ESG is shorthand for "environmental, social and governance." The term refers to everything from a state or company's policies regarding climate change and carbon emissions to their stance on social justice issues and their support for diversity in hiring.
Idaho State Treasurer Julie Ellsworth and U.S. Sen. Mike Crapo will host an educational roundtable regarding ESGs next week.
ESG ratings have become an increasingly popular marketing tool for private firms that want to portray themselves as socially responsible.
Wall Street has also attracted trillions of dollars in new investment by promising consumers the opportunity to "put their money where their values are."
Supporters say companies that demonstrate a commitment to ESG issues are better managed, generate greater brand loyalty and attract a better workforce — meaning they ultimately provide a greater return on investment.
Opponents, by contrast, see ESGs as a backdoor scheme to pressure companies into supporting liberal causes.
Earlier this year, for example, West Virginia Treasurer Riley Moore convinced lawmakers to give him the authority to stop doing business with financial institutions that won't lend money to the coal or oil industries.
Moore said the current situation in Europe, where Russia has cut off energy exports to countries that oppose its invasion of Ukraine, "clearly demonstrates the dangers of letting woke capitalism weaken and destroy our domestic energy producers."
Idaho joined West Virginia and 13 other states last year in warning financial institutions that they'll take "collective action" against lenders who refuse to provide financing for companies based on subjective ESG evaluations.
More recently, Ellsworth joined Gov. Brad Little and several other Idaho officials in objecting to Standard & Poor's use of ESG criteria in state credit ratings.
S&P Global Ratings is one of the main ratings agencies in the United States. Its credit ratings help determine how much a state or private entity pays when it borrows money. A slight reduction in credit rating can translate into millions of dollars in additional costs over the life of a bond.
In a May 18 letter to the agency, the officials noted that Idaho balances its budget every year, is in the process of paying off almost all of its long-term bonds and has "robust" cash reserves to address any future economic downturn.
"In short, Idaho is solvent and should not be penalized by you or any other entity for its sovereign decisions," the officials wrote. "We ... object to S&P's attempts to overlook Idaho's sound financial management in favor of evaluating its political priorities. This is inconsistent with the fundamentals of sound financial planning and evaluation."
In a telephone interview Tuesday, May 31, Ellsworth said the basic message to S&P and other financial institutions is to "stay in your lane."
"We don't want public policy decisions being made by these financial institutions," she said.
If states want to pursue climate change initiatives or set goals for greenhouse gas emissions, "that's a decision for policy makers," Ellsworth said. "Since when should a state that's getting ready to pay off its bonds early get penalized based on subjective (ESG) considerations? That's the essence of what we're fighting here."
S&P maintains its use of ESG criteria ultimately did not affect credit ratings for Idaho or most other states.
Nevertheless, states with Republican governors are pushing back against the use of ESG factors, as opposed to traditional financial measures.
"It is a movement to advance public policy agendas through undemocratic means," Ellsworth said.
On Tuesday, Gov. Brad Little joined 15 other Republican governors in urging the Securities and Exchange Commission to rescind a recently proposed rule requiring publicly traded firms to make detailed disclosures about climate change risks and greenhouse gas emissions.
"We are deeply concerned your proposed rule veers far outside the SEC's authority as a federal agency," they wrote. "The proposed rule will harm businesses and investors by increasing compliance costs and by larding disclosure statements with uncertain and immaterial information that the federal government ... is not equipped to judge. We strongly urge you to withdraw the proposed rule and allow the market to continue serving as the appropriate mechanism for judging climate risk, as it does for other types of market risks."
Idaho lawmakers also passed legislation earlier this year prohibiting the state pension plan from using ESG characteristics to make investment decisions, if doing conflicts with its fiduciary responsibility to look out for the best interests of plan beneficiaries.
In addition, the House approved a concurrent resolution asking the interim Committee on Federalism to do more research regarding the potential impact ESG ratings might have on Idaho and to propose legislation next session to address any concerns.
(c)2022 the Lewiston Tribune (Lewiston, Idaho) Distributed by Tribune Content Agency, LLC.
Related Articles
