Climate deniers sport their slick new anti-ESG look
Editor’s note: This is the latest in our Emerging Voices series featuring work from current or recent university students on topics related to climate and capital.
Would you recognize a wolf in sheep’s clothing? Or, if you’re a fan of The Emperor’s New Groove, a selfish prince in fuzzy llama’s wool? What about a climate denier in a business suit sporting a politician’s red tie or sitting at a state treasurer’s desk?
The climate denial movement, whose decades of disinformation were revealed in a recent damning Congressional report, has found a new straw man in the rise in popularity of ESG investing, or investments evaluated on the basis of their environment, social and governance returns as well as financial returns.
Right wing politicians and other recipients of fossil fuel funding have broad-brushed ESG as “woke capitalism” and part of a “liberal agenda” designed to put politics before people. But this anti-ESG crusade is not the product of conscientious free-marketers nor financial experts. The first major proponent of the anti-ESG campaign, the National Center for Public Policy Research, a right-wing think tank that described itself as “the original and premier opponent of the woke takeover of American corporate life,” has been funded by ExxonMobil since 1998.
“We focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients”
Today’s ESG opponents assert that investment managers using ESG standards are violating their “fiduciary duty” to put investors and their returns first. But as BlackRock CEO Larry Fink said in his infamous 2022 letter, “we focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients.” Study after study has demonstrated that investments with an ESG screen outperform. More than 85% of U.S. investment managers and 96% of S&P 500 companies use ESG measurements of how – or whether – companies address the environmental, social and governance risks and opportunities that can have a significant or “material” impact on the value of a business. Yes, many financial experts say many ESG ratings are superficial or misleading, and rightly call for better regulation or deeper analysis but measuring ESG risks is now an industry standard way to judge an investment for its governance and impact therefore providing protection for investors.
In fact, the anti-ESG campaign that purports to protect investors and public pensioners actually interferes with the free markets. Financial leaders created ESG, not politicians. As more than 250 companies and investment management firms have argued in a new counter campaign, anti-ESG efforts violate people’s “freedom to invest.” In using the word “woke,” which originally meant alert to racism, the anti-ESG campaign uses a racist dog whistle to whip up support on the political right. And if we “follow the money,” to use the Watergate term, we see that it’s funded in large part by fossil fuel companies with vested interests in preventing the ESG lens. Rather than an authentic investment strategy, anti-ESG claims are the latest weapons in the culture wars designed to obscure environmental, social and governance risks and impact.
Let’s be clear: The anti-ESG movement did not emerge organically from a grassroots desire for free capitalism or “protection” of financial returns. It’s classic astroturfing. An investigation by HEATED World reveals that the anti-ESG campaign was launched and financed by fossil fuel and tobacco lobbyists back in 2008, when the National Center for Public Policy Research, already funded by ExxonMobil, acquired the anti-ESG campaign’s originator: the Free Enterprise Education Institute.
The Free Enterprise Education Institute was the brainchild of Steve Milloy, a former coal company executive and lobbyist for ExxonMobil and Philip Morris, and Tom Borelli, a tobacco lobbyist and pioneer in the field of corporate-sponsored climate denial. Upon its incorporation in 1976, the Free Enterprise Education Institute dedicated itself to launching a campaign against the Corporate Social Responsibility (CSR) movement, in which companies adopt strategies to make a positive impact on society and the environment to reduce risk and increase brand value.
The anti-CSR movement started in 2004 as a website called “CSRwatch.com.” Now defunct, CSRWatch was dedicated to attacking corporations that had climate change and other socially conscious policies, such as fighting pollution, corruption and child labor. HEATED’s investigation reports, “the anti-’woke investing’ movement was not created by financial experts. It was created by two of the fossil fuel industry’s most notorious climate disinformers.”
Since Morris and Borelli’s initial foray into fossil-fuel-sponsored disinformation, the connections between the fossil fuel industry and the anti-ESG campaign have only grown deeper.
CSRWatch and the Free Enterprise Education Institute were directly funded by the fossil fuel industry. In 2004, HEATED revealed, ExxonMobil gave $80,000 to the Morris- and Borelli-controlled nonprofit behind the website. The Free Enterprise Education Institute also received grants from, you guessed it, a Koch family charity foundation, DonorsTrust, and the Randolph Foundation – conservative groups with fossil fuel ties. These funds, to quote CSRWatch website, went toward [keeping] “big businesses from becoming wholly-owned subsidiaries of Marxist-Socialism, Inc.” Such claims against conscious social investing clearly mirror anti-ESG rhetoric today – in an 2022 op-ed, Mike Pence claimed that “ESG empowers an unelected cabal of bureaucrats, regulators and activist investors to rate companies based on their adherence to left-wing values.” Morris and Borelli also sought to profit from this rhetoric, launching the Free Enterprise Action Fund.
Corporate America moving in lock-step to the left?
Morris and Borelli eventually shut down CSRWatch.com, and the Free Enterprise Education Institute merged with the conservative National Center for Public Policy Research to form the Free Enterprise Project, in order to “significantly enhance our ability to educate the public on emerging threats to our free enterprise system,” Borelli announced in a 2008 press release. Borelli has been promoting what has become a standard anti-ESG talking point, claiming that “as we have witnessed with global warming legislation, liberal CEOs are partnering with left-wing political and environmental activists to lobby for a regulatory scheme that will reduce economic growth and limit consumer choice.” Today, the Free Enterprise Project is churning out articles such as “It’s Not An Accident That Corporate America is Moving in Lockstep to the Left” and “Biden Uses Green Policies to Control Us, Not Just Energy.”
