“Climate cartel,” “ideological agenda,” “economic collusion,” and “anti-trust” were among the key phrases used by Republicans to describe the consideration of environmental, social and governance factors in investing at a hearing hosted by the House Judiciary Subcommittee on the Administrative State, Regulatory Reform, and Antitrust on Wednesday.
Representative Jim Jordan, R-Ohio, and the chairman of the judiciary committee, briefly stated his belief as to why ESG investing amounts to anti-trust activity. He argued that various institutional investors, proxy advisers, and non-profits have agreed to invest and exercise shareholder rights to reduce output of fossil fuels, to the detriment of consumers: “When you form a cartel to limit supply, it’s called restraint of trade,” Jordan said.
Representative Harriet Hageman, R-Wyoming, was more direct. She told the witnesses, who represented Ceres, a sustainable economy advocacy nonprofit, the California Public Employees’ Retirement System, and other organizations that “You are evil in what you are attempting to do and the violations of law you are engaged in,” and “your engagement is designed to fundamentally change business and industries to the detriment of consumers.”
Dan Bienvenue, the interim chief investment officer for CalPERS, explained to the subcommittee that he accounts for many risks in building CalPERS portfolio, “including climate-related risks.” He added that CalPERS does not boycott fossil fuels: “We remain invested because we believe owning these companies provides good value for our members.” When engaging with companies, Bienvenue said that they want to be sure that the companies they invest in are “positioned to be advantaged by the transition to a low-carbon economy.”
Several Republicans on the subcommittee focused on membership in Climate Action 100+ as evidence of unlawful collusion among ESG informed institutional investors.
Representative Victoria Spartz, R-Indiana, asked Bienvenue why CalPERS joined Climate Action 100+. Bienvenue answered that “we view Climate Action 100+ as an opportunity for investors to get together and share ideas and figure out how to navigate, in our case a $500 billion portfolio, through a very uncertain future.” Emphasizing the multi-generational nature of California’s pensioners, he added: “we want every company to have a credible plan to navigate the climate transition, that way they can be profitable now and they can be profitable 20 years from now and 50 years from now.”
Democratic members of the subcommittee pointed out that Climate Action 100+ is not collusive because signatories are still independent fiduciaries. Representative Mary Gay Scanlon, D-Pennsylvania, noted that Climate Action 100+’s website says that “Signatories are independent fiduciaries responsible for their own investment and voting decisions and must always act completely independently.”
The American Securities Association said in an emailed statement of the hearing that: “The financial interests of America’s retail investors and retirement savers should always come before partisan politics and the profits of the ESG Industrial Complex. Examining whether any anticompetitive practices flow from this agenda is necessary to maintain the public’s trust and confidence in our financial markets.”
A lot of things trouble asset owners these days, from geopolitical tensions to regulatory demands. Atop all that, there’s insufficient good data and methods of managing it, according to the third annual Morningstar “