Summer of deadly heat, wildfires, and flash floods crash the GOP’s hearings meant to convince investors to ignore climate risk.
ESG Month was a series of July hearings scheduled by the Environmental, Social, and Governance (ESG) Working Group of the House Committee on Financial Services. The Republican-led hearings were intended to “protect the financial interest of everyday investors from progressive activists.” Sounds ominous! The hearings, concerning proxy voting, proxy advisory, and ESG rating agencies, among other supposedly nefarious far-left topics, led to bill mark-ups that have little chance of becoming law. Nevertheless, we must pay attention because anti-business politicians could do serious damage to some of the basic plumbing that makes corporate capitalism function for shareholders, planet, and people.
The anti-ESG crowd is struggling for success. The 2023 state legislative season saw a wave of anti-ESG bills introduced, but most failed to get traction. Anti-ESG funds are also underperforming. And survey after survey after survey indicates that while corporate boards are talking less about their sustainability projects, it’s otherwise business-as-usual when incorporating, addressing, and managing climate risks in operations.
One day the GOP will cease to waste time and energy, but it won’t be any time soon given their funding. Among the movement’s backers are the oil and gas industry and Leonard Leo, the architect of the most conservative Supreme Court in nearly a century. As we’ve seen with the overturning of Roe, any creeping progress Leo makes in the financial markets could be disastrous.
Fact is climate change can’t be stopped without the private sector. Trillions of dollars are required, more than any government can provide. Public-private partnerships and financing are essential to prevent a calamitous age for humanity. Moreover, public companies are responsible for 40% of all greenhouse gas emissions. Their investors, who vote for their boards of directors, can be effective regulators of heat pollution in the face of public policy paralysis.
A financial system restrained from positive climate impact will reap what it sows. As the costs of disasters rise, as insurers flee their markets, as food systems shake, the money and supply chain effects on the economy, businesses, the markets, and the retirement funds of people like you and me will be profound. It would seem the only way to disregard these effects would be to deny climate change. That is exactly what one of ESG Month’s witnesses said: “there is no evidence in support of the ubiquitous assertions of a climate ‘crisis,’ whether ongoing or looming”.
Another potentially damaging outcome of these anti-ESG efforts follows the recent anti-affirmative action decision by the Supreme Court. Republican attorneys general quickly sent a letter to Fortune 100 CEOs warning that their diversity programs may be illegal. While this letter was countered by another letter from Democratic AGs, lingering threats may chill further progress in reducing rampant inequality. This could hurt the economy through more social unrest, exacerbated by environmental damage. Meanwhile, San Francisco Federal Reserve research has estimated that over the last 30 years the U.S. economic pie would be $23 trillion larger if opportunities were more equally distributed.
ESG Month was tragically smoked out of the headlines this summer by fires, floods, and widespread death. Americans who want to ensure their finances don’t deteriorate should do everything in their power to stop the anti-business crusade against ESG.
ABOUT THE AUTHOR
Paul Rissman is a former archaeologist, financial analyst, portfolio manager, director of research, and chief investment officer. He is a Director of the Sierra Club Foundation and co-founded Rights CoLab, a global network of human rights experts. Paul was also named an Open Society Fellow in 2019.
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