Will the Republicans be able to slow down the ESG train?

The predicted “red wave” for the midterm elections didn’t pan out. But the Republican-majority House can derail some of President Biden’s initiatives.

One of them is the ever-expanding Environmental, Social and Governance (ESG) movement and specifically a proposed Securities Exchange Commission (SEC) rule that would require publicly traded companies to disclose their greenhouse gas emissions and associated climate change-contributing factors.

Utah Representative Chris Stewart (R), who sits on the House Appropriations Committee, warns the GOP majority will defund the climate risk disclosure program via a rider in one of the first spending bills of 2023. Stewart says he and his colleagues are willing to shut down the government to defeat the climate rule, among many other Biden initiatives.

“The question then becomes: Is the president or our Democratic leaders willing to endure, or have the country endure, a potential government shutdown over this language?” says Stewart. “I can’t imagine that they would.”

The last government shutdown didn’t prove popular for the GOP, so we’ll see how far the new GOP House majority is willing to go to stall SEC measures.

States are starting to call the shots on ESG

While the SEC is putting pressure on companies and investors to go all-in on ESG, there’s a strong pushback by lawmakers and governors in more than 20 states.

Florida pulled more than $2 billion in assets from BlackRock this week. It’s the largest such divesture from an investment firm yet. BlackRock is arguably the biggest proponent of ESG investing worldwide.

West Virginia announced the state won’t do business with five banking corporations that promote anti-coal ESG policies. WV joins Texas, Oklahoma and other states that won’t do business with banks that are advising investors to avoid coal and other fossil fuels.

Four states – Arizona, Indiana, Louisiana and Pennsylvania – are weighing laws and regulations to restrict ESG initiatives that use state taxpayer assets. And 10 states – Arizona, Florida, Idaho, Indiana, Kentucky, Louisiana, North Dakota, Oklahoma, Texas and West Virginia – adopted anti-ESG rules, several of which give state attorneys general (AGs) and treasurers the power to shut out pro-ESG employee pension plans and other funds.

And finally, 24 Republican state AGs argue the SEC’s climate rule violates the “major questions doctrine” which factored into a Supreme Court decision against EPA earlier this year. The AGs will sue the SEC in order to overturn the rule if it’s finalized in coming weeks.

Bottom line: Some of the biggest players in finance will either play ball or get shut out of winning lucrative contracts in Republican-run states.