In this week’s edition of Economy and Society:
- Democratic state financial officers support ESG in letter to regulators
- Florida sues Target over stock drop and pride campaign
- Florida bill would prohibit ESG discrimination against farmers
- NZBA reevaluates goals following departures
- BlackRock halts, then resumes engagement after SEC guidance
In the states
Democratic state financial officers support ESG in letter to regulators
What’s the story?
Seventeen Democratic state financial officers sent a letter to the acting heads of the Securities and Exchange Commission (SEC) and the Department of Labor (DOL), asking them to not restrict the use of environmental, social, and governance (ESG) factors in financial decisions. The letter responds to one sent last month by Republican state financial officers asking the Biden administration to limit ESG considerations.
Why does it matter?
During the Biden administration, Republican state financial officers opposed federal efforts to advance ESG policies. With a Republican administration now in office, Democratic financial officers are advocating for ESG in response to federal regulatory actions.
What’s the background?
For more on the Republican state financial officers’ Jan. 28 letter to the SEC and DOL, click here.
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According to ESG Dive:
The Democratic finance officials took particular issue with the Republican officials’ letter relying heavily on a federal judge’s ruling against American Airlines in a lawsuit over the management of its retirement plans. The Republican finance officials used U.S. District Court judge Reed O’Connor’s ruling as evidence that the incorporation of factors like ESG is being used to pursue non-pecuniary goals.
The officials included state auditors, treasurers, controllers and comptrollers from New York City, California, Illinois and 12 other states who said that such a characterization of the use of environmental, social and governance factors is “incorrect and dangerously misleading.” …
Officials from Connecticut, Colorado, Delaware, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, Oregon, Rhode Island, Vermont and Washington also signed onto the letter. They said that risks related to climate change, governance failures and systemic issues are “present-day financial realities affecting market valuations, insurance costs, supply chains and infrastructure resilience.”
Florida sues Target over stock drop and pride campaign
What’s the story?
The Florida State Board of Administration, represented by state Attorney General James Uthmeier, sued Target Corporation on Feb. 20, claiming the company misled and harmed investors, including Florida’s state pension plans.
Why does it matter?
Target faced criticism from some conservatives and diversity, equity, and inclusion (DEI) opponents in 2023 over its LGBTQ pride campaign. Some critics boycotted the company, arguing the pride displays were overly graphic and sexualized. The state of Florida’s lawsuit claims the displays reduced sales and caused Target’s price to drop. It argues the company’s executives should have known the DEI efforts were excessive and violated the law.
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According to Florida’s Voice:
The lawsuit, filed in the U.S. District Court for the Middle District of Florida, claims that Target’s board and CEO, Brian Cornell, misrepresented the company’s oversight of social and political risks associated with its ESG and DEI policies.
The SBA, which manages Florida’s public pension funds, alleges that these misstatements caused significant financial losses for shareholders when consumer boycotts and backlash led to a sharp decline in Target’s stock value. …
“Corporations that push radical leftist ideology at the expense of financial returns jeopardize the retirement security of Florida’s first responders and teachers,” Uthmeier said. “My office will stridently pursue corporate reform so that companies get back to the business of doing business—not offensive political theatre.”
Florida bill would prohibit ESG discrimination against farmers
What’s the story?
Florida Agriculture Commissioner Wilton Simpson (R) recently highlighted provisions in the state’s farm bill that he says would protect farmers and ranchers from discrimination based on ESG factors.
Why does it matter?
Florida is the second state in two weeks to address concerns about ESG’s impact on agriculture. Two weeks ago, North Carolina Rep. Neal Jackson (R) introduced a stand-alone bill that similarly focused on farmers, credit, and ESG.
What’s the background?
For more on the North Carolina ESG-agriculture bill, click here.
Read more
According to Florida’s Voice:
Under the proposed Florida Farm bill, financial institutions could not use ESG criteria to deny services or loans to agricultural producers. Instead, banks would continue to rely on traditional methods like credit scores and debt-to-income ratios to decide whether to provide financial support.
One of the bill’s sponsors, Sen. Keith Truenow, also weighed in, calling the scoring system far-reaching.
“Florida’s farmers and ranchers are the backbone of our economy and our way of life,” he said. “Thanks to Commissioner Wilton Simpson’s leadership and the hard work we’ve put into this legislation, we are standing strong against woke financial institutions that want to force their radical agenda on our agricultural industry.”
On Wall Street and in the private sector
NZBA reevaluates goals following departures
What’s the story?
The Net-Zero Banking Alliance (NZBA)—an organization focused on climate-related financial risk management, has indicated it is willing to change its goals and member expectations. Reports suggest it may ease its strict climate targets.
Why does it matter?
The NZBA lost significant members in late 2024 and early 2025, including all major American bank participants. The group’s reported consideration of reduced climate targets may seek to retain members and engage more banks in their effort.
What’s the background
For more on American banks leaving NZBA, click here.
Read more
According to Bloomberg:
The Net-Zero Banking Alliance is considering an overhaul of its membership terms that may include abandoning a requirement for signatories to align their portfolios with a goal of limiting global warming to 1.5C, according to a person familiar with the group’s thinking who asked not to be identified discussing private deliberations. …
A spokesperson for NZBA said the alliance is currently undertaking a “strategic review,” adding that the group was designed to allow for adaptation to “changing conditions.”
The development follows a tumultuous few months for NZBA. The alliance was founded just four years ago and once claimed to represent over 40% of global banking assets. Now, with Wall Street responding to the Trump administration’s attacks on climate policies, net zero alliances are fighting for survival.
In the spotlight
BlackRock halts, then resumes engagement after SEC guidance
What’s the story?
The Securities and Exchange Commission (SEC) on Feb. 11 released new guidance to asset managers about the differences between active and passive management. The guidance indicated that engagement to promote specific policies, such as ESG or sustainability, could be considered active management.
Why did it matter?
The guidance indicated some managers would need to stop ESG engagement or rework their operations and file different forms (as non-passive managers).
What happened next?
The initial response from asset managers – including two of the “Big Three” passive firms – was to halt all corporate engagement. The Financial Times reported the story as follows:
BlackRock and Vanguard have cancelled meetings with companies in the middle of shareholder battles because they fear it could violate guidance on investor activism that the US Securities and Exchange Commission issued last week.
Large asset managers typically talk with companies about voting ahead of activism campaigns and also about routine proxy ballot issues at annual shareholder meetings.
But that practice has been called into question by the SEC’s guidance, which has been widely interpreted as an attack on using environmental, social and governance factors in investing. The change imposes more onerous regulatory requirements on fund managers that may be seeking to influence corporate behaviour.
After a more detailed review of the guidance, BlackRock resumed engagement, arguing the firm’s practices didn’t force corporate behaviors. Reuters reported:
BlackRock, the world’s largest asset manager, said on Thursday it had resumed meeting with the leaders of its portfolio companies after reviewing new guidance from the U.S. Securities and Exchange Commission.
In a statement sent by a representative, BlackRock confirmed it had temporarily paused the talks while it assessed the guidance, but has now resumed the ‘stewardship engagements.’ …
In the statement, BlackRock said that it “does not use engagement as a way to control publicly traded companies.” The New York firm also said “we are complying with the new requirements including by highlighting our role as a ‘passive’ investor at the start of each engagement.”
ESG opponents argued BlackRock’s statement contradicted earlier claims by the firm’s CEO, Larry Fink, who said, “Behaviors are gonna have to change and this is one thing [we’re] asking companies. You have to force behaviors, and at BlackRock we are forcing behaviors.”