Republican lawmakers on the House Financial Services Committee are ramping up their offensive against the so-called ESG movement and the corporations that embrace the controversial investment trend.
Chairman of the House Financial Services Subcommittee on Oversight and Investigations, Congressman Bill Huizenga (R-MI), today sent letters to ten of the largest asset managers including BlackRock, Vanguard, State Street and JP Morgan requesting information on how the investing giants balance their ESG initiatives with their fiduciary responsibilities of maximizing investor returns.
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ESG, short for Environmental, Social Governance is a broad term used to describe an investing technique that encourages public companies to take steps to protect the environment, create governance mandates that ensure diversity and adhere to principles that supposedly better society. In recent years, ESG has grown into a $20 trillion business, popular with some big investors, such as public pension funds. However, many red-state government finance officials have pushed back banning the big ESG players, such as BlackRock, from managing money in state retirement systems. GOP members in Congress such as Huizenga have held hearings on how ESG mandates by asset managers are forcing big corporations to embrace progressive policies in the boardroom and sparked rising inflation as oil companies cut output to meet ESG standards.
Amid the conservative backlash, BlackRock, the world’s largest asset manager with just over $9 trillion in assets under management, is looking to possibly change the narrative regarding its association with ESG. The firm and its CEO Larry Fink have been among the biggest targets of the attacks. Fink, in interviews on FOX Business, has said that BlackRock is charting a moderate course on ESG and only offers it to clients who hire the asset manager for that purpose.
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In June, he made headlines when he said he won’t use the term ESG anymore because it has become too political. And on Monday, BlackRock named Amin Nasser, the CEO of the world’s largest oil producer Saudi Aramco, as the newest member of its Board of Directors, in a move seen to appease critics who say BlackRock’s ESG commitments have caused a decline in oil production.
A BlackRock spokesman had no comment. The other companies named above did not immediately return calls for comment.
It’s unclear if BlackRock’s recent efforts are enough to quell the criticism from the right. Huizenga’s letters cite the example of a collective pledge made by a group of over 300 global asset managers, including the addressees, to achieve net-zero emissions by 2050. The goal of the group, known as Net Zero Asset Managers, is for all pledges to eventually have their entire portfolios made up of companies that focus on decarbonization and support a similar goal of net-zero emissions.
Huizenga points out that, by making such commitments, investment institutions inherently involve themselves and their clients in social and political matters that do not appear to directly contribute to investor returns.
“These decisions can have a very serious impact on everyday investors and those saving for retirement,” Huizenga told FOX Business. “The fiduciary responsibility should be to maximize returns, period. This should not be an experiment in pushing an ideological and political agenda that reduces financial security and makes it harder for Americans to retire.”
In the past two weeks, the House Financial Services Committee held five subcommittee meetings and one full committee hearing to examine the effect of ESG-related policies on the financial markets and the everyday investor.
Today, the Committee pressed the Securities and Exchange Commission’s Director of Corporation Finance, Erik Gerding, on the agency’s controversial climate proposal that would, if passed, require public companies to make costly disclosures on their carbon footprints.
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“The House Financial Services Committee is leading the fight in Washington against damaging ESG policies,” tweeted Patrick McHenry (R-NC), Chairman of the House Financial Services Committee. “President Biden is using financial regulators to advance his radical climate and social goals without a mandate from the American people.”