ESG power struggle continues

Fiona McNally reports for Responsible Investors on the latest anti-ESG attack in the U.S.:

Twenty-one US state officials havewritten to BlackRock and other asset managers calling for them to “reaffirm and operationalise” their commitment to “traditional” fiduciary duty. The officials set out the steps they consider necessary to achieve this, including “abandoning the practice of framing deterministic future outcomes as long-term risks to justify immediate ideological interventions through corporate engagement or proxy voting”. They cited climate change as “a common example of this issue”.

If this doesn’t make much sense to you, that’s because the original letter is a contradictory mess. Quoting from a copy they sent to BlackRock:

Abandoning the practice of framing deterministic future outcomes as long-term risks to justify immediate ideological interventions through corporate engagement or proxy voting. Climate change is a common example of this issue, where potential risks—often uncertain and already accounted for in insurance and financial markets—are framed as certain and catastrophic to justify forcing companies to take immediate actions that may not align with their long-term business interests. Successful long-term investing relies on diversified portfolios rather than speculative predictions presented as guaranteed outcomes.

If climate risks are, as the letter calls it, “uncertain”, how is it an example of asset managers “framing deterministic future outcomes as long-term risks”? And the notion that potential risks are perfectly “accounted for in insurance and financial markets” is just incredibly naïve. If that’s the case, financial markets would never go down at all, would they? I have never heard anyone, ESG investor or climate activist, who frames climate change as “certain and catastrophic”. If climate change is “certain and catastrophic”, we should all give up and go all in on colonising Mars.

McNally continues:

Other asks of managers included committing not to use passive investment vehicles for activist proxy voting or corporate engagement and committing to “abstain from embedding international political agendas, such as net zero climate mandates, natural capital frameworks, or the EU’s Corporate Sustainability Reporting Directive (CSRD), into default investment strategies and corporate engagement”.

The officials also continued recent attacks on proxy voting by US right-wingers, calling for “clear and transparent voting guidelines and stewardship practices that reflect a singular focus on shareholder value”. […]

This is, at its core, a power struggle between big, greedy but rational Wall Street money masters, versus fossil fuel-loving, climate-hostile but democratically elected politicians. I’m not sure whom I want to root for.