Democratic attorneys general in 16 states and the District of Columbia sent a letter to four key lawmakers Monday, voicing their support for the environmental, social and governance investing movement and pushing back against Republican efforts to undermine it.
"A rigorous consideration of ESG factors to evaluate Value — the risk and reward of a potential investment — not Values — a subjective preference as to whether a given business or entity merits investment based on the nature of its business — can provide significant financial benefits to investors," the letter states, which is addressed to Sens. Sherrod Brown, D-Ohio, and. Patrick J. Toomey, R-Pa., chairman and ranking member of the Senate Banking Committee, respectively; and Reps. Maxine Waters, D-Calif., and Patrick McHenry, R-N.C., chairwoman and ranking member of the House Financial Services Committee, respectively.
The letter specifically makes reference to an Aug. 4 letter sent by 19 Republican attorneys general of other states to BlackRock CEO Larry Fink, accusing the company of using "the hard-earned money of our states' citizens to circumvent the best possible return on investment."
"The August 4 letter distorts the sound investment rationale for considering ESG factors in investment decision-making," the 17 attorneys general said in Monday's letter. "Consideration of ESG factors alongside all other material factors does not 'sacrifice' pensioner retirements to further a political agenda; it simply acknowledges that environmental, social, and governance issues are material factors that can affect returns."
District of Columbia Attorney General Karl A. Racine said in a news release that "Republican politicians are engaging in a dangerous misinformation campaign to influence how investment decisions are made."
In the midterm elections earlier this month, four state-level GOP candidates won their respective races on platforms promoting anti-ESG policies. One such winner was South Carolina Treasurer Curtis M. Loftis Jr., who announced in October that he will divest $200 million from BlackRock funds for their sustainable investing policies.
Mr. Loftis previously told Pensions & Investments that ESG "had the potential to seriously undermine our state's economic model from one that values fiduciary responsibility and sound financial judgment to one that pushes the left-wing political agenda of 'stakeholder capitalism.'"
The Democratic attorneys general underscore in their letter, however, that consideration of ESG factors in making investment decisions is consistent with typical fiduciary responsibilities.
"Put simply, consideration of ESG metrics can help public pension funds fulfill their fiduciary duty to provide the best return for beneficiaries; failing to do so appropriately can put their pensioners at risk," the letter states.
Mr. Racine maintained in his news release that "thoroughly considering all potential risks before making investment decisions is a fundamental principle of capitalism. These anti-ESG efforts are akin to putting a blindfold on investors."