Bank