US: 14 Democratic states show ESG support
September 15, 2022
State treasurers from 14 democratic states have voiced their support for ESG investment, in the latest development in a widening political rift over how public investments are influenced.
A public declaration of support has been posted on the website of For the Long-Term, a public charity that supports the integration of non-financial metrics of public authorities’ finances.
The statement, entitled ‘We are in it for the long term,’ is signed by 14 state treasurers.
These include the state treasurers for Maine, Nevada, Delaware, Vermont, New Mexico, Illinois, Wisconsin, Massachusetts, New York, California, Rhode Island, Washington, Oregon, and Colorado.
All of these states are majority represented by democrats.
The statement alluded to recent high-profile action taken by republican states against ESG investment where critics have argued these metrics do not belong in public finances such as state pension funds.
Disagreeing, the 14 state treasurers have argued that disclosure, transparency and accountability make companies “more resilient by sharpening how they manage, ensuring that they are appropriately planned for the future.”
Arguing against this anti-ESG stance, the statement highlights the financial costs short-term approaches foregoing long-term sustainability can bring about.
“This type of short-term thinking imposes an ideological screen on an investment manager’s ability to perform or whether an investment banker can compete for the opportunity to underwrite debt,” read the letter.
“This screen negatively impacts competitive costs and increases potential risks that will be left for others to deal with in the future. In the case of state and public pension funds, these losses will be borne by the taxpayers and that means all of us.”
ESG investment has become an increasingly politicised subject in the US, with democratic President Joe Biden showing greater support for this during his term in office.
Republicans have since become vocal in their criticism.
In June, the State Financial Officers Federation (SFOF) – a republican lobby group – wrote to the SEC complaining its proposed climate disclosure regulations exceeded its regulatory remit.
Asset management Federated Hermes was forced to explain its sponsorship of this group in August, despite the firm’s focus on sustainable investment.
In September, Texas and Florida – both republican states – moved to boycott ESG investment, signing rules to omit firms practicing such considerations from state pension funds.
Last Updated: 16 September 2022