ESG developments this week
Economy and Society is Ballotpedia’s weekly review of the developments in corporate activism; corporate political engagement; and the environmental, social, and corporate governance (ESG) trends and events that characterize the growing intersection between business and politics.
In Washington, D.C.
Lawmakers argue ISS sale could threaten national security
Congressmen Andy Barr (R, Ky.) and Brian Snell (R, Wis.) wrote a letter last week concerning the sale of Institutional Shareholder Services (ISS), the world’s largest proxy advisory service, to a German financial services firm four years ago. They argued ISS proxy votes supporting ESG have a significant impact on corporate decisions that reduce American energy independence and harm national security:
“We write to draw your attention to national security concerns arising from the Deutsche Börse Group’s (“Deutsche Börse”) acquisition of Institutional Shareholder Services Inc,” Rep. Andy Barr, R-Ky., and House Administration Committee Chair Bryan Steil, R-Wis., wrote to Treasury Secretary Janet Yellen. …
ISS is the largest proxy advisory firm both in the U.S. and abroad, according to a 2018 Harvard Law School report. Along with another company, Glass Lewis, they make up over 90% of the proxy advisory market, the lawmakers’ letter said.
Consumers’ Research Executive Director Will Hild explained, “Glass Lewis and ISS’s advice weighs heavily on the makeup of boards of directors, C-suite hiring, and even capital investments within public companies. To give just one example, their push for absurd targets like Net Zero increases the cost of gasoline and shuts down critical electrical grid capacity in our nation.”
In the states
Oklahoma judge pauses enforcement of anti-ESG law
An Oklahoma judge on May 7 paused enforcement of a 2022 state law prohibiting the state from contracting with businesses the treasurer identifies as boycotting oil and gas companies:
An Oklahoma County judge halted the enforcement of a controversial state law Tuesday, a measure that places banks and financial companies on a blacklist if they invest in entities critical of the oil and gas industry. Under the law, those blacklisted companies are prevented from doing business with the state.
District Judge Sheila Stinson issued a temporary injunction against the enforcement of the Oklahoma Energy Discrimination Elimination Act of 2022. The act is administered by state Treasurer Todd Russ’ office. …
Oklahoma’s law was the result of a push by the State Financial Officers Foundation, a Kansas nonprofit that promotes anti-ESG legislation. It’s part of an ongoing effort by many Republicans on the state and national level to push back against companies that have environmental and social governance polices. Critics say those policies are an attempt to push a climate change agenda at the expense of the oil and gas industry. At least 20 states have adopted some type of anti-ESG legislation.
Oklahoma state officials and groups respond to enforcement pause
Following the enforcement pause, Attorney General Gentner Drummond (R) fired the legal team responsible for defending the law and blamed the team’s ineffectiveness on Treasurer Todd Russ (R):
Oklahoma’s attorney general said he is firing the outside legal team hired to defend a state law prohibiting state pension systems from contracting with companies that limit investment in the oil and gas industry, days after a judge temporarily blocked the statute’s enforcement.
Republican Attorney General Gentner Drummond in a statement on Thursday said he was firing counsel at the Plaxico Law Firm, which he said was handpicked by state Treasurer Todd Russ to defend the law. Drummond said he would also remove Russ from any decision-making authority over the legal defense going forward.
The decision came after a state judge on Tuesday issued a temporary injunction blocking enforcement of the law in oil-rich Oklahoma. The judge found that a retired state employee who is challenging the measure was likely to succeed in his lawsuit alleging the law violates the state constitution and is too vaguely written.
The American Accountability Foundation responded to Drummond’s actions with a press release arguing he has secret ties with BlackRock, the largest asset manager in the world and an institutional supporter of ESG:
Tonight, Oklahoma Attorney General Genter Drummond announced that he is taking control of Treasurer Todd Russ’s case against BlackRock. However, documents obtained by the American Accountability Foundation show that his actions tonight are motivated, not by the best interest of Oklahomans, but by a close relationship with Blackrock and their lobbyists. Put simply, Drummond does not want to take over to win the case, he wants to take over so that he can tank it and protect BlackRock.
While Drummond claims in public to stand against ESG, these documents show him praising and working closely with BlackRock, the champions of ESG, behind closed doors. Drummond has extensive communications with BlackRock official Mark McCombe and lobbyist Pat McFerron of CMA Strategies, which represents BlackRock.
Emails obtained by AAF show Attorney General Drummond fawning over BlackRock’s team, telling McCombe that “I look forward to receiving empirical data from your team and from Pat, who is a deeply respected and influential consultant.” BlackRock was able to secure a meeting personally with the Attorney General because Drummond’s Chief of Staff, Trebor Worthen, put the extraordinary meeting on his calendar.
Oklahoma Governor Kevin Stitt (R) weighed in on May 10, offering his support for the anti-ESG law and Treasurer Russ:
“We’re not going to let companies come into Oklahoma and attack our oil and gas industry,” Stitt said about the 2022 law. “That’s what the treasurer is trying to do, and we certainly support the treasurer in that effort.”
During a news conference Friday, Stitt aligned himself with Treasurer Todd Russ after the state attorney general intervened to block Russ’ participation in the legal proceedings. Russ oversees the list of financial institutions endorsing environmental, social, and governance (ESG) policies, which often alienate oil and gas interests. …
“I am solely looking out for the financial interests of the citizens of Oklahoma and its industries,” Russ said. “This ruling is not going to stop the fight for Oklahomans against activists using ESG in state.”
Arkansas ESG panel votes to keep 10 firms on restricted business list
The Arkansas ESG Oversight Committee decided on May 8 to keep 10 companies on its list of firms barred from doing business with the state because they violated state policies prohibiting fossil fuel boycotts:
[Committee Chairman David] Scott said “I think it is logical to believe that some of these decisions [by financial service providers] that we are seeing that are couched as policies based on ordinary business practices are actually based on environmental policy decisions.”
In voice votes, the committee voted Wednesday to determine the following financial service providers discriminate against energy and/or fossil fuel companies because they didn’t demonstrate to the committee that they don’t discriminate against these companies.
Goldman Sachs & Co., and Goldman Sachs Group Inc.
Royal Bank of Canada and RBC Capital Markets.
UBS Group AG and UBS Securities.
Nomura Asset Management and Nomura Securities.
Credit Suisse Group AG and Credit Suisse Securities LLC.
Along with Scott, committee members John Sinclair and Mike Frost voted to keep Goldman Sachs & Co. and Goldman Sachs Group Inc. on the list. Committee members Steve Cook and Tom Lundstrum dissented.
On Wall Street and in the private sector
Swiss Re leaves Climate Action 100+
Swiss Re has become the latest company to leave Climate Action 100+ (CA100). The insurance company alerted CA 100 in March that it would leave, following other large financial firms like JP Morgan and State Street, according to Responsible Investor:
Prior to its departure, Swiss Re was listed on CA 100+’s investor signatories page as a “supporter”, which meant it publicly supported the initiative’s goals but did not participate directly in engagements with focus companies.
A Swiss Re spokesperson told RI that the insurance giant was streamlining the number of its “sustainability agreements” in order to “focus our resources and advance our group-wide sustainability strategy more effectively.” …
The climate investor group was rocked in February by the departure of some of its largest members. State Street, PIMCO, Invesco and JP Morgan Asset Management exited the initiative, while BlackRock pulled out its US business.