Hello, and welcome back to Drilled. I'm Amy Westerbelt. We've talked before on this show about the growing backlash against taking environmental, social and governance or ESG factors into consideration when it comes to investing. The watchdog group Documented first revealed last year that state treasurers were getting in on the action, kicking woke investment firms like Blackrock out of their states. Back then, I wondered when the Attorney's General would show up to join the fray, And now sure
enough they are here. The Republican Attorney's General Association RAGA, our old favorite, has come to play in the anti ESG space. But first a quick reminder, why all this upset about ESG all of a sudden in the first place. Good question For a really long time. Oil companies actually kind of loved ESG. It was all very loose and self reported, and it gave them a way to unlock
so called green capital. But in twenty twenty one, the Securities and Exchange Commission the SEC looked around and went, huh, there are all these different SEG ratings and some of them seem a little scammy, and no one knows what these disclosures even really mean, these are the kinds of things it's our job to clean up. So we are
going to provide formal guidance on climate risk disclosure. And that is when you start to see corporate interests, fossil fueld companies and right wing politicians lose their minds over ESG because all of a sudden they couldn't just write whatever they wanted to in a report. They might have to actually disclose what their real climate risks are. Here is Jesse Coleman, with documented.
I think that a lot of this, both the legislative side, this legal strategy, the strategy of using state treasures to pressure asset managers and to attack climate disclosure, all of this is really mostly aimed at SEC Scope three emissions disclosure requirements coming supposedly coming soon in the next couple of months.
Even wait, sorry, I'm going to pause to define Scope three. That means how your product's actually being used, not how you're making it, which is a big deal for especially heavy polluting industries like oil and gas companies for example.
Yeah, yeah, it's a really big deal, you know, whereas ESG having a non standardized ESG disclosure is no big deal to a major company, the SEC coming and saying how much carbon emissions are you really responsible for? Not just you know what you're claiming you're responsible for, but if you're an oil company, for example, how much carbon are you actually putting in the atmosphere from everything that you've gotten from underground? What is your real impact? And
that is a really big deal. It's probably one of the biggest climate policy issues in play right now. So you know, in my opinion, a lot of this anti ESG stuff which doesn't make a lot of sense on its face. You know, these state bills that have passed in some states, have been introduced in a ton of states. The actual thing that those bills are going to do,
they're not going to have a really big impact. And sort of this anti trust stuff is very similar in the sense that, you know, the claims are kind of weak and it's hard to say exactly what the impact is going to be specifically. But at the same time, it's building up all of this pressure, and it's building up all of this political inertia that is all aimed at opposing disclosing climate emissions. And that's what this SEC rule would do when it comes out, is that it
would require publicly traded companies to disclose those emissions. So you know, in my opinion, that's the real goal is to keep that from happening.
You may have heard Jesse mentioned there the words anti trust. That is where the Republican Attorney's General Association comes into the picture. Back in June twenty twenty one, a guy named Jason Isaac, who spearheads the Texas Public Policy Foundations work on energy, went to a meeting of the American Legislative Exchange Council Aleck with an idea for a legal strategy that he thought could take ESG down. Documented shared audio from that meeting with us.
Yeah, so earlier a couple of months ago our state affairs. The committee voted nine to nothing, so brought by partisan support, every single member voted in support to give the committee sub poena authority. So they have sent out letters to these financial institutions to get some paper documents to find
out where this collusion is happening. We anticipate truckloads of documents being delivered, and so we look forward to the Texas Public Policy Foundation to going through those meticulously because we believe that there is and we actually partner with C. Boyd and Gray Boyd and Gray Associates law firm out of Washington, DC. Corporate collusion, liability risk for the ESG agenda to charge higher fees and rig the market. We
believe that there's antitrust violations. This is really kind of geared towards our attorney's general to lay the the foundation for antitrust violations on this corporate collusion. Find out the connections with the Glasgow Financial Alliance for net zero, which has over I think one hundred trillion dollars under managed assets in their cartel. That's colluding for this two degrees, this net zero, this Paris accord all rooted in decarbonization,
which is net zero. So I hope our committee gets a ton of paperback from these large financial institutions and they get hammered in the corps and our attorneys general around the country file anti trust violations.