Since Morris and Borelli’s initial foray into fossil-fuel-sponsored disinformation, the connections between the fossil fuel industry and the anti-ESG campaign have only grown deeper. A key firm driving the campaign today, Strive Asset Management, also has ties to the fossil fuel industry. Strive’s Head of Corporate Governance Justin Danhof is a former executive vice president of the National Center for Public Policy Research, and, as he noted, a former manager of the Free Enterprise Project and colleague of Morris and Borelli.
Of course, the fossil fuel industry also funds politicians to push anti-ESG rhetoric and legislation. OpenSecrets, a nonprofit that tracks campaign contributions, reported that U.S. Sen. Dan Sullivan of Alaska, who introduced a May, 2022 bill aimed at barring large asset managers like BlackRock from discriminating against the fossil fuel industry, received $376,497 in campaign donations from the oil and gas industry between 2017 and 2022. OpenSecrets also reported that from 1996 to 2022, the oil and gas industry donated more than twice as much to Republicans, the party that has pushed anti-ESG legislation, as to Democrats.
The most recent spur of anti-ESG activity has come from inside our own government. A 2022 New York Times investigation found that the State Financial Officers Foundation, working with the American Petroleum Institute and other conservative groups with ties to the fossil fuel industry, has been extensively lobbying state treasurers to punish major banks that consider ESG factors. The State Financial Officers Foundation, a once-little-known nonprofit that went from managing routine issues like debt loads to pushing Republican state treasurers to block President Biden’s climate agenda, “hosted representatives from the oil industry and funneled research and talking points from conservative groups to the state treasurers, who have channeled the private groups’ goals into public policy.” The Times reported that their positions included “[skirting] the fact that global warming is an economic menace” and “[framing] efforts to reduce emissions as a threat to employment and revenue.”
The result? Republican state treasurers have started barring government contracts from banks with environmental interests. Riley Moore, State Treasurer of West Virginia, barred government contracts with Goldman Sachs, JPMorgan and Wells Fargo, and pulled $700 million out of BlackRock. Moore cited “reports that BlackRock has urged companies to embrace ‘net zero’ investment strategies that would harm the coal, oil and natural gas industries,” even though BlackRock noted that it also manages many millions of dollars in fossil fuel investments. In an interview about his decision, Moore defended himself with textbook climate denialism, saying, “the climate has been changing in the world since Earth was created…whether these greenhouse gas emissions are contributing to the warming of the globe, I’m not sure I necessarily agree with that.”
The “Climatism Cartel”
Moore ignores the massive amount of science showing that greenhouse gas emissions are, in fact, warming the planet. That, too, is the climate denier’s playbook. “Ultimately, members of the climate change denial movement do not concern themselves with building fact-based objections to mainstream scientific consensus. Rather, they are focused on how to coordinate political reactions to any sort of mitigation policy effort that detracts from fossil fuel-based economic growth strategies,” Professor Jeremiah Bohr wrote in “The ‘climatism’ cartel: why climate change deniers oppose market-based mitigation policy.” Bohr notes that “tactics used to frame scientists as corrupt, activists as anti-progress, corporations as “woke,” or journalists as liars, represent a crucial element of the contemporary climate change denial movement.” The anti-ESG campaign uses these same tactics. Touting pro-fossil fuel, anti-sustainability propaganda, climate denial and anti-ESG campaigns are one and the same.
Moore’s comment on the passage of Kentucky’s anti-ESG bill exemplifies those disinformation tactics. He praised legislators for “[pushing] back against the woke capitalists who are trying to destroy our energy industries.” Moore failed to address the enormous cost to taxpayers, politicized ESG analysis, sounded the racist dog whistle, and in citing “our energy industries,” suggested that only fossil fuels are core to economic growth even though green energy is projected to continue creating jobs much more quickly.
This framing of ESG as in conflict with the “energy industry” ignores the fact that green energy is seeing tremendous innovation, unprecedented affordability and accelerating growth while, apart from market fluctuations, easy-to-access fossil fuel reserves are dwindling, making fossil fuels more expensive to access. It ignores the data showing that ESG investments outperform. With this comment, Moore unwittingly reveals that the anti-ESG campaign is not about protecting shareholders, but about propping up the heavily subsidized fossil fuel industry. As Ben Cushing, campaign manager for the Sierra Club, says, Republicans have “moved on to decrying ESG as a way of talking about their climate denial and expressing their interest in protecting the fossil fuel industry at all costs.”
In short, the anti-ESG campaign is the climate denial campaign repackaged for today. Funded by the same corporations and foundations – ExxonMobil, the Heritage Foundation, the Kochs – with the same goal of boosting the fossil fuel economy and profits, the anti-ESG and climate denial campaigns share sponsors, funds, goals and methods.
Just as we combat climate disinformation with education and science, we can combat the anti-ESG movement with the facts that they hide behind smokescreens. Unmasking the perpetrators is the first step. We need to see the bought-and-paid-for fossil fuel propagandists masquerading as the people’s representatives for who they truly are…vested interests whose ongoing success means an unlivable planet.