Just when corporate America was starting to have a conscience, a certain — and increasingly extreme — faction of Republicans wants to punish it for it.
Investors, corporations, and credit rating agencies have begun to incorporate factors called ESG (environment, social, and governance) into how a credit agency might rate a municipal bond offering, corporate debt, or value companies held in public pension funds.
Rating agencies pushed the idea which is embraced by a myriad of investors. ESG factors are used by investors who control $16.6 trillion in investments in the United States, according to a Wall Street study cited by The Associated Press. Republicans oppose the idea, likening it to their critique of critical race theory, awakening or diversity initiatives, pushing the narrative that these ideas simply take away the Americanness of America.
But investors and Wall Street see it another way: ESG measurement assesses the real risk of business enterprises in a world where resources like water are becoming scarcer and the use of things like fossil fuels has higher costs for the business enterprise or government entity. Proponents argue that the factors have a real impact on a company’s bottom line.
“We focus on sustainability not because we’re environmentalists, but because we’re capitalists and trustees for our clients,” said Larry Fink, CEO of investment firm BlackRock and a key supporter. of ESG in a newsletter to clients.
Some Republican leaders who have gravitated around many baseless tropes and inflated them on unregulated and irresponsible social media argue that factors shouldn’t matter in assessing a state’s debt, for example. Utah Republican State Treasurer Marlo Oaks recently asked S&P Global Ratings to withdraw and change its “moderately negative” rating which was supported by an analysis that said “long-term challenges regarding the water supply, which could remain a constraint on its economy…given the widespread drought. conditions in the western United States »
Oaks likened ESG to GOP interpretations of critical race theory, and he said he was more concerned that investors pushing ESG factors would somehow limit companies’ ability to fossil fuels to access capital by selling shares. But that’s the whole point of capitalism, to get someone to buy your product in the open and free market. The government should not intervene.
ESG finally brings the true cost of certain business practices and industries into the realm of reality and is based on facts. It accurately assesses the cost of external damage that certain industries cause to others through environmental impacts and puts the cost on the polluter, not the victim.
It is important to note that not all Republicans buy into these extreme and emotionally charged ideas. But increasingly, we see the Republican Party being willfully branded with these ideas. This should make voters realize that their vote for Republicans may no longer be a vote for business, economic development and prosperity.
Indeed, Republican lawmakers in states facing poor environmental/debt ratings have begun to impose regulations on companies that would adopt ESG principles.
But ESG principles embedded in business decisions and corporate and government debt risk factors have ultimately become cost factors that rightly feature in our corporate capitalist system.
Attacks on ESG analysis by Republicans are attacks on capitalism.
– The free press of Mankato (Minnesota)