Demanding An End to Environmental and Social Policies
By ERIK SHERMAN
Source: Anevis
The formerly corporate-friendly GOP has found itself at odds
with big companies that take an interest in ESG, an acronym that stands for
policies concerned with environmental, social, and governance issues.
The party’s beef is with the first two parts of ESG. It’s trying
to bring pressure, for assumed political advantage, from as many directions as
possible to attack these activities.
The pattern and intent has been unusually clear of late. It
indicates a polar swap in the relationship between Republican politicians and
business. The traditional image of Armani-dressed executives handing over their
wish lists, along with campaign contributions, is being twisted into a U-turn.
In today’s politics, pragmatism takes a back seat to rigid ideology and
vengeance can come to those who refuse to kneel to Republican demands.
Smart Business
Big corporations and savvy investors take ESG seriously because
it’s smart business. Companies that recognize climate risk and adapt their
operations and strategies are going to be better at managing risk than
competitors. That also means they are likely to be more profitable than
companies that ignore ESG.
Those that see changes in society, and look at their customers
both now and where they’re headed, will take better market positions and
shares.
Disinterest in governance is a particularly befuddling aspect of
Republican moves to cow companies, as that pertains to how companies manage
themselves and their relationships to investors.
These are business realities that traditional fiscal
conservatives understand. But such people are no longer in control of the
Republican party. Instead, the now dominant, and crazy, wing of the GOP wants
companies to keep sending the campaign contribution checks, but to keep quiet
on topics that the fanatics find inconvenient or unacceptable.
Toe the Line Or Else
GOP leaders aren’t shy about telling business what lines to toe,
either, a contradiction to the Republican promise of less government
interference in the economy and individual lives.
“We live in a political world and I think businesses do best
when they really focus, at least on their relationship with us, on these key
issues of the economy,” Texas Republican U.S. Rep. Kevin Brady told Yahoo Finance.
“I think the new paradigm today is that if businesses are engaged in social
issues, they are entering a part of politics fairly new to them and I think
there will be pushback from parties, depending on where the businesses stand.”
Being attuned to changing social values is nothing new for
business. Whether its building cars that go three times more on a mile of gas
than in the Fifties, adopting new colors in clothes and appliances or embracing
blended, same-sex and extended families, smart corporations prosper be catering
to society as it is, not as people like Brady wish it would be.
Push back from companies that look to their own interests
instead of bowing down to what Brady and his confreres want can result in
swiftly negative responses delivered with rancor.
An example came with Florida’s “don’t say gay” law. Ostensibly
it’s designed to prevent classroom “discussion” or “instruction” about “sexual
orientation or gender identity” in kindergarten through third. But legal
critics told NBC News that the framing was so vague that it chill speech in
schools more broadly.
The Walt Disney Company, an economic powerhouse in Florida, was
outspoken in its opposition — an example of the “S” in ESG. Disney spoke up at
the behest of many of its employees and management’s sense of its own interests
as a company serving a global market.
Gov. Ron DeSantis led Florida’s GOP establishment in punishing
Disney by rescinding a special arrangement under which the company ran its own
government district and paid for what it wanted in infrastructure. Undoing
the Reedy Creek Improvement
District may mean big property tax increases for area
homeowners, litigation from bondholders, or heaven knows what, but none of it
likely good.
Senator Josh Hawley doubled down in the Republican attacks
on Disney. “No more handouts for woke corporations,” the junior senator
from Missouri tweeted.
Copyright Gambit
Hawley filed legislation to “strip Disney of its special
copyright protections.” He likely did this as a stunt as the copyright protections
extend to all corporations. Big changes in the law in the U.S. could well put
the country at odds with major international copyright treaties, but that’s an
issue of governance, which is not Hawley’s long suit or even his interest.
Given that the chance of such a bill passing in the Senate is
virtually zero, the point isn’t what business should do so much as it is to
twist arms, bring in money and try to make companies kneel before the GOP.
As the Kansas City Star reported, “Josh Hawley is fundraising
off his bill targeting Disney’s copyright protections.” Call it payback and
payoff.
The New York Times DealBook wrote, “Calls to rein in
investing based on environmental and social principles are growing louder.”
ALEC’s role
The influencer group the American Legislative Exchange Council
(ALEC) is part of this drive even though its funded largely by businesses,
notably the Koch fossil fuels and consumer proucts empire.
ALEC has successfully pushed model state legislation written
by its corporate and political sponsors, that would lighten regulations on
fossil fuels.
Lately, ALEC has been touting a bill that would undermine ESG.
It would require state employee union pension funds to make investments “based
solely on pecuniary factors that have a material effect on the return and risk
of an investment.” In other words, ALEC would outlaw ESG as a strategic factor
in investment decisions no matter how economically sound it is.
Former Vice President Mike Pence took up the exact same theme in
a speech that came after ALEC began pushing the new bill. Pence urged states to
prevent state pension funds from using environmental, social, or governance
principles in their investments.
Pence said that ESG considerations only served “left-wing” concerns rather
than business interests, which simply isn’t true, but pleases the ears of
authoritarians in the GOP.
All this resonates in the GOP echo chamber. The point isn’t to
make things work in a better way, but to create so much noise that opponents
get distracted and cover their ears while supporters head to the polls and
contribute to Republican political campaigns.
Erik Sherman is an independent journalist and
author who primarily covers business, economics, finance, technology, politics,
and legal/regulatory, elegantly expressing the complex and often incorporating
data analysis.
