For 3rd year in a row, companies have retreated from Environmental & Social Governance efforts, as pushback against "socially conscious investing" continues
WASHINGTON, D.C. (Texas Insider Report) — The wave of pushback against Environmental, Social, and Governance (ESG) investment efforts has once again proven successful. It is not only state-level and other policymakers that are following Texas’ leadership. A new round of reports shows that businesses and asset managers of all types have moved away.
And, the call has especially been heard across Wall Street.
In August 2022, a group of State Attorney Generals from across the country – including Texas' Attorney General Ken Paxton (right,) – called on the nation's largest investment giants to reevaluate their commitments to "Environmental, Social & Governance" (ESG) investing. And after Texas' legislators passed Senate Bill 13, the movement against the left-wing political ESG agenda spread throughout the country, as states like Louisiana, Oklahoma, and West Virginia followed suit in opposing ESG.The Texas Legislature's "bill analysis" for SB 13 said the effort was designed to prohibit certain State Agencies from investing funds in financial companies taking “any action that is, solely or primarily, intended to penalize, inflict economic harm on or limit commercial relations with [an energy company that] does not commit or pledge to meet environmental standards beyond applicable federal and state law.”
These, and other similar efforts have only become more widespread – as businesses of all types have moved away from ESG issues and socially motivated investment behaviors.
Earlier this year, a Morningstar report found that support for environment and social resolutions from asset managers declined from 36% in 2023, to 30% in the 2024 proxy year.
Last month, BlackRock released its 2024 Global Voting Spotlight, which details the firm’s proxy voting activities from the past 12 months. It showed the firm once again cut support for shareholder proposals linked to environmental and social issues.
In 2023, BlackRock supported only 6.7% of similar proposals, which was a dramatic decrease from 2021, when the firm supported 47% of resolutions.
2024 continued the downward trend, when the company supported only 20 of the 493 environmental and social proposals – or 4%.
Their reasoning? The proposals were found to be:
“Overly prescriptive, lacking economic merit, or asking companies to address material risks they are already managing.”
The company claims this is not in response to political backlash, but rather follows investor demands and trends. The firm further highlighted their role as a fiduciary – and to working in the interests of investors – in their release explaining the voting updates:
“As ever, we remain focused on fulfilling our fiduciary duty as an asset manager to our clients and helping them achieve their investment goals.”
This commitment comes at a time when other asset managers are placing political agendas over client goals. State Street recently confirmed that the company’s new voting choice program still lists climate change as a “key priority” within the service. State Street’s global head of ESG and sustainable investing, Karen Wong, revealed that the firm has no plan to offer clients a service that does not center stewardship on sustainability.As Texas has pointed out from the beginning of this fight against ESG, investors should have a choice rather than being forced to vote for, or invest in, issues they don’t believe in.
Moreover, the two major proxy advisory firms, Institutional Shareholder Service (ISS) and Glass Lewis, have continued to recommended voting in favor of ESG proposals at a much higher rate than asset managers.
While Glass Lewis supported over 30% of ESG resolutions, ISS supported more than 75%.
BlackRock’s voting spotlight only continues a trend of being responsive to the calls from Texas leaders and others to move away from ESG and has recognized the growing influence of Texas in the financial sector. In the last 12-months, just within Texas, BlackRock has:
- Created a Joint Venture with Occidental to develop STRATOS, the World’s Largest Direct Air Capture Plant in Ector County, Texas;
- Met with Texan leadership at a “Texas Power Grid Investment Summit,” which encouraged investment in natural gas power plants in Texas;
- Provided initial capital to launch the Texas Stock Exchange, which aims to be more CEO and management friendly than the New York Stock Exchange or the Nasdaq,
Across the country, investors have turned their backs on ESG funds. Investors pulled out of ESG funds more than ever this year as clients withdrew $8.8 billion from environmental and socially-focused funds in the first quarter of 2024.
Texans should be proud to be leading the country in the right direction.
