The ESG Advocate 010 - The markets strike back! 🤜🤛
Over the past few weeks, a steady stream of news has come out of the US around the anti-ESG movement. Still, that's not all that's going on in the world.
Let's run through an update on the latest from the anti-ESG crowd this week but quickly pivot to a new trend - pushing back.
Finally, we'll wrap up with some positive examples of change and progress.
Let's get to it!
A quick update on the anti-woke crowd
The disinformation and political game around ESG leading up to the midterm elections continues. Last week, things ratcheted up incrementally with the Florida State Board banning ESG considerations for pension plans and the Texas comptroller boycotting BlackRock and a handful of others for boycotting energy companies.
The law defines a boycott as:
refusing to deal with, terminating business activities with, or otherwise taking any action that is intended to penalise, inflict economic harm on, or limit commercial relations with a company
Florida and Texas use an older yet popularized definition of ESG as negative screening and divestment. While you can find funds that exclude fossil fuels via strategies to minimize perceived risk exposure, that's not broadly what ESG is about. As Robert Eccles pointed out this week, many energy companies score high on ESG so that they could be included in ESG ETFs.
Pushback!
Finally, some financial services firms are pushing back against the anti-ESG crowd!
First, Nasdaq showcased a piece by Robert Smith, the President and Chief Investment Officer of Sage Advisory Services, called The Misguided Vilification of ESG. Smith provides facts and figures behind ESG and perfectly articulates the considerations of ESG factors in an investment strategy.
At Sage, we regard ESG-related risk assessment as an expansion of our fiduciary responsibilities.
Don't miss that word, "fiduciary." It is a critical piece of the anti-ESG argument because they believe ESG is a concessionary. In reality, it's a core consideration for corporates and investors since risk management pays out over the long term.
Things escalated quickly, with The Financial Times headline declaring that BlackRock labels Texas ‘anti-competitive’ over ESG blacklisting.
ICYMI, BlackRock has over $100B in energy investments in Texas with over $290B in total investments. Mark McCombe, the head of BlackRock’s US business, did not sugarcoat his feedback.
Do other companies want to be doing business in a state where the rules can change around you?
Morningstar came out similarly this week with a piece from Global Head of Sustainability Research. He picks apart the anti-ESG talking points, including the often overlooked anti-DEI argument. He makes several powerful points, but this is the one big takeaway.
Just ask yourself who is likely to know better how to invest your money—professional asset managers or politicians? I’ve known many of both over the years and believe me, not very many politicians of either partisan stripe know the first thing about investing.
I applaud this type of pushback from these firms and hope more join the conversation. With politicians and media fueling the cycle of distrust, firms have an excellent opportunity to set the story straight. Also, it seems like good governance, doesn't it?
This week's last pushback was from US SIF: The Forum for Sustainable and Responsible Investment. The organization launched a new site to help dispel the anti-ESG disinformation, ESGTruths.com. The site contains "The truth about ESG and sustainable investing." Still, it's quite clear why this site is needed. 👇
ESG Example: Coal Needs Water
Before moving on, it's worth a stop in Wyoming, where an ESG risk concerning a coal plant's operations threatens energy production. The Jim Bridger coal plant is one of the largest in the US, but producing energy with coal takes a lot of water. The western US is now drier than it's been in 1,200 years.
This is a huge risk for states like Wyoming, which supplies 40% of the coal for the US. Joe Smyth, research manager at the Energy and Policy Institute, describes the risk.
If you don't have water to cool it, you can't run it, right? Like it's not a minor risk. It is a very disruptive event. If you're not aware of those risks, then you are not really operating your power plants responsibly.
This is a great example of the risk ESG helps you think about. It's worth noting that Wyoming governor Mark Gordon, a Republican, and his state did not sign the anti-ESG letter to BlackRock. He also seems to be in the minority of his party who understands the need to transition to clean energy, stating:
We will be home to the second largest wind farm in the world.
This is against the backdrop of two interesting numbers:
462% more electricity was from renewables rather than fossil fuels in the first half of 2022 compared to 2021
Renewable energy accounted for 25.3% of the nation's electricity generation in the first six months of this year, up 3% YoY
Good news and progress
Richard Peers, the founder of ResponsibleRisk, asked me to pivot this week to some good news, so let's take a look!
California took the lead this week with a string of three interesting announcements. People pay attention when the world's fifth largest economy makes a move!
California to Ban the Sale of New Gasoline Cars — www-nytimes-com.cdn.ampproject.org
The decision, to take effect by 2035, will very likely speed a wider transition to electric vehicles because many other states follow California’s standards.
Diversity Requirements For California’s $330M Annual Film & TV Tax Credits Poised To Become Law
Hollywood soon might be required to do more than just talk about the importance of diversity in the industry, if a new addition to an extension of California’s lucrative film and television tax credits becomes law.
In a US first, California will pilot solar-panel canopies over canals — electrek.co In 2021, scientists published a feasibility study about erecting solar panels over canals, and it's about to become a reality.
Not to be outdone, there was positive, sustainable transportation news coming out of the largest economy in the EU this week, too!
First 100% Hydrogen-Powered Passenger Train Route Begins Operation in Germany - ESG Today — www.esgtoday.com
Rail transport manufacturer Alstom announced today that its hydrogen train, Coradia iLint, is now being used on the world’s first 100% hydrogen-powered passenger train route. The trains, operated by Germany’s Elbe-Weser railways (evb) on behalf of operator LNVG, emit only steam and condensed water.
In more interesting news, which just might intersect with degrowth, France is banning fossil fuel advertising. Timothée Parrique, a researcher in ecological economics at Lund University in Sweden, covers advertising's impact a little bit in this interview (51:25 - 58:10).
France becomes first European country to ban fossil fuel advertising | Ethical News — ethicalnews.org
Adverts promoting fossil fuel products and services have been banned in France under a new climate law. France has become the first European country to put such a ban in place, and firms will no longer be able to promote petroleum energy products, energy from the combustion of coal mining and hydrogen-containing carbons.
Hawaii is getting rid of coal power (E) and considering what to do about the coal industry's workers (S).
Hawaii is about to get rid of coal power for good | Canary Media — www.canarymedia.com Next up: finding new roles for coal plant workers — and keeping the lights on during a global energy crisis.
Lastly, a little bit of fun for those of us working on these issues. There are some pretty interesting job titles out there. I totally could be the Director of Philosophy!
10 cool titles in sustainability | Greenbiz — www.greenbiz.com The evolution of the sustainability profession has given rise to an array of roles and responsibilities across industries.
LinkedIn Post of the Week
A late-minute entry here by my fellow Microsoftie, Samira Khan, Director of Global Public Affairs. She posed a great question:
In two years, what will people be saying about ESG?
This would be around the 20th anniversary of the paper Who Cares Wins, which kicked off the movement.
I weighed in, but you should too!
Samira Khan on LinkedIn — www.linkedin.com
Two years from now, what will people be saying about “ESG”? Does it matter? What matters most now?
Tweet of the Week❗
As an English major, I love this one. Exclamation points are showing up in scientific papers to stress the criticality of climate issues!
HT to Jonathan Dunnett
