May 19, 2023 - The recent Republican push against sustainable investing likely originated in a backroom campaign by the fossil fuel industry in states like West Virginia and Texas.
Its tactic: to tar moves by the financial sector to weigh the climate risks posed to the oil, gas and coal businesses as “discrimination,” according to internal documents obtained by InfluenceMap.
InfluenceMap is a nonprofit think tank that reports on corporate lobbying around climate policy — an issue that has become almost entirely subsumed over the past year in the broader Republican campaign against what Gov. Ron DeSantis (R-Fla.) calls “woke investing.”
That campaign began as a failed 2021 attempt to get West Virginia to ban banks that figured into loans then-obscure metrics around environmental, social and governance (ESG) factors.
But over the past two years, the approach has gained rapid ground, as the ESG issue has bloomed into a major focus of state Republican politics and a key battleground in the national culture wars.
The documents obtained by InfluenceMap — which date back to the first attempts to craft anti-ESG legislation — reveal fossil fuel companies’ role as the major driver in the fight against sustainable finance.
Fight Against ESG
While it has largely failed to resonate with voters, the anti-ESG push has been successful in weakening climate commitments from major banks, which could now face a tide of anti-ESG lawsuits enabled by a rising wave of state laws.
Eighteen GOP-controlled state legislatures have passed bans of ESG, as has Congress — a piece of legislation that caused President Joe Biden to issue the first veto of his term.
Recent rhetoric around such ESG bans in Indiana, Kansas and Florida has focused on factors other than climate — in particular, Republican narratives around gender equity in the workplace and protections against discrimination. That push centered on the backlash by some finance companies against investment in firearms and private prison companies, as The Hill reported.
“WOKE-Wall Street wants to cozy up to the [Chinese Communist Party] and Dylan Mulvaney!” Florida State Financial Officer Jimmy Patronis said in a statement following DeSantis’ signing of anti-ESG legislation earlier this month.
“Our stance against ESG is another signal to the rest of the world that Florida believes in prosperity, we believe in freedom, and we’re a place where WOKE GOES TO DIE!” Patronis added.
ESG’s path to its current culture war status began with an attempt by West Virginia coal companies to push back against the financial industry’s rising unease around investing in coal — which as the dirtiest-burning fuel has the most powerful and disrupting impacts on the climate.
Documents obtained by InfluenceMap via a Freedom of Information Act request show that in February 2021, the West Virginia Coal Association sent a draft anti-ESG bill to state delegate Zack Maynard, who introduced it to the legislature that session.
That bill targeted “commercial discrimination of producers of coal, gas, oil, carbon-based energy,” and anti-discrimination rhetoric would become common in state anti-ESG bills across the nation.
The West Virginia bill was “part of a multi-state initiative to counter back against corporate cancel culture specifically ESG,” a lobbyist from Alliance Resource Partners — a major coal producer — wrote the head of the state pension committee.
This campaign began early on “to cast ESG as a threat,” said Cleo Rank, the InfluenceMap researcher who obtained and analyzed the documents.
In the case of coal, that threat was real: over 200 global financial institutions have committed to no longer finance coal mining or coal plants, according to the Institute for Energy Economics and Financial Analysis.
But the anti-ESG push soon expanded to focus on perceived finance industry threats to oil and gas, even though that industry had received nearly $500 billion in 2022 alone to explore for new supplies — its largest amount since Obama’s second term, according to S&P Global.
By 2021, conservative arguments against ESG consistently described it as a form of unethical — and potentially illegal — discrimination.
In a white paper commissioned by the highly conservative Texas Public Policy Foundation (TPPF) and circulated alongside the West Virginia legislation, oil industry Bud Brigham described ESG as a threat to American values, not just economic gains.
“Economic freedom — our right to spend, invest and donate our hard-earned money as we choose — is one of our most cherished rights,” Brigham, who has self-funded adaptations of movies by arch-libertarian Ayn Rand, wrote in the paper.
But “the energy discrimination movement, having penetrated the boardrooms and pension funds, seeks to undermine these fundamental principles,” Brigham added.
The West Virginia legislation failed in 2021 — but groups that backed it went on to push successfully for anti-ESG legislation in other states.
Copycat ESG Legislation
One key player was the conservative State Financial Officers Foundation (SFOF), InfluenceMap’s Rank told The Hill.
In one email to the group, West Virginia’s state financial officer asked for help getting signatures for a letter complaining to the U.S. banking industry about discrimination against fossil fuels.
The following year, the SFOF began to coordinate the opposition that ultimately helped scuttle the nomination of climate hawk and Biden appointee Sarah Bloom Raskin as the Federal Reserve’s top cop.
SFOF has close ties to the American Legislative Exchange Council (ALEC), a corporate-backed group — with heavy fossil fuel industry representation — that writes conservative draft bills for state legislators.
Draft language nearly identical to that submitted by a member of ALEC for an “Energy Discrimination Elimination Act” — model legislation that was rejected by ALEC’s board — later found its way into anti-ESG bills passed in states like Texas, Louisiana, Oklahoma, and Kentucky.
The arguments made for these laws now often focus on the idea that conservative beliefs are under attack.
‘The Climate has Always Changed’
Last December, Brigham — the oilman who coined the idea of energy discrimination — told a Texas Senate committee that his beliefs about climate change had cost him loans with Credit Suisse.
The loan officer, Brigham testified, said, “Bud, we may not be the right bank for you. And I said, ‘Really? Why?” And he said, ‘We kind of have to hear you say ‘Climate change is real. And it’s not debatable.’”
Brigham said he agreed with that — “the climate has always changed, and it always will” — but didn’t believe that carbon emissions had caused a crisis, and believed that the international treaties used to slow carbon emissions “would be a net human destruction.”
“I was personally very offended by that,” Brigham said. “And for them to use their power, their access to capital, to try to suppress my freedom of speech to try to coerce us into their political viewpoint — I found to be offensive.”
That frame is now mainstream on the right. Federal climate disclosures “would violate the First Amendment” because they would force companies to say that “they regard alleged climate risks as material,” the State Financial Officers Association wrote the Securities and Exchange Commission in 2022.
And the sweeping Florida anti-ESG bill passed earlier this month cast Republican banned “discriminating against customers for their religious, political, or social beliefs.”
These beliefs included “their support for securing the border, owning a firearm, and increasing our energy independence.”
The Price of Freedom
The other side of the anti-ESG argument advanced in the documents is that it’s illogical — because ESG investors are losing money by putting political concerns over financial returns.
But recent studies suggest that anti-ESG policies are beginning to cost states — and cities within them — as large financiers elect to leave the public market, leaving municipalities and state pension funds with fewer, smaller options.
One independent financial analysis found that Indiana’s anti-ESG bill could cost the state pension system nearly $7 billion, Reuters reported.
After Texas passed its anti-ESG law, five of the largest banks — Goldman Sachs, Citigroup, JPMorgan Chase, Fidelity and Bank of America — stopped doing business with the state’s urban governments, according to a study from Wharton Business School.
“This is new in its scale,” study author Daniel Garrett said in a statement. Those banks “used to underwrite about 35% of the debt in the market, so they’ve left a really big gap.”