The Pushback Against Financial Institutions That Advance ESG

* In February, State Street and JPMorgan Chase exited Carbon Action 100+ (CA100+), a group of over 700 institutional investors seeking to decarbonize the global economy by pressuring greenhouse gas emitters to act against climate change. The departures cut $14 trillion from the group's funds.

* Earlier that month, BlackRock CEO Larry Fink co-produced an energy conference with the Texas government and announced that his company would raise $10 million for new fossil fuel-powered plants.

These decisions are unusual, because banks and institutional investors have been coercing the shift to net zero carbon emissions for several years. They do this by insisting that customers commit to environmental, social justice, and corporate governance (ESG) goals and follow 'sustainability' standards. Critical banking and financial services are denied to businesses that do not adhere to ESG guidelines.

It is not as if the investment giants have had a change of mind. The retreat by State Street, JPMorgan Chase, and Blackrock from ESG investment policies are likelier driven by the profit motive, for the energy markets are shifting and there has been a fall-off in ESG investments. These nods to a worldview that questions climate change can also be seen as a weak, concessive response to the backlash against the ESG agenda, especially in states with Republican governments.

For instance, BlackRock, the world's largest investment manager, with $10 trillion in assets, faced a cease-and-desist order from Mississippi. It is accused of misleading investors by claiming to invest in "non-ESG funds" when it has "committed to using all assets under management" to pursue the "agenda of reducing carbon emissions to net zero." Mississippi also alleges that BlackRock misled investors by saying ESG funds yield greater financial benefits than non-ESG funds, which carry high fees. In 2022, Texas blacklisted the company over allegations that it was boycotting fossil fuels.

In 2023, concerned that Americans' savings were being used to "push political goals," attorneys-general from 20 states took a strong stance by threatening legal action against financial institutions that are members of climate alliances such as CA100+. They said the institutions are disregarding their primary duty to clients – providing "sound investment products and advice." They also expressed "significant concerns" about how these institutions were advertising their products.

Besides litigation, warnings, and blacklisting, states are also taking the route of legislation to combat ESG overreach. According to Pleiades Strategy, between 2021 and 2024, state legislatures have introduced 348 anti-ESG bills, with 37 passing into law so far. Oklahoma has been most active, with 14 bills; South Carolina, Missouri, and West Virginia follow with nine, eight, and seven bills.

However, the strongest factor working against widespread acquiescence to the ESG agenda is the growing realization that a) programs ostensibly created to stem global warming have failed to provide viable alternatives for energy generation; and b) sustainability standards work against the interests of farmers and ultimately jeopardize America's food security.

Green zealots promoting Net Zero, Agenda 2030, Build Back Better, or other such programs ignore the unviability of the solutions they have offered. Wind and solar energy – requiring more land, and fraught with disposal and pollution problems – have proved far less efficient and reliable than traditional energy production methods. Besides, they create new problems – including threats to the environment – that we are only now becoming aware of.

A few weeks ago, the failure of solar farms was brought into sharp relief when a large-scale solar facility near Houston was battered in a hailstorm. A similar event occurred in West Texas in 2019, causing damages of $70-$80 million. Wind turbines – of which there are 70,000 in the U.S. – could be a "huge threat to the entire biodiversity," according to Dr. Ursula Bellut-Staeck, who has since 2015 been studying the deleterious effects of low-frequency sound (infrasound) emitted by wind turbines. Besides affecting microcirculation and endothelial cells, she says, infrasound causes dizziness, headaches, ear pressure, sleep disorders, and cardiac arrhythmia, and affects concentration and memory. As all organisms react to infrasound, wind turbines pose a threat to the whole ecosystem. This runs against the very goals of the green agenda.

The more immediate danger from ESG policies, though, is to the nation's food security. According to a report from the Buckeye Institute, a free market think tank, adherence to the recommendations of the Paris Climate Accords, stipulations of the Inflation Reduction Act, and ESG-guided mandates would cause the operational costs of farming in America to rise 34%, ultimately affecting consumers. The report points out how such misguided climate control policies have failed in Europe.

Twelve state agricultural commissioners and ten members of Congress have demanded explanations from banks pursuing ESG agendas and in the process endangering food security. Their letters to Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo say that pursuit of a net-zero agenda will "have severe consequences for American farmers" and "increase food costs and decrease production at a time when global food demand is expected to rise dramatically."

These six banks – together representing 41% of global banking assets – are part of the U.N. Net Zero Banking Alliance (NZBA), a conglomeration of leading global banks focused on aligning the banking sector's objectives with the goals of the Paris Climate Accords.

The commissioners' letter cites the disastrous example of Sri Lanka, where a U.N. Environmental Program-led initiative to ban nitrogenous fertilizers resulted in a 95% food inflation. The climate agenda, it says, which calls for a complete overhaul of the farming industry, will force farmers to use less efficient equipment, eliminate nitrogen fertilizers that improve yields, and reduce livestock herds. The Congress members' letter also raises the matter of sovereignty. It says, "our nation's farmers should not be subjected to the political demands of an unelected international organization."

But worldwide, banks, asset managers, insurers, and corporations are in accord with the U.N. agenda for climate change and achieving 'Net Zero.' Like the NZBA, the Net Zero Insurance Alliance (NZIA) is an alliance, also under the aegis of the U.N., for insurance companies. Its aim: to work towards decarbonizing insurance and reinsurance underwriting portfolios. Then there is CA100+, which describes itself as an "investor-led" initiative, though, as BlackRock demonstrated, these asset managers may mislead the real investors, that is, clients whose money they manage. The Glasgow Financial Alliance for Net Zero (GFANZ), like the CA100+, is a suo motu initiative of leading financial institutions working to mobilize trillions of dollars in support of the race to Net Zero.

These alliances and conglomerations continue to strongly push the green agenda. So, it's too early to tell if retreats such as those by JPMorgan Chase and BlackRock signal a genuine commitment to the fossil-fuel sector or amount to self-serving rhetoric driven by the conservative pushback. In fact, Texas State Controller Glenn Hegar accuses JPMorgan Chase of "doublespeak" – telling Texas one thing and providing contradictory information to liberal states like New York and California!

As Brent Bennett, head of the energy practice at the Texas Public Policy Foundation, says, "I haven't heard anyone saying, 'We're dropping net zero by 2050 as a goal.'"

The biggest hope lies in American voters, who, according to a Rokk Solutions-Penn State study, are "becoming increasingly sophisticated when it comes to identifying corporate say-do gaps," and find "disingenuous" the corporate tendency "to profess to care about any and every liberal cause."

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