Republicans Poised for More Anti-ESG Fights in 2023

Florida Gov. Ron DeSantis in Las Vegas, Nev., on Nov. 19, 2022. Wade Vandervort/AFP via Getty Images

Republican lawmakers are set to take on the environment, social, and governance (ESG) agenda this year, with multiple states like Florida, Indiana, and Oklahoma targeting the use of such policies for business purposes.

The Republican charge against ESG is being led by some of the GOP’s biggest names, including former Vice President Mike Pence, Florida Gov. Ron DeSantis, and Texas Gov. Greg Abbott. DeSantis finds it troubling that ESG investors prioritize “woke corporate ideals” and nonfinancial factors as part of their investing process, according to the “People Before Corporate Power” presentation uploaded on the Florida governor’s website.

The main victims of ESG are conservative Americans, soon-to-be retirees, those who hold strong religious beliefs, Second Amendment supporters, victims of the “Biden border crisis,” and everyday U.S. citizens who fill up their gas tanks, it said.

“ESG investors are corporate cartel elites who do not represent the will of the people, but rather base their investment strategies on social causes and virtue signaling while driving up costs for consumers in the name of diversity and sidelining hardworking Americans by threatening their livelihoods,” the presentation states.

The Florida governor has already proposed a framework for strict action against ESG policies that will be taken up in the March session by the state’s lawmakers.

This includes a) prohibiting credit card firms, big banks, and money transmitters from discriminating against customers for their political, religious, or social beliefs; b) requiring State Board of Administration (SBA) fund managers to focus only on maximizing the return on investment on behalf of Florida’s retirees; and c) prohibiting SBA fund managers from taking into account ESG factors when investing state money.

More GOP Action

In Indiana, State House Speaker Todd Huston (R-Ind.) raised the issue of ESG considerations being applied to investments made by the Indiana Public Retirement System (INPRS) during a floor speech in November.

“We want—particularly within our pension funds—our pension fund managers to be focused on return on investment and not on energy and social policies,” Huston said at the time, according to the Indiana Capital Chronicle. The Republican leadership in the House is set to take up these issues when the session begins this month.

In Oklahoma, Republican State Senator Casey Murdock has introduced a bill that seeks to ban government entities from entering into contracts with firms with restrictive firearms policies. Texas has proposed House Bill 645 seeking to limit the use of ESG criteria.

In December, six Republicans on the House Judiciary Committee wrote a letter to two executives on the steering committee for an investor group called Climate Action 100+. In the letter, the GOP members blamed ESG agenda for pushing restrictions on oil and gas investment while also promoting abortion access and gun control.

“When companies agree to work together to punish disfavored views or industries, or to otherwise advance environmental, social, and governance (ESG) goals, this coordinated behavior may violate the antitrust laws and harm American consumers,” the lawmakers wrote.

ESG Performance

Investment funds that adhered to ESG policies fared poorly last year. A Bloomberg analysis of the 10 largest ESG funds by assets shows that while the S&P 500 Index was down by 14.8 percent as of Dec. 5, eight of the 10 funds fell even more.

At the top of the list was Brown Advisory Sustainable Growth Fund, which declined by 28.1 percent, which is almost double the loss of the S&P 500. A Bloomberg survey from November found that 65 percent of respondents expect ESG funds to underperform the broader market this year.

“Given the challenges of 2022, there will be some recovery next year, but it will remain mixed,” owing to economic issues like inflation, Fionna Ross of Edinburgh-based fund manager Abrdn Plc said about ESG funds in an interview with the media outlet.