House Judiciary Committee subpoenas ESG supporters

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.

ESG developments this week

In Washington, D.C.

House Judiciary Committee subpoenas ESG supporters

The House Judiciary Committee last week subpoenaed certain organizations that support ESG to investigate whether the groups have violated antitrust laws, according to the committee. The first subpoena went to As You Sow, which the committee said did not respond to previous, voluntary requests for documents and information:

The House Judiciary Committee has issued a subpoena to As You Sow—a nonprofit shareholder representative and climate action advocacy organization—and its CEO, Andrew Behar, seeking documents and instructing Behar to testify before the committee on December 1.

The subpoena served to As You Sow alleged that “corporations are collectively adopting and imposing left-wing environmental, social, and governance (ESG)-related goals, and the Committee is concerned that As You Sow appears to facilitate collusion that may violate U.S. antitrust law.” …

The committee’s requests … specified documents relating to: goals regarding climate change; how the groups arrived at those goals; communications related to shareholder proposals that promote decarbonization; communications with shareholder engagement service providers, such as As You Sow, on how to reduce emissions through shareholder actions; communications related to how asset managers can advance decarbonization; and how decarbonization goals impact consumers of “fossil fuels such as coal, gas, and oil.”

The committee also subpoenaed the Glasgow Financial Alliance for Net Zero (GFANZ), alleging similar possible antitrust behavior:

The Committee on the Judiciary is conducting oversight of the adequacy and enforcement of U.S. antitrust laws. Pursuant to the Rules of the House of Representatives, the Committee on the Judiciary has jurisdiction to conduct oversight of matters concerning the “[p]rotection of trade and commerce against unlawful restraints and monopolies” to inform potential legislative reforms, such as whether existing civil and criminal penalties and current antitrust law enforcement efforts are sufficient to deter anticompetitive collusion in the investment industry.

Corporations are collectively adopting and imposing left-wing environmental, social, and governance (ESG)-related goals, and the Glasgow Financial Alliance for Net Zero (GFANZ) and its constituent alliances such as the Net Zero Asset Managers initiative (NZAM) appear to facilitate collusion that may violate U.S. antitrust law. To advance our oversight and inform potential legislation related to collusive ESG policies, the Committee must understand how and to what extent GFANZ and NZAM facilitate collusion to promote ESG-related goals. …

GFANZ’s response without compulsory process has been inadequate. For example, to date, and despite your repeated assurances of GFANZ’s cooperation, GFANZ has produced just 795 documents, some of which contain excessive redactions. In addition, GFANZ appears to have taken no meaningful efforts to collect and produce responsive documents or communications from before 2022, which the Committee’s letter explicitly requested.

In the states

Five state financial officer positions on the ballot today

Five state financial officer positions are on the ballot in today’s elections. Ballotpedia’s “Daily Brew” newsletter ran a short update on the races last week, noting the following:

State treasurer races will be decided in Kentucky, Louisiana, and Mississippi, while two state auditor positions will be decided in Kentucky and Louisiana. Republicans currently hold all five positions. These officials collectively make up what are called state financial officers (SFOs). There are 105 such positions nationwide. …

In addition to the five SFOs listed above, Virginia’s Auditor of Public Accounts will also be determined this year. Unlike the other officers discussed here, it is not the voters but the General Assembly who fills this position.

Different states have different names for these elected officials, but they all fall into three groups: treasurers, auditors, and controllers. Broadly, these officials are responsible for things like auditing other government offices, managing payroll, and overseeing pensions. In some states, certain SFOs are also responsible for investing state retirement and trust funds, meaning they get to decide where that public money goes.

To learn more and to stay up-to-date on the outcomes of these races, click here.

J.P. Morgan CEO pushes back against Texas’ ban on contracts with businesses that boycott firearm and energy companies

Jamie Dimon, the CEO of J.P. Morgan Chase, the biggest bank in the world by market capitalization, told lawmakers in Texas that he thinks it’s a mistake for them to ban state contracts with financial services companies that limit their exposure to firearms and traditional energy businesses. Dimon said the policies could damage what he called Texas’ business-friendly reputation.

Texas Republicans picked a fight with Wall Street over investment policies on firearms and oil in 2021, passing two laws that restricted public contracts with financial firms that “boycott” the fossil fuel sector or “discriminate” against gunmakers. The laws have upended bond deals and led to multiple probes into corporate policies, the latest of which was launched by Attorney General Ken Paxton last month to review 10 financial companies, including JPMorgan.

“We don’t discriminate or boycott anybody, neither for political affiliation nor for anything else,” Dimon said, marking his most direct public comments on the issue. “We do make risk, legal, credit and reputational decisions, which is our legal right — and my obligation as chairman and CEO of JPMorgan Chase.” …

The bank isn’t pulling back on Texas. On Wednesday, JPMorgan announced that Chase intends to hire 1,000 new local bankers across the US, including in Texas, by 2025 to support small business clients. That’s double an earlier plan to add 500 by next year. The increased commitment comes as the firm hosts a summit for small business owners outside of Dallas, featuring speakers like actor Matthew McConaughey and Dallas Mavericks owner Mark Cuban.

On Wall Street and in the private sector

UK investors continue to pull out of ESG funds

UK investors continued to pull record amounts of capital out of ESG funds in September:

September saw UK investors pull £544 mn ($673 mn) from ESG funds, the highest outflow on record, as more stakeholders back away from responsible investing in favor of sturdier ventures.

Across the month, UK savers took a total of £1.4 bn out of funds, with nearly half coming from ESG-based investment vehicles.

The responsible investment funds that monitor all ESG moves has been in decline all year, with the Investment Association recording only £95 bn in funds under management at the end of September, dropping from £95.9 bn in August.

Some reports argue that economic conditions related to energy prices and cost-of-living pressures in the UK contributed to the ESG fund outflows:

[S]ince the end of pandemic restrictions, they have struggled as growth companies were buffeted by rising interest rates, energy stocks have boomed and ESG investing has faced a political backlash in the US. Analysts at Deutsche Bank attributed Europe-wide ESG underperformance to “surging rates and the energy crisis”. …

Analysts also suggested that the UK’s cost of living crisis was putting pressure on DIY investors, who withdrew some £1.4bn from funds overall in September — the biggest monthly outflow in 2023.

“Investors continue to be squeezed by inflationary pressures and the cost of living, as net inflows into funds experience their second quarter of decline,” said IA chief executive Chris Cummings.

In the spotlight

ESG opponents hold conference in London

The Alliance for Responsible Citizenship, the brainchild of Canadian psychologist and academic Jordan Peterson, hosted its first global conference in London last week, and opposition to ESG was high on the agenda. Among the conference’s attendees and speakers were Republican presidential candidate Vivek Ramaswamy, who is also the founder of what he calls the post-ESG investment firm Strive Asset Management, and Derek Kreifels, the CEO of the State Financial Officers Foundation. Kreifels especially focused on ESG and encouraged government officials and investors worldwide to dig deeper into debates about ESG and its potential impacts:

Kreifels said in an interview that he hopes the gathering of anti-ESG advocates helps nudge folks in the U.K. to “pick up the mantle” and lay the groundwork for a strategy pushing back on this kind of investing.

“Absolutely, this is about sharing what’s working. We’re winning. We’re creating pause in the industry,” Kreifels said in an interview. “There’s already a lot of leaders who have already figured this out — that ESG is a losing proposition. This is going to be an opportunity to give voice and cover to those who may have felt like they were on an island believing that.” …

Ramaswamy, who appeared virtually, told the London audience that European companies have suffered financially from not focusing solely on maximizing shareholder returns — and cast the issue as one in which a few corporations undermine democracy by imposing their market power to achieve societal changes not approved by the government.