GOP directs culture war fury toward green investing trend
SALT LAKE CITY (AP) — Republicans are coming out swinging against Wall Street's growing efforts to consider factors like long-term environmental risk in investment decisions, the latest indication that the GOP is willing to damage its relationship with big business to score culture war points.
Many are targeting a concept known as ESG — which stands for environmental, social and governance — a sustainable investment trend sweeping the financial world. Red state officials deride it as politically correct and woke and are trying to stop investors who contract with states from adopting it on any level.
For right-wing activists who previously brought criticisms of critical race theory (CRT), diversity, equity and inclusion (DEI) and social emotional learning (SEL) to the forefront, it's the latest acronym-based source of outrage to find a home at rallies, in conservative media and in legislatures.
ESG has yet to take hold as mainstream political messaging, but backlash against it is gaining steam. Last week, former Vice President Mike Pence attacked the concept during a speech in Houston. And on Wednesday, the same day he said on Twitter he planned to vote Republican, Elon Musk attacked it after Tesla lost its place on the S&P 500′s ESG Index. He called it a scam “weaponized by phony social justice warriors.”
The concept calls on investors to consider criteria such as environmental risk, pay equity or how transparent companies are in their accounting practices. Aided by recently proposed disclosure requirements and analysis from ratings agencies, they have adopted the principles to such an extent that those who use them control $16.6 trillion in investments held in the U.S.
In response, Republicans — historically known for supporting fewer regulations — are in many places attempting to impose new rules on investors. Their efforts reflect how members of the party are willing to distance themselves from big business to push back against those they see as ideological foes.
“I don’t think we’re the party of big business anymore. We’re the party of people — more specifically, we’re the party of working people. And the problem that we have is with big banks and corporations right now trying to dictate how we’re going to live our lives,” West Virginia Treasurer Riley Moore said.
Opponents criticize ESG as politicized and a potentially costly diversion from purely financial investment principles, while advocates say considering the criteria more accurately accounts for risk and promises steadier returns.
“We focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients,” Larry Fink, CEO of investment firm BlackRock and a leading proponent, told clients in a letter this year.
But Moore and others including Utah’s Republican state treasurer Marlo Oaks argue favoring green investment over fossil fuels denies key industries access to the financial system and capital. They have targeted S&P Global Ratings for appending ESG scores to their traditional state credit ratings. They worry that without changes, their scores could make borrowing for projects like schools or roads costlier.
In an April letter, Oaks demanded S&P retract analysis that rated Utah as “moderately negative” in terms of environmental risk due to “long-term challenges regarding water supply, which could remain a constraint for its economy ... given pervasive drought conditions in the western U.S.”
The letter was co-signed by the governor, legislative leaders and the state’s congressional delegation, including Sen. Mitt Romney, whose former firm Bain Capital calls ESG factors “strategic, fact-based and diligence-driven.” It said ratings system “attempts to legitimize a dubious and unproven exercise” and attacks the "unreliability and inherently political nature of ESG factors in investment decisions.”
Though he likened ESG to critical race theory, Oaks said he was mostly concerned with capital markets and what he called attempts by fossil fuel opponents to manipulate them by pressuring investors to pick businesses with high ESG scores.
“DEI, CRT, SEL. It can be hard to keep up with the acronyms,” he wrote on an economics blog last month, “but there’s a relatively new one you need to know: ESG.”
Investors making carbon neutral or net zero criteria common were, in effect, Oaks said, limiting access to capital for oil and gas businesses, hurting their returns and potentially contributing to gas price spikes.
In more than a dozen red states, officials dispute the idea that the energy transition underway could make fossil fuel-related investments riskier in the long term. They argue employing asset managers with a preference for green investments uses state funds to further agendas out of sync with constituents.
In statehouses, anti-green investing efforts are backed by conservative groups such as the American Legislative Exchange Council and the Heartland Institute, a think-tank skeptical of scientific consensus on human-caused climate change that has backed bills that either divest state funds from financial institutions that use ESG or forbid them from using it to score businesses or individuals.
In Texas, West Virginia and Kentucky, lawmakers have passed bills requiring state funds limit transactions with companies that shun fossil fuels. Wyoming considered banning “social credit scores” that evaluate businesses using criteria that differ from accounting and other financial metrics, like ESG
After conservative talk show host Glenn Beck visited the Idaho Statehouse and referred to ESG as critical race theory “on steroids,” the Legislature passed a law in March prohibiting investment of state funds in companies that prioritize commitments to ESG over returns.
The American Legislative Exchange Council recently published model policy that would subject banks managing state pensions to new regulations limiting investments driven by what it calls “social, political and ideological” goals.
