Today the Interfaith Center on Corporate Responsibility (ICCR) announced it had sent a letter to members of both houses of Congress urging them to oppose a well-orchestrated and well-funded campaign seeking to block investors’ use of environmental, social and governance (ESG) factors as a framework to reduce long-term risk.
The letter was endorsed by 78 institutional investors who are members of ICCR, a coalition of over 300 investors focused on engaging corporations on issues affecting long-term value, including ESG issues. ICCR’s membership comprises faith-based organizations, asset managers, union and other pension funds, endowments, and other long-term investors with collective assets exceeding US$4 trillion.
In its letter, ICCR noted a marked increase in proposed state legislation that would prohibit state and municipal pension funds from implementing ESG investing strategies or utilizing asset managers that do so. Numerous anti-ESG bills have been introduced in 37 states and a number of these bills have been passed into law, including a law in Texas mandating that state pension funds cut ties with investment firms seen to be “boycotting” fossil fuel companies by addressing climate risk in their portfolios. Yet, if implemented, these “anti-ESG” bills could cause considerable financial damage to state pension funds and their beneficiaries.
According to the investor letter: Recent studies highlight that these bills will cause significant financial harm to pension beneficiaries and taxpayers. A Wharton study[i] on the consequences of the Texas law concluded the state would pay up to $532 million in additional municipal bond costs as a result of banning some of the largest bond underwriters due to their ESG policies. A further study by ESI Economics[ii]] applied the same methodology used in the Wharton study to six states which have passed or have pending similar legislation - Florida, Kentucky, Louisiana, Missouri, Oklahoma, and West Virginia - finding that this legislation could cost taxpayers across these states a total of over $700 million, through lost interest and fees on municipal bonds. Another study of a proposed Indiana anti-ESG bill noted the legislation could cost the State pension funds $6.7 billion over a decade[iii].
Said Josh Zinner, ICCR’s CEO, “It is deeply concerning that ESG investing, which for decades has been a crucial investment framework used to mitigate long-term risks, is being thrust into the heart of the culture wars and used as a political weapon by opponents. The great irony here is that these opponents, who --guided by special interests-- purport to mandate to investors which risks they can and cannot consider in their investments, are the ones who are truly politicizing investment to the great detriment of taxpayers and beneficiaries.”
The investors say challenges such as climate change and industrial pollution, the widening wealth gap, worker and supply chain issues, and escalating healthcare costs are systemic risks to society that threaten the broader economy and should concern all diversified investors as well as the general public.
Said Rob Fohr, of the Presbyterian Church U.S.A. and ICCR Board Chair, “The American public has a strong interest in how corporations impact the communities where they operate, how they treat their workers, and how they help or hurt the environment. Investors must be allowed to consider the impacts that companies generate to mitigate risk to our portfolios. Any actions that would constrain investors in this pursuit are antithetical to the public interest and to foundational free market concepts.”
On Tuesday, June 6th at 2:00 pm ET, a joint subcommittee of the House Oversight Committee will hold its second hearing as the House majority continues its efforts to politicize ESG investing as harmful.
Said Sonia Kowal, President of Zevin Asset Management, “We are appealing to legislators to restore sanity to this conversation and to acknowledge that there is no place for partisan politics in investment decision-making. When corporate ESG risks have the potential to negatively affect shareholder value we must respond as part of our fiduciary duty and protect the interests of our clients and beneficiaries.”
About the Interfaith Center on Corporate Responsibility (ICCR)
The Interfaith Center on Corporate Responsibility (ICCR) is a broad coalition of more than 300 institutional investors collectively representing over $4 trillion in invested capital. ICCR members, a cross-section of faith-based investors, asset managers, pension funds, foundations, and other long-term institutional investors, have over 50 years of experience engaging with companies on environmental, social, and governance (“ESG”) issues that are critical to long-term value creation. ICCR members engage hundreds of corporations annually in an effort to foster greater corporate accountability. Visit our website www.iccr.org and follow us on Twitter, LinkedIn, and Facebook.