“It is pension money that runs the most significant financial risk if they don’t take ESG into account,” he said. “ESG—when done for real—is first and foremost a risk-management tool. Politicians run for four years, maybe eight. But pension money is very long term.”
The notion that ESG is a left-wing conspiracy infiltrating US corporate life also is hard to square with the fact that 69% of major companies in the country are run by executives who identify as Republicans, according to University of Oxford’s Said Business School professor Robert Eccles, who cited a paper by professors Vyacheslav Fos of Boston College, Elisabeth Kempf of Harvard Business School, and Margarita Tsoutsoura of Washington University in St. Louis.
Eccles, who’s a proponent of sustainable investing, has suggested it may be necessary to jettison the ESG label now that it’s become a target for Republicans. While the principles behind ESG are sound, it would be better—given the political climate—to change the terminology, he said.
Whatever the label, ignoring ESG risks such as a hotter planet comes at a physical cost, said Sonali Siriwardena, partner and global head of ESG at law firm Simmons & Simmons. The claim that ESG hurts returns is “short-termism at play,” she said.
“The science is now clear and we’re seeing the negative effects of climate change far earlier than predicted,” Siriwardena said.
Florida is perhaps uniquely vulnerable with a coastline exceeding 8,000 miles (12,900 kilometers). DeSantis has even acknowledged the threat, and late last year recommended more than $1.5 billion of environmental programs be earmarked to help protect the state from coastal flooding. But that may be just a tenth the amount needed given the scale of the environmental threat facing the state, according to Jesse Keenan, a professor at Tulane University in New Orleans who focuses on climate-change adaptation.
The United Nation’s Intergovernmental Panel on Climate Change estimates that the planet might be on track for temperature increases that may be twice the limit set out in the Paris climate accord. That would result in a climate catastrophe with the potential to render much of the planet uninhabitable, with coastal areas particularly at risk.
New York City Comptroller Brad Lander earlier this month accused Republicans of defending the interests of oil companies in a “war of political distraction.”
“Being a comptroller, being a fiduciary of pension obligations for hundreds of thousands of people, you keep an eye on the long term, you pay attention to the science,” Lander said. “You make the wisest, long-term and responsible decisions you can.”
In the final months of Donald Trump’s presidency, his Department of Labor moved to adjust the Employee Retirement Income Security Act of 1974 (ERISA) to require those overseeing pension and 401(k) plans to always put economic interests ahead of so-called non-pecuniary goals. It was seen as a direct attack on ESG and green investing. In January 2021, President Joe Biden included the DOL’s “Financial Factors in Selecting Plan Investments” on his list of Trump climate-related agency actions that are up for review.
“We’re still waiting for the Biden administration to officially reverse the Trump proposal,” McGannon said. As for Florida, the governor’s pronouncement will only effect state-run pension funds and not company-run retirement plans, he said.
This article was provided by Bloomberg News.