Fossil Fuel Interests Help Fuel Republican Attacks on 'Woke Capitalism'

The fossil fuel industry and its allies are partly behind the Republican effort to pass legislation targeting Environmental, Social and Governance, or ESG investment criteria, a new report has found.

The report, released Thursday by Pleiades Strategy, is the first in-depth analysis of the campaign that saw Republican lawmakers introduce 165 pieces of anti-ESG legislation in 37 states in 2023.

"We think this is the latest iteration of climate denial and obstruction and delay," report co-author Connor Gibson toldThe Guardian.

"While many of these organizations' finances are obscured through donor-advised funds, there are clear connections between anti-ESG legislation, the fossil fuel industry, and right-wing figures."

ESG criteria is a way of taking different risk factors into account when making investment decisions, such as a company's workplace diversity, the treatment of employees, and preparedness for the climate crisis. Passing legislation to ban ESG-based decisions is a way to "manipulate the market to favor select industries, particularly the volatile fossil fuel and firearms sectors," Gibson and co-author Frances Sawyer, who is also the founder of Pleiades Strategy, wrote in the report.

Gibson and Sawyer looked at where all these anti-ESG bills were coming from, mapping the "coordinated special interest groups that crafted model bills and lobbied for their introduction," they wrote. They concluded that the anti-ESG movement was an extension of a long-standing effort by right-wing groups to stymie corporate climate action.

In particular, they traced the language in the bills to models developed by four right-wing think tanks: the American Legislative Exchange Council, the Heritage Foundation, the Heartland Institute, and the Foundation for Government Accountability.

The groups that made the case for the bills included the Texas Public Policy Foundation (TPPF), the Opportunity Solutions Project, and Heritage Action, with behind-the-scenes lobbying from Consumers' Research. The majority of these groups have ties to the State Policy Network, which receives money from the fossil fuel-linked Koch family and has also backed laws setting harsh penalties for anti-pipeline protests, The Guardian reported.

TPPF, which has criticized ESG since 2020, has received at least $8.8 million from Koch-affiliated groups beginning in 2012 as well as funding from major oil companies ExxonMobil, ConocoPhillips, and Chevron.

Elected official groups also supported the anti-ESG legislation, including the State Financial Officers Foundation, the Republican Attorneys General Association, and the Rule of Law Defense Fund, the report found.

"While many of these organizations' finances are obscured through donor-advised funds, there are clear connections between anti-ESG legislation, the fossil fuel industry, and right-wing figures," Sawyer and Gibson wrote. "Fossil fuel companies, executives, consultants, and trade groups have advocated for the legislation detailed in this report."

This includes the American Petroleum Institute, according to The Guardian. S&P Global reported in January that the largest oil and gas lobby group in the U.S. had sat in on weekly Zoom calls hosted by CRC Advisors, which is chaired by Leonard Leo, to update state treasurers on ESG news.

The report found that anti-ESG measures pushed by fossil fuel interests and the far right have adopted five main strategies:

1. Fifty-nine bills in 30 states were considered that limit which asset managers state and municipal retirement funds can invest in.
2. Forty-two bills were introduced in 23 states that bar states or municipalities from contracting with a financial institution that restricts its engagement with certain industries, such as fossil fuels.
3. Twenty-five bills were introduced in 18 states that restrict what risks private financial institutions can consider when making investment decisions.
4. Twenty-three bills were considered in 13 states banning ESG scores in some form, such as prohibiting states from considering ESG scores when selecting contractors.
5. Ten bills and resolutions were considered in eight states stating opposition to federal rules perceived as supporting ESG.

While the number of bills is significant, the bulk of them did not pass, and the movement has faced opposition from not only labor leaders and retirees, but also business leaders and other Republicans.

"What you have in front of you is probably the most anti-free market bill that you'll see this legislative session," Jay Kaprosy of the Arizona Bankers Association said in response to S.B. 1138, which would have barred financial institutions doing business in the state from discriminating against a company based on various factors including ESG score.

"The dark money-funded attacks on the freedom to invest responsibly hit deep opposition from business, labor, and environmental advocates in statehouses across the country this year," Sawyer told The Guardian. "Our report shows that the effort to weaponize government funds, contracts, and pensions to prevent companies and investors from considering real financial risks is not a winning platform."

Out of the 165 bills and resolutions considered in the report, 83 were killed, 42 will pass to the 2024 legislative session, 12 remain pending, and 22 bills and six resolutions passed.

That's "a low batting average," Sawyer told The Washington Post.

That doesn't mean the bills aren't a concern. They could cost states and municipalities millions to billions of dollars, the report found. For example, municipal bond rates in Texas and Oklahoma went up after the states passed restrictions on contracting.

And their backers are likely to adjust their strategy for 2024, the report notes.

"These fights will only be supercharged in a presidential election year where most state legislators are also up for election," Sawyer and Gibson wrote, "and we have every indication that anti-ESG and woke capitalism will be at the center of the Republican platform."