In this week’s edition of Economy and Society:
- Republicans respond to Europe’s ESG regulations
- American delegation opposes UN Sustainable Development Goals
- Longtime ESG advocate becomes Canadian Prime Minister
- JP Morgan CEO argues against proxy advisors
- CFA Institute drops ESG label
In Washington, D.C., and around the world
Republicans respond to Europe’s ESG regulations
What’s the story?
Sen. Bill Hagerty (R-Tenn.), a member of the Senate Banking Committee, introduced a bill—the PROTECT USA Act—that he says will protect American companies from the European Union’s (EU) ESG reporting requirements.
Why does it matter?
Republicans and American business organizations have argued the EU’s ESG regulations would hurt and force compliance on U.S. companies. Hagerty’s bill would prohibit foreign governments from enforcing the rules against some American businesses and nullify foreign court judgments against protected companies.
What’s the background?
U.S. Commerce Secretary Howard Lutnick previously said the Trump administration would oppose the EU rules and try to reduce their effect on American companies.
For more on Secretary Lutnick’s comments, click here.
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According to Bloomberg:
“American companies should be governed by US laws, not unaccountable lawmakers in foreign capitals,” Hagerty said in the proposal. “The European Union’s ideologically motivated regulatory overreach is an affront to US sovereignty.”
Confrontations between the EU and US have become routine since the November reelection of Donald Trump, with ESG emerging as a particular flashpoint. Even before Trump’s return to the White House, the GOP has regularly attacked ESG (environmental, social and governance), characterizing it as “anti-American” and “woke.
The focus of Hagerty’s proposed bill is the EU’s Corporate Sustainability Due Diligence Directive, which seeks to hold large companies accountable for ESG violations, and requires them to produce climate transition plans. Widespread opposition to CSDDD — both from within and outside the EU — led the European Commission to propose significant changes to the directive last month. Among provisions abandoned was a planned civil liability clause that would have applied to all large companies doing business in the EU.
American delegation opposes UN Sustainable Development Goals
What’s the story?
The American delegation to the United Nations (UN) rejected the organization’s Sustainable Development Goals (SDGs) and announced the U.S. will withdraw from the Loss and Damage Fund. The fund is supported by developed nations and compensates developing countries for environmental and weather-related damages.
Why does it matter?
The UN has led the ESG movement since at least 2005, when it introduced its Principles for Responsible Investment. Last week’s American opposition to the UN’s environmental policies indicates the U.S. government’s new priorities under President Donald Trump (R).
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According to ESG Dive:
The nation’s new stance on the SDGs surfaced during remarks made by Edward Heartney, a minister-counselor at the U.S. mission to the UN, on a resolution to create an “International Day of Peaceful Coexistence.” This resolution also included a reaffirmation of the 2030 Agenda for Sustainable Development.
Heartney said the 2030 agenda and SDGs “advance a program of soft global governance that is inconsistent with U.S. sovereignty and adverse to the rights and interests of Americans.” He added that “globalist endeavors like Agenda 2030 and the SDGs lost at the ballot box” in the U.S. November election. …
The U.S. also announced the same day that it was exiting the board for the Loss and Damage Fund, which was established during COP27 in 2022. The creation of the fund was the culmination of years of pressure from developing nations most vulnerable to climate change and, notably, the highlight of the UN’s climate change summit that year. The fund aims to help financially compensate for losses and damages from natural disasters spurred by climate change.
Longtime ESG advocate becomes Canadian Prime Minister
What’s the story?
International banker and ESG supporter Mark Carney became Canada’s prime minister on March 14 after being elected leader of the Liberal Party on March 9.
Why does it matter?
Stephen Soukup—an ESG opponent and the author of The Dictatorship of Woke Capital—argued in January that Carney was one of the most important leaders in the ESG movement and global finance. His election could boost support for ESG principles in Canadian public policy as America rolls back ESG-related regulations and commitments.
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According to Soukup:
[Carney] was the Governor of the Bank of Canada from 2008-2013 and the Governor of the Bank of England from 2013-2020. It was in this latter capacity that, in September 2016, Carney gave one of the most important and influential speeches in the history of central banking. Appearing at an event in Berlin, Carney gave a very carefully and very confrontationally worded address, in which he addressed climate change and framed its mitigation in fiscal and fiduciary terms. “A wholesale reassessment of prospects, as climate-related risks are re-evaluated,” Carney intoned, “could destabilise markets, spark a pro-cyclical crystallisation of losses and lead to a persistent tightening of financial conditions: a climate Minsky moment.”
A “Minsky moment” is a market term named for the economist Hyman Minsky, which is used to identify the point at which a bull market has become so speculative and over-leveraged that it hits a peak and then tips over and crashes. What Carney meant by predicting a “climate-related” Minsky moment was that he—and others, presumably—believed that global capital markets were already overleveraged, already well overbought, given the inevitability of climate change. As a result, once investors started to understand the reality of the climate “crisis,” they would come to realize how foolish and speculative their investments in “unsustainable” businesses were, leading to a crash. Or to put it more simply, Carney—the Governor of the Bank of England—was warning global investors and politicians that they either had to force business in general to become environmentally sustainable immediately or could face commercial and economic Armageddon. …
In 2022, Carney, along with his friend Michael Bloomberg, helped create GFANZ—the Glasgow Financial Alliance for Net Zero—an outgrowth of the UN’s COP26 meeting on climate change and one of the most powerful advocacy organizations pressing governments and businesses to abandon fossil fuels. The next year, Bloomberg appointed Carney chairman of the board of directors of Bloomberg L.P. In 2024, Canadian Prime Minister Justin Trudeau formalized Carney’s advisory role with his government, naming him a special advisor and chairman of the task force on economic growth.
On Wall Street and in the private sector
JP Morgan CEO argues against proxy advisors
What’s the story?
Jamie Dimon, the CEO of JP Morgan Chase—the largest bank in the world by market capitalization—spoke against Institutional Shareholder Services (ISS) and Glass Lewis (the two largest proxy advisory services) last week. Dimon argued they were ineffective, used inaccurate data, and had conflicts of interest.
Why does it matter?
Dimon’s opposition to the proxy advisory firms may reflect division among ESG supporters.
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According to The Wall Street Journal:
Glass Lewis and ISS provide recommendations to asset managers on how to vote their shares on proxy ballots. Pension funds, college endowments, foundations and mutual fund providers outsource their voting to the two firms, which make up 90% of the proxy advisory market. But the firms have conflicts of interest and don’t do adequate due diligence.
“They are incompetent,” Mr. Dimon said at a BlackRock retirement summit. “They are owned by the NGOs,” meaning non-governmental organizations. Their data is “wrong,” he continued, yet “they don’t have to correct them.” And companies “can hire them” to improve their corporate governance ratings. “Really? They should be gone and dead, done with,” Mr. Dimon said. …
ISS last month announced that it would no longer include diversity in its voting recommendations for U.S. boards, saying “we anticipate that institutional investors and U.S. companies will have a range of perspectives on DEI.” Yes, but ISS heretofore required companies to follow its “cookie cutter”—to use Mr. Dimon’s term—DEI rules.
CFA Institute drops ESG label
What’s the story?
The CFA Institute, which administers exams for the Chartered Financial Analyst designation, announced last week that it is removing the term ESG from the title of its sustainable investing training certificate.
Why does it matter?
The CFA designation is considered the gold standard among asset managers. The title requires thousands of hours of study and three levels of testing.
The institute has supported ESG and offered a Certificate in ESG Investing. The move to drop ESG language from the certificate is part of a broader move of asset managers away from the term.
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According to ESG Today:
The name change comes as the “ESG” label has become politically charged, particularly in the U.S. over the past few months since the election of Donald Trump as President, and following an increasingly active anti-ESG movement by Republican politicians, which has seen asset managers targeted by lawsuits and divestments over their ESG investing policies.
CFA Institute launched the Certificate in ESG Investing globally in 2021, providing investment professionals with an education program aimed at enabling the analysis and integration of ESG factors into the investment decision-making process.
In a FAQ on its website discussing the name change, however, CFA Institute said that since launching the certificate, “the concept of ESG investing has evolved and has, at times, had varied meanings in different markets,” adding that “the term “sustainable investing” now more accurately captures the broader, long-term impact and investing goals that the certificate aims to support.”