Industry targets of U.S. Republicans' anti-ESG efforts

[April 22, 2023]  By Ross Kerber
 
(Reuters) - Republican federal and state lawmakers, governors, and attorneys general are pushing back on growing efforts by investors and executives to include environmental, social and governance (ESG) factors in their business decision making.  

A trader works as a screen displays the trading information for BlackRock on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 14, 2022. REUTERS/Brendan McDermid

In all 39 bills targeting aspects of ESG were filed as of the end of 2022, of which 9 had been passed, 14 were proposed, and 16 were dead, according to law firm Morgan Lewis.

Here is a look at major efforts and, in some cases, their impact on specific industries.

ASSET MANAGERS

Attorneys general from 21 states told 53 of the largest U.S. fund firms in March that their participation in industry-wide groups like the Net Zero Asset Managers (NZAM) initiative could be "inconsistent with your clients' financial interests" such as investors who do not share ESG goals.

In addition, legislation pending in states, including Texas and Florida, aims to limit the consideration of ESG factors by pension funds, which could cut off fund firms from public contracts.

Top fund firms such as BlackRock Inc and State Street Corp - both NZAM members - have said their ESG efforts only support clients concerns, for instance the view that climate change poses investment risks. To date only one major U.S. asset manager, Vanguard Group, has left NZAM, and says it still considers climate risks relevant to investors.

PAYMENT COMPANIES

Laws proposed by Republicans in at least six states aimed to limit or ban the use of a planned merchant code for credit card transactions at gun retailers meant to detect suspicious firearms and ammunition sales. Citing the pending laws, major payment card companies, including Visa Inc and Mastercard Inc in March paused work to implement the new code.

Several of the bills have been passed into law in states including Mississippi and West Virginia.

PROXY ADVISERS

Republican attorneys general in January sought answers from top proxy advisers Institutional Shareholder Services and Glass Lewis & Co about whether their voting recommendations on such issues as climate and boardroom diversity violated duties to clients. Both responded they focus on long-term shareholder value.

LAW FIRMS

Five Republican U.S. senators on Nov. 4 told top attorneys at major corporate law firms they planned to use congressional oversight powers "to scrutinize the institutionalized antitrust violations being committed in the name of ESG." Republicans failed to gain control of the U.S. Senate in elections held Nov. 8, however, limiting their investigative powers.

(Reporting by Ross Kerber; Editing by Aurora Ellis and Anna Driver)

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