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.
Around the world
Austrian government issues ESG bonds
The Austrian Treasury started issuing bonds to raise money for the nation’s environmental infrastructure. The government doesn’t charge extra fees on the bonds and fully guarantees deposits above the European Union’s €100,000 limit:
Austrian debt pioneers say they’ve forged novel new instruments designed to appeal to environmentally-conscious retail investors who want to avoid complicated financial products and commissions. The Austrian Treasury is offering two retail debt products with a green label as part of an initiative to channel household saving directly into the federal budget. Funds will help finance renewable energy generation, electric-vehicle charging points and Austria’s power grid.
Households can buy so-called Bundesschaetze notes from Monday, choosing among maturities ranging from one month to a decade. The government doesn’t charge fees and offers a full guarantee in excess of the European Union’s traditional €100,000 ($107,000) cap on deposits. …
Austria is the latest government to offer their citizens a way to invest directly toward their nation’s climate plans. The UK started selling retail green bonds in 2021 with Hong Kong following in 2022.
In the states
South Carolina lawmakers consider bill to prohibit ESG discrimination against agriculture companies
South Carolina lawmakers are considering legislation that would prohibit financial services institutions from discriminating against agricultural businesses on the basis of ESG criteria. The bill passed the state House on March 29 and was amended in the state Senate last week:
Representative Patrick Haddon of Greenville, South Carolina, is leading a proposal that would prevent financial firms from denying services to agricultural producers for environment, social and governance-related reasons. Those include factors such as limiting greenhouse gas emissions, as well as using fossil fuel-derived fertilizers and oil-powered machinery.
GOP officials across the US have attacked ESG for more than two years now, saying the investing and financing strategy furthers liberal goals such as fighting climate change. In January, a dozen agriculture commissioners in GOP-led states, including Iowa, Mississippi and South Carolina, asked banks to provide information explaining how their climate policies impact their lending to farmers.
“I don’t want any industry governed by ESG principles,” said Representative Cal Forrest of Saluda, South Carolina, another sponsor of the state’s proposal.
Texas fund adopts shareholder voting approach opposing ESG
The Texas Permanent School Fund announced last week that it will use a new proxy voting option from Institutional Shareholder Services (ISS) referred to as the ESG skeptic option, which was developed by Bowyer Research. The move came after the fund generated headlines last month when it removed $8.5 billion from BlackRock’s asset management over the firm’s ESG policies:
Texas PSF has adopted proxy voting guidelines created by proxy consulting firm Bowyer Research. These have been made available to access through ISS since March 4, but are not a product of ISS itself.
In a news release, Bowyer said its guidelines are “designed for investors who wish to counter the promotion of ESG ideology by political activists through the use of the proxy voting system and to reassert the traditional understanding of shareholder primacy as their fiduciary duty.”
The new Texas PSF proxy voting matrix will take effect immediately and will be used to cast votes on behalf of Texas PSF during the first half of this year. According to Texas PSF, ISS will produce a report for the Texas PSF to allow for an annual review to ensure that proxy votes comply with the matrix.
On Wall Street and in the private sector
Unilever scales back ESG pledges
Unilever, a long-time corporate ESG supporter, has announced that it will scale back its ESG goals, citing practical difficulties and reduced investor support for such efforts:
The move by Hein Schumacher, Unilever’s chief executive officer, marks a major shift for the £95 billion ($118 billion) consumer group — home to brands ranging from Hellmann’s mayonnaise to Domestos bleach — which has built its business strategy on a bedrock of ESG policies for more than a decade. Seen as the corporate world’s biggest cheerleader for the idea that companies should do good in the world, the downgrading of some commitments will be watched closely by other businesses under shareholder pressure to reduce costs and boost stock market performance.
Unilever, one of the world’s biggest users of plastic packaging, had previously committed to halve its use of virgin plastics by 2025. That target will now be one-third by 2026 — the difference accounting for more than 100,000 tons of fresh plastic annually. A commitment to pay all its direct suppliers a living wage by 2030 will be replaced by a living wage promise covering suppliers of half of its spending on goods and services by 2026. A pledge to spend an annual €2 billion ($2.1 billion) with diverse businesses worldwide by 2025 has been dropped along with a commitment that 5% of the workforce will be made up of people with disabilities by the same year.
The shift represents a sharp break with Schumacher’s predecessors Paul Polman and Alan Jope, who became industry advocates of the need for companies to take greater responsibility for sustainability and equality.
In the spotlight
BlackRock argues clean energy transition requires more investment
BlackRock, the world’s largest asset management firm, argued on April 22 that transitioning the global economy to green energy will require investments of $4 trillion per year:
BlackRock estimates that the world’s green energy transition will require $4 trillion annually by the mid-2030s, calling for more public-private partnerships, especially in Asia-Pacific.
The forecast comes from BlackRock’s latest “Investment Institute Transition Scenario,” which analyzes how the low-carbon transition is most likely to play out and its potential impact on portfolios.
The $4 trillion figure is double previous expectations of $2 trillion annually, and will require increases in both public and private sector capital, according to Michael Dennis, head of APAC Alternatives Strategy & Capital Markets at BlackRock.
Bloomberg reported the same day that new data from Morningstar shows BlackRock’s business would benefit significantly from the growth of energy transition investments:
BlackRock Inc. has emerged as the clear leader in a fast-growing corner of ESG: climate transition.
Transition strategies entail investing in companies that are seen as instrumental in shifting toward a low-carbon economy. Last year, the market for transition funds grew 25% to almost $210 billion, according to data provided by Morningstar Inc. And no asset manager drew as much investor cash to transition funds as BlackRock, the data show.
“BlackRock is the incontestable leader,” said Hortense Bioy, global director of sustainability research at Morningstar. “It dominates the ESG fund landscape globally, in large part due to its passive fund range. And the climate investing space is no exception.”