Sen. Marsha Blackburn (R-Tenn.) and Sen. Tom Cotton (R-Ark.) are telling 51 of the nation’s top law firms that they should warn their clients to “lawyer up” if they enter environment, social and governance (ESG) agreements that create “climate cartels.”
“Of particular concern is the collusive effort to restrict the supply of coal, oil, and gas, which is driving up energy costs across the globe and empowering America’s adversaries abroad,” the letter reads.
The ESG movement encourages large public investors such as Fortune 500 corporate and governmental pension programs to pull investments in corporations and public institutions that resist adopting a wide range of progressive environmental, social, and governance policies in place of maximizing the profitability and efficiency that drives product innovation, job growth, and market expansion.
Joining Blackburn and Cotton in signing the letter were Sens. Mike Lee (R-Utah), Marco Rubio (R-Fla.), and Charles Grassley (R-Iowa). Lee, Rubio, and Grassley were reelected in the Nov. 8 midterm election.
“Over the coming months and years, Congress will increasingly use its oversight powers to scrutinize the institutionalized antitrust violations being committed in the name of ESG, and refer those violations to the Federal Trade Commission (FTC) and the Department of Justice (DOJ),” the letter reads.
“To the extent that your firm continues to advise clients regarding participation in ESG initiatives, both you and those clients should take care to preserve relevant documents in anticipation of those investigations.”
The request to preserve documents is typically made prior to the official beginning of a congressional investigation. Blackburn, Cotton, and Lee are members of the Senate Judiciary Committee, while Grassley is the panel’s ranking minority member and would likely become chairman if Republicans succeed in regaining control of the Senate.
A Senate probe of ESG programs for possible antitrust violations would also clash with President Joe Biden’s determination to include the approach in federal funding decisions.
In their letter, the senators reminded the law firms that “although businesses would certainly be wise to lawyer up before undertaking ESG initiatives, your firm has a duty to fully inform clients of the risks they incur by participating in climate cartels and other ill-advised ESG schemes.”
The senators also pointed out that during a recent Senate hearing, FTC Commissioner Lina Khan and Assistant Attorney General Jonathan Kanter of the DOJ’s antitrust division were asked to share their thoughts about ESG collusion.
They said Khan emphasized that there was no ESG exemption to antitrust laws and regarding ESG group initiatives, she noted that those types of cooperation or agreements—in as much as they can affect competition—were “always relevant to” the FTC.
The senators said Kanter emphasized his own agreement with “the sentiment that collusion is anti-competitive,” and he agreed that when firms had substantial power and used that power to achieve anti-competitive ends, that should be “actionable under the antitrust laws.”
The popularity of ESG investment strategies has grown in recent years, but criticism of them has also increased as more data becomes available on how they perform.
“All too often these higher fees are unwarranted given that ESG funds often closely mirror ‘vanilla’ funds,” the analysis reads.
The HBR analysis further pointed out that “confusion about ESG has also led to criticism within the investment community.”
It continued, quoting hedge fund manager Sir Chris Hohn saying, “ESG for most managers is total greenwash and investors need to wake up to realize that their asset managers talk but don’t actually do.”