Though the policy doesn't mention it outright, Jonathan Williams, the group's chief economist, said ESG's mainstreaming amid broader trends of political correctness was a driving force. He said his research shows that incorporating factors beyond traditional financial metrics can lower the rate of return for already underfunded state pensions.
Sustainable investing advocates deny that charge and say considering the risks and realities of climate change amounts to responsible investing.
West Virginia and Arkansas recently divested their pension funds from BlackRock in response to the asset manager adding businesses with smaller carbon footprints to its portfolios. Moore, West Virginia's treasurer, hopes more will follow.
Though it's drawing enthusiasm, the green investment discourse differs from recurring debates over gender and sexuality or how history is taught. Both proponents and detractors acknowledged they’re surprised pensions, credit ratings and investment decisions have become campaign rally fodder.
Last month at the Utah state party’s convention, thousands of Republicans roared when Sen. Mike Lee described green investment in similar terms to critical race theory — another acronym-based foil: “Between CRT and ESG and MSNBC, we get way too much B.S.,” Lee said.
Bryan McGannon, a lobbyist with US SIF: The Forum for Sustainable and Responsible Investment, said opponents were wrong in framing sustainable investing trends as political. If states refuse to reckon with how the future will likely rely less on fossil fuels and limit how environmental risk can be considered, he said, they're making decisions with incomplete information.
“If a state’s not considering those risks, it may be a signal to an investor that this might not be a wise government to be putting our money with," McGannon said. "Investors use a huge swath of information, and ESG is a piece of that mosaic.”
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Associated Press writers Stan Choe in New York and Lindsay Whitehurst in Salt Lake City contributed to this report.
Sam Metz, The Associated Press
GEORGIA IS A GOP STATE
Hyundai announces $5.5B electric vehicle plant in Georgia
ELLABELL, Ga. (AP) — Hyundai Motor Group officials confirmed Friday the company will spend $5.5 billion on a huge electric vehicle plant near Savannah that will employ thousands — a deal Georgia’s governor called the largest economic development project in the state’s history.
Hyundai Motor Group CEO Jaehoon Chang made the announcement with Gov. Brian Kemp at the site of the future factory in Bryan County, where state and local officials purchased a flat, sprawling tract for $61 million last year in hopes of luring a major manufacturer.
Hyundai said it plans to employ at least 8,100 workers at the Georgia plant, where it will assemble electric vehicles as well as vehicle batteries. State and company officials expect an additional $1 billion in investment from suppliers to the factory.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
SAVANNAH, Ga. (AP) — A year after the state of Georgia and local government partners spent $61 million to buy a sprawling tract of land for future industrial development, Gov. Brian Kemp planned to travel to the site Friday for what his office would only describe as a “special economic development announcement.”
All signs pointed to Hyundai Motor Group building a massive auto plant at the site outside Savannah. President Joe Biden is visiting South Korea and his schedule included a weekend event with the company's chairman to discuss “Hyundai’s decision to invest in a new electric vehicle and battery manufacturing facility” in the area, according to the White House.
Expected to cost $7 billion and employ up to 8,500 workers, according to two Georgia officials familiar with the plans, the plant would rank among the largest development deals ever in Georgia. The officials were not authorized to discuss the project publicly and spoke on condition of anonymity.
The announcement comes five days before Kemp faces a contested Republican primary election against former U.S. Sen. David Perdue. It also coincides with Biden's visit to South Korea, where Hyundai is headquartered.
State and local officials purchased the 2,200-acre (890-hectare) site a year ago in Bryan County, about 25 miles (40 kilometers) inland from Savannah. The land sits adjacent to Interstate 16 that links Savannah and Macon, not far from its intersection with Interstate 95 that spans the eastern seaboard. It's also near to the Port of Savannah, the fourth-busiest U.S. seaport.
Bryan County and neighboring Chatham County, which includes Savannah, each chipped in $9 million toward the $61 million purchase price.
Hyundai Motor Group sells cars under the Hyundai and Kia brands. The South Korean automaker already operates two American assembly plants in Montgomery, Alabama, and in West Point, Georgia.
It would be the second huge electric vehicle plant announced in Georgia in less than a year. Rivian Automotive announced in December plans for a $5 billion electric truck plant east of Atlanta that's expected to employ about 7,500 workers.
In his primary campaign against Kemp, Perdue has attacked the Rivian deal and its promises of $1.5 billion in incentives and tax breaks by Georgia and local governments. Perdue says the deal transfers money to liberal financiers and the state failed to consulted with local residents who fear the plant threatens their rural quality of life.
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Amy reported from Atlanta and Madhani reported from Washington.
Russ Bynum, The Associated Press
