The generally dry race for Arizona treasurer has extra juice this year as conservatives try to scale back efforts to incorporate climate concerns into financial decisions.
Outgoing State Treasurer Kimberly Yee, a Republican, has taken a stand against so-called “ESG” standards. These are environmental, social and governance standards that take into account factors such as a company’s greenhouse gas emissions and its vulnerability to global warming.
You may have heard them called “woke capitalism”. In the primary election Yee won, opponent Jeff Weninger’s slogan was “No Woke Investments”.
It’s a shortcut that some conservatives have taken up to raise the same kind of heckling about ESG that they successfully raised about another three-letter acronym, CRT, or Critical Race Theory. You might not be surprised to learn that they aren’t completely consistent in their reviews.
People also read…
Yee’s opponent, State Senator Martin Quezada, blames the fossil fuel industry for leading this movement against considering environmental factors in investment and financial decisions.
“They decided to politicize the offices of the state treasurer,” Quezada said on Tuesday. “They’re trying to create some sort of anti-CRT movement to piss people off.”
Yee and the state’s investment board adopted a new policy Aug. 30 that prohibits the treasurer from considering anything other than “monetary factors” in making investment decisions. Specifically, it prevents these from being taken into account:
1. International, national or industry agreements relating to environmental or social objectives.
2. Corporate governance structures based on social characteristics.
3. Social or environmental objectives.
“They put politics in the investment room,” Yee told me from the road as she drove to Bullhead City on Wednesday. “It’s a dangerous path, because you’re dealing with taxpayers’ money.”
Yee and 22 other state financial officers also signed a letter opposing a proposed SEC rule that would require publicly traded companies to compile and disclose data about their vulnerability to climate change. This would include not only their direct greenhouse gas emissions, but also their indirect emissions and their vulnerability to increased severe weather events, as well as other risk factors.
Yee said that by joining these other treasurers, she’s trying to stand up for US energy companies and “pushing back on this big government approach.”
When I spoke to him on Tuesday, Quezada noted that it’s common these days for individuals and companies to invest in ESG-compliant funds.
“Using ESG factors is a common sense financial strategy,” he said. “It’s widely used by individuals involved in investing public funds around the world. It’s nothing new, it’s nothing radical. It’s just smart money management.”
“My interest as state treasurer is to gather all the information I can to create the strongest portfolio possible,” he added. “If it’s a decisive decision, I will make an environmentally friendly decision.”
I asked Nicole Darnall, founding professor of management and public policy at ASU, what she thought of the investment board’s new policy of ignoring ESG metrics and focusing only on metrics. “pecuniary”. She described it as a false dichotomy.
“In my world, ESG risk is pecuniary,” Darnall said.
For individual companies, this could mean, for example, that they have facilities that are vulnerable to sea level rise, or it could mean that they burn a lot of fossil fuels which are vulnerable to increased regulation, or that they use a lot of water in regions are expected to have less in global warming.
“Everything ESG is, and ESG reporting, provides insight to the market so individuals and investors can make decisions that make sense to them,” Darnall said. “By opposing this type