By Kevin Stocklin
Oklahoma State Auditor Cindy Byrd says she would rather be at her desk, crunching numbers, than taking on political causes.
“Usually, when an auditor is in front of the news, it is just not where we like to be,” Ms. Byrd told The Epoch Times. “We’d like to be back in our office with a spreadsheet computer.”
But that changed when the finance industry began targeting key industries and jobs in her state.
“Oklahoma is a natural gas and oil industry state,” she said. “These things are very important to us, and we’ve seen that shut down over the last few years, which is really hurting Oklahoma.”
Increasingly, the environmental social and governance (ESG) industry is coordinating efforts among banks, insurance companies, and asset managers to cut America’s production of fossil fuels. It coordinates these efforts through a coalition of net-zero associations under the umbrella of the U.N.-affiliated Glasgow Financial Alliance for Net Zero (GFANZ).
The net-zero clubs that are part of GFANZ encompass virtually all elements of global finance, including the Net Zero Banking Alliance (NZBA), the Net Zero Insurance Alliance (NZIA), the Net Zero Asset Managers initiative (NZAMi), the Net Zero Asset Owners Alliance (NZAOA) and the Net Zero Financial Service Providers Alliance (NZFSPA). Members of these alliances pledge to work together to achieve UN goals of net zero CO2 emissions by 2050 or sooner.
“We thought about investments, getting good returns, trying to make money with your money, and that was the prominent thought when I first got in office,” said Kentucky State Treasurer Allison Ball. “I remember when I first started coming to events, I began to hear about an initiative called ESG, and I thought at the time that this was academic; I didn’t really take it very seriously.
“In the course of the last couple of years, it began to become very aggressively pushed,” she told The Epoch Times. “There’s been an effort to really make it the only game in town, to really shift that mentality from investing to make money, making sure you’re getting good returns, to using investments as leverage to push certain mostly political ideas.
“Coal and oil and gas industries, those are signature industries in Kentucky,” Ms. Ball said. “And they’ve been targeted very strongly by the E part of ESG, so I began to see real impacts on the economy of Kentucky, my home area.”
Louisiana is another state that relies on fossil fuels. According to Louisiana State Treasurer John Schroder, his state has about 300,000 jobs that depend on the fossil fuel industry, and many Louisiana residents are not affluent and need access to reliable, affordable energy.
“We just want to be left alone,” Mr. Schroder told The Epoch Times. “I didn’t bring a fight to anybody, but corporate America has engaged us in a way that we have to push back on behalf of taxpayers.”
One of the most outspoken critics of the ESG industry has been West Virginia Treasurer Riley Moore.
“We dealt with a lot of this under the Obama administration, with the war on coal and the push against the fossil fuel industry, but this was obviously quite a bit different,” Mr. Moore told The Epoch Times. “It wasn’t through overt government action; this was done in a more collusive manner through this ESG paradigm, which doesn’t just affect the fossil fuel industry, but a number of the social issues that happen to be important to them.
“And interestingly, all of it done without one ballot cast in favor of it,” he said.
Taking Control of the Proxy Vote
One of the leverage points for ESG advocates has been the corporate proxy vote, whereby asset managers exercise the voting rights for the shares they manage on behalf of investors in their funds. Critics of the ESG industry charge that activist asset managers like BlackRock, Vanguard, and State Street, as well as blue-state pension funds like CalPERS, CalSTRS, and New York state and city pension funds, use these proxy votes to force companies to enact progressive policies on global warming and social justice.
Together, this short list of asset managers comprises the largest shareholders in the vast majority of S&P500 companies.
Many states, including Florida and West Virginia, recently passed legislation to take back their proxy votes from asset managers. However, with tens of thousands of corporate proposals to vote on each year, this can prove to be a daunting task.
Even for a relatively small state, “we cast about roughly 15,000 votes a year,” Mr. Moore said. “The legislation that we passed said that no vote can be cast by the board for any ESG proposal that does not have some type of material or financial consideration.
“We reclaimed our voice and our vote in our pension system,” he said. “That’s where BlackRock and these asset managers get a lot of their power. But it’s not their money; it’s other people’s money, which they’ve leveraged as that voting power to be able to change corporate boards and push some of these ESG initiatives around the country.”
The Biden administration recently announced its latest efforts to encourage cooperation, some would say collusion, among financial institutions to curtail America’s fossil fuel industry. This week, the U.S. Treasury Department issued its “Principles for Net Zero Financing and Investment,” which calls for “the development and execution of a net-zero transition plan” by all financial institutions.
Among other things, the Treasury Department states, “financial institutions should establish credible metrics and targets and endeavor, over time, for all relevant financing, investment, and advisory services to have associated metrics and targets,” to achieve these net zero plans. In addition, “financial institutions should assess client and portfolio company alignment to their (i.e., financial institutions’) targets and to limiting the increase in the global average temperature to 1.5°C.”
Many conservative states have taken action against federal mandates and the coordinated efforts of the ESG industry. This has included the boycotting of banks and asset managers that are found to be discriminating against the oil, gas, and coal industries.
“It wasn’t quite as pervasive five years ago, or even three years ago, as it is now,” Missouri State Auditor Scott Fitzpatrick told The Epoch Times. “It really wasn’t until after the election in 2020 when the Biden administration took over the executive branch and really began using the whole-of-government approach to try to advance ESG-type principles in capital markets.”
This includes new rules from the Securities and Exchange Commission (SEC) to compel all listed companies to produce audited annual reports on greenhouse gas (GHG) emissions for themselves, their supplier, and their customers, the so-called “green accounting.” It also includes guidance from the U.S. Labor Department to allow private pension funds to invest retirees’ money according to environmental or social justice criteria, instead of purely for monetary gains.
“That’s when treasurers and auditors and other financial officers in the states became the first line of defense against what’s happening in DC, and in New York City, on Wall Street,” Mr. Fitzpatrick said.
He recently threatened to boycott JPMorgan Chase bank, when one of their payment services subsidiaries abruptly cut off services to a conservative organization, reportedly on political grounds. Missouri has also joined the ranks of states that have boycotted BlackRock due to what state officials say is its support of ESG causes.
“The most prominent and pressing matter for the state of West Virginia was the fossil fuel industry, and this is where they really started to push very aggressively, particularly in 2021, as Biden came in,” Mr. Moore said. “And for our coal operators, gas as well, and we also have oil in West Virginia, but particularly coal couldn’t continue to finance their operations; they were being shut out from access to capital and lending institutions.
“It is an existential threat for us in West Virginia,” he said. “Just to give you a little bit of context there, of an about $4.7 billion state budget last year, we had about a billion dollars in severance taxes from coal, gas, and oil.”
Severance taxes are the money paid to the state for the extraction of natural resources such as oil, gas, and coal. These taxes are concentrated in a small number of fossil fuel-producing states, including West Virginia, Texas, Oklahoma, Montana, North Dakota, Wyoming, Alaska, and New Mexico.
How to Meet America’s Energy Needs
“I’m not someone who’s opposed to the development of alternative energy sources,” Mr. Fitzpatrick said. “I think all these things—solar, wind, whatever—are good.
“I do find it difficult to understand how we are failing to embrace nuclear, which seems like the most reliable renewable energy source that we could possibly embrace,” he said. “But in the meantime, fossil fuels are the cheapest, most reliable form of energy that exists on the planet today.”
Critics say that shifting too much of America’s energy production to weather-dependent wind and solar, while retiring functioning coal and gas plants that can be ramped up or down at will, risks creating electricity shortages and chronic blackouts in America, particularly at a time when so much new demand is being pushed onto the grid in the form of electric vehicles, stoves, and home heating systems.
“China is building 50 new coal-fired plants as we speak, to continue to fuel their growth,” Mr. Fitzpatrick said. “We’re knee-capping ourselves, and we’re doing it unnecessarily, to the benefit of our greatest adversaries.”
To push back against this agenda, many conservative states have come together as part of the State Financial Officers Foundation (SFOF), which includes state officials from 28 states with about $3 trillion in pension and other state assets to invest, SFOF CEO Derek Kreifels told The Epoch Times.
“We’ve continued to bring the fight to those that want to leverage capital and create social policy by circumventing the democratic process, both in the states and in Washington DC,” Mr. Kreifels said. “They know they can’t win in Congress, and they know they can’t win in the courts anymore, so they’re very much trying to leverage public dollars.”
For state financial officers, the issues with ESG go beyond the harm to local industries and jobs to include things like the solvency of state pensions. For many states, municipal pension money has been used to pursue political and environmental goals.
“I sit on our Pension Board; I deal with our investments as treasurer,” said Ms. Ball. “I have for the last several years really worked hard to make sure our investments and our pensions are on a good path, working towards solvency.”
But Kentucky’s state pension system is currently only 17 percent funded, she said.
“We can’t play around with our pensions,” Ms. Ball said. “We need to make sure that we’re investing for returns; we’re making sure that people can retire at the end of their work life.
Some analysts have argued that red states will only harm themselves by boycotting Wall Street banks and asset managers. A 2022 study by Wharton Business School titled “Gas, Guns, and Governments: Financial Costs of Anti-ESG Policies” stated that Texas municipalities will pay an additional $300 million to $500 million in interest for refusing to do business with the biggest Wall Street banks that underwrite municipal bonds.
Some state officials, however, say that Texas is unique because of the volume of debt it issues. But they also argue that they have been successful in finding banks to work with that do not push the ESG agenda.
“Luckily for us, we have not lost any money because the market has been big enough that other players will step up,” Mr. Schroder said.
“That’s a common question I ask: Am I costing the taxpayers of Louisiana money?” he said. “No, but I’m also not going to sell my soul to live under corporate America.
“That is not what I believe this country stands for.”