So yeah, cartel's colluding for decarbonization. What the hell is he talking about here? We're going to try to answer that question right after this quick break and we're back. So after COP twenty six in Glasgow, insurers and asset
managers both formed groups focused on ESG. In both cases, these firms were saying, look, all sorts of environmental and social factors can impact our bottom line, and we would like to know what those risks might be so we can factor that into our decision making around what to ensure and what to invest in. But according to Isaac, these firms talking to each other, issuing joint statements about what kind of information they'd like to see from companies.
That's colluding to rig the market. In the wake of that twenty twenty one ALEC meeting you heard Isaac talking at before, not only did Texas continue with the investigation Isaac mentioned, but Arizona Attorney General Mark Bernovich opened an investigation into ESG investing, and RAGA coordinated a letter to various asset managers and politicians, with more than a dozen attorneys general signed on stating their concern that ESG investing
might actually be an anti trust violation. Here's Jesse Coleman again.
We started to see, you know, some of the bright lights of the Republican Attorney's General Association file various kinds of legal attacks on ESG issues, whether that's you know, going directly after asset managers and asking them questions about their net zero commitments or that's you know, going directly after ratings agencies and you know, saying that you're boycotting fossil.
Fuels, and they seem to have coalesced around this idea of painting esg as some sort of like corporate collusion, you know, building an antitrust case. Can you explain what the thinking is there? What they're trying to prove.
The allegation is that a lot of large asset managers get together in a shadowy cabal and they plan to collude to reduce carbon emissions. The reason that these groups are alleging anti trust violations is that anti trust violations are very scary to companies. If a jury finds you guilty of an anti trust violation, it's very expensive and
it's a pretty hard bar to meet. And most experts are saying that the anti trust allegations that are coming from these people that are opposing climate policy, you know, they probably don't have a light to stand on, but a lot like slap suits and other kinds of legal
tools that are used to silence people. Just defending against an anti trust allegation is very very expensive, So you know, you see companies really backing away from participation in these kind of global groups that are trying to address climate emissions and trying to address investment in the fossil fuel industry by large asset managers.
In twenty twenty two, ALEC once again held a meeting with a session on how to handle ESG at the state level, and again the antitrust strategy was from and center. This time Isaac was in the room cheering on new proponents of the strategy, including Will Hild with Consumers Research, which is funded by former Federalist Society president Leonard Leo. Paul Watkins, who used to work in the Arizona Attorney General's office and now runs an outfit called Fusion Law
advising on these sorts of strategies. Andy Puster, former CEO of the food conglomerate that is home to Wendy's and Hardy's, and Catherine Gonzalez with the Heritage Foundation. Puster kicked off by comparing ESG investors to not kidding here the Nazis.
I want to tell.
You, ESG investing is socialism and chief's clothing. This is the challenge of your generation. My father's generations challenge was the Nazis, who, by the way were of course very proud socialists. The challenge of my generation was the Communists, who were of course very committed socialists. The challenge of your generation is ESG investing, and it's more insidious than communism or the Nazis. It's more insidious, it's more devious.
You almost have to respect how comprehensive this horrible thing they're doing is so E s G environmental, social and governments, Like, how bad could that be? Right? It sounds so innocuous, but it's a ruse. It's a ruse to conceal the fact that it's a direct threat to our founding principles. It's a threat to our democracy.
Hild and Watkins kept it focused on the strategy.
And if you clear, Paul, this is this consortium, is these companies coordinating their activities. They get in rooms and they talk about they're going to set a policy across the market. Now, it's been a while since I was in law school, but when I was there, that was any trust one oh one.
And then that's its way.
You see US senators saying this is potentially criminal anti trust liability.
You see AG saying that they're going.
To investigate, and again I have yet to speak with a single legal expert who thinks that this strategy could actually win in court. But like we said before, that is not necessarily the point. It's already having a chilling effect on investment firms and insurance companies in these net zero groups, and now that Republicans have control of the House, it's the focus of a series of Oversight Committee hearings too. The first one happened back in May and featured the
attorneys general of Utah and Alabama as witnesses. Here's John Reyes, Attorney General of Utah.
But ever since the signing of the Paris Agreement, there's been an open conspiracy to bypass Congress using the power of horizontal agreements by key players in our financial system. Some of these groups are Climate Action one hundred, the Glasgow Alliance for Net Zero, which include the largest asset managers, banks,
and insurance companies globally. These horizontal organizations seek to use their collective market power over tens of trillions and assets to force burden some changes on American companies.
The Democrats witness During this hearing, Illinois State Treasurer Michael Freerris gave a great and completely non climate related example of where ESG can safeguard profits.
The more data we as investors have, the better informed our decisions are when selecting investments over the long term. ESG is about looking at a wider range of risks and value opportunities that have we can have a material financial impact on investment performance. For example, if you're investing in a pharmaceutical company, it's thinking about whether that company has exposure to massive lawsuits because of its role in the opioid epidemic. Our approach is to integrate material ESG
factors into investment decisions along with many other considerations. We are not ignoring traditional financial factors like profitability and credit worthiness. We are integrating more data into our decisions to give us a better idea of risk and growth prospects.
Ferris also pointed out that limiting the information investors can get about the companies they're investing in is the exact opposite of a free market idea.
This pushback is anti free market and anti investor. It is misleading, and it is harmful. It harms retirement savers, pensioners, working people, businesses, and harms America. This coordinated campaign is focused on ESG investing most people don't know what ESG is. ESG is data. ESG is simple, the additional information that investment professionals use to assess risk and return prospects. It
is about value, not about values. In order to maximize returns, an investor must be able to manage and mitigate risk. The more data we as investors have, the better informed our decisions are when selecting investments over the long term. ESG is about looking at a wider range of risks and value opportunities can have a material financial impact on investment performance.
Last week, the House Oversight Committee held its second hearing on this subject, calling on none other than Jason Isaac himself to testify.
I'm Jason Isaac. I'm the director of Life Powered, a national initiative of the Texas Public Policy Foundation to raise America's energy IQ and I live a high carbon lifestyle, and I think the rest of the world should too. So why I refer to the ESG agenda as the China ESG Agenda. It does very little to help Americans. It does everything to help the Chinese Communist Party and
again making energy expensive, scarce and government controlled. This body, the United States Congress, has not ratified to the Paris Treaty. It is not the law of the land here in the United States. But to force an American entrepreneur to admit that his company will comply with that is just mind blowing to me.
Whether the committee will hold a third hearing remains to be seen. I'm not sure the Anti ESG Bench of Experts rules that deep. Plus, while these ideas might get folks at an ALEC meeting riled up, they're remarkably unpopular with American voters, including the majority of Republican voters. New Mexico Rep. Melanie Stansbury made that point at last week's hearing.
What I find particularly strange about this conversation is that over sixty three percent of American voters actually opposed directly oppose any kind of government interference in investing strategies, and
the vast majority of Republicans oppose it as well. And you know, when you look at the bigger picture, when you look at what the American people are actually asking Congress to do, asking businesses in the private sector to do, almost seventy percent of Americans are in support of actions to address climate change, to transition to a clean energy economy.
Whether the SEC will be swayed by the antitrust argument remains to be seen. That's it for this week, Thanks for listening, and we'll see you next time. Drilled is an original Critical Frequency production. Our producer is Sarah Ventry. Sound design, mixing and mastering are by Peter Duff, who also wrote our original score. Our First Amendment attorney is James Wheton at the First Amendment Project, and the show is reported, written and hosted by me Amy Westervelt