Another dumb and dangerous battle in the U.S., this time over sustainable investing.
Big proxy advisers like ISS are suing Texas over a new law (going into effect now) requiring that any ESG-related shareholder resolution include a disclaimer: advice is “not being provided solely in the financial interest of the company’s shareholders.”
This sounds wonky or obscure, but it’s part of a broader attack on sustainability. More than 50 anti-ESG laws at the state level have already passed (out of nearly 500 proposed since 2021). They generally try to punish financial firms for using a sustainability lens on investing. Ok, let’s quickly acknowledge that “ESG investing” has serious problems (a debate for another time).
But this attack still matters.
If this coordinated push succeeds, the next steps seem clear: laws hindering or banning investment in clean tech, affordable housing, or other environmental and social progress. Texas blocking clean tech — a huge industry there — would be a giant self-inflicted wound. And yet, we’re already seeing absurd moves, like the feds stopping a massive offshore wind project that was 80% built.
On the merits, the Texas law is ludicrous. Forcing a statement about not putting finances first? By that logic — which seems to assume that a focus on sustainability hurts returns — ANY investment screen could be a problem. And that covers almost everything managed (like, say, a tech or healthcare fund). Over the long haul, 90% of managed funds underperform simple index funds. Every investment screen is risky.
And to say that sustainability issues have NO impact on financial performance? Just false. Climate change and extreme weather create risk and serious costs. Inclusivity in hiring or marketing directly affects engagement and sales (just ask retailer Target which faced shopper backlash after backing off DEI).
Will the finance world fight aggressively against laws that dictate how they assess risk? They should. But given today’s politics, and the climate of fear, who knows.
[See discussion on LinkedIn]
fyi, some other recent LinkedIn posts:
Idiocy: Trump admin stops offshore windfarm that’s 80% done
Employees still care about sustainability
The terrifying rise of ‘whole body scans’ to identify us
A rare, civil and productive online debate
[Note: if you’re upset about federal troops taking over a U.S. city, here’s a good post of things to do]
2519
