Pence tears up ESG investing by injecting leftist politics into business
Former Vice President Mike Pence has criticized investor-activist campaigns to force companies such as Exxon Mobil Corp. to follow socially responsible investment principles, claiming that they elevate left-wing goals above the interests of corporations and their employees.
Pence, a potential Republican candidate for president in 2024, gave a speech on energy policy in Houston on Tuesday and called on states like Texas to “curb” the push for employee pension funds to use environmental principles, and governance in their investments.
The former VP cited activist investor Engine No. 1, which was backed by companies such as BlackRock Inc. last year as it staged a successful proxy campaign that led to the replacement of three directors on Exxon’s board of directors. “These three are now working to undermine the company from within,” Pence said.
ESG investing – the use of environmental, social and governance factors in decision-making – has become one of the hottest areas of finance in recent years, with the global market adding up to $40 trillion dollars in assets, according to Bloomberg Intelligence estimates.
Still, the strategy has drawn the ire of lawmakers in some states. Officials in Utah and West Virginia have urged S&P Global Ratings to abandon a system that rates states based on their ESG-related credentials. In Texas, authorities require finance companies to disclose their climate policiesincluding if they limit business with energy companies.
Finance has always been meant to facilitate investment and drive economic growth that benefits the entire United States, Pence said. But President Biden and government regulators are “weaponizing the financial system to do the exact opposite,” including through “freakish new ESG regulations that allow left-wing radicals to destroy American energy producers from within.”
Similar accusations have been circulating in Texas for some time, but Pence’s comments are among the most aggressive to date. The growth of ESG investing has caused some of Wall Street’s biggest investors to become much more active in proxy campaigns.
But the idea that such campaigns hurt businesses is unproven, especially in the case of Exxon. The success of the No. 1 driver came from the persuasion of major shareholders that an improved climate strategy would also help the oil giant’s financial returns.
After the vote, Chairman and CEO Darren Woods quickly made peace with the three new directors and announced a series of green measures, including eliminating emissions from its operations by mid-century and reducing fossil fuel expenditure. Buoyed by rising oil prices, Exxon’s stock has risen 36% over the past year.
GOP lawmakers and powerful industry groups, including the U.S. Chamber of Commerce, opposed increased activity by financial watchdogs on ESG issues during the Biden administration, even as the White House called for increased oil and gas production to help reduce fuel prices.
Biden has also made tackling climate change a centerpiece of his presidency, and last year order regulators to develop stronger plans to measure and mitigate the risks that climate change poses to the financial system.
A Securities and Exchange Commission proposal would require companies to disclose the risks a warming planet poses to their operations when filing regulatory filings.
Bloomberg writers Saijel Kishan and Jennifer A. Dlouhy contributed to this report.