Here’s what they get wrong.
Ron DeSantis, Florida’s Republican governor and likely future presidential contender, has opened up a new front in his party’s war on “woke capitalism”. He is proposing to change the rules around how public bodies within Florida borrow from the markets by issuing bonds.
The proposal is that they would no longer be able to work with ratings agencies that value the bonds using the ESG (environmental, social and governance) sustainability criteria that have become commonplace in the world of finance in the past few years. Public bodies and companies with lower ESG scores can see this reflected in their borrowing costs, and some politicians on the right object to this “interference” with market valuations.
DeSantis already pledged in December to pull US$2 billion (£1.7 billion) of the state’s investment from BlackRock, the world’s largest asset manager and a key player in the ESG movement. This was after 19 Republican state attorneys-general told the asset manager in a letter: “Our states will not idly stand for our pensioners’ retirements to be sacrificed for BlackRock’s climate agenda.”
Eighteen states have also either proposed or adopted legislation over the past two years restricting state business with financial institutions that use ESG criteria to limit funding to industries like fossil fuels.
According to Republican senator Kevin Cramer from North Dakota, banks and asset managers “should ignore calls for ESG and woke capitalism and stick to what they do best”. Former vice president Mike Pence wants the the next Republican congress to work to “end the use of ESG principles nationwide”.
What they get wrong
Newly in charge of a Congressional branch, Republicans are taking their quest to Washington, DC. Andy Barr, the new chair of the House financial services subcommittee responsible for financial institutions, claimed America’s financial system had been “co-opted by the intolerant left that is intolerant of diversity”. For the US to be economically competitive, he said “we need our financial system to provide equal access to capital to all kinds of businesses”.
This revealed either a remarkable ignorance about financial markets and the financial risks posed by environmental and social challenges – or he was being cynically misleading to score political points.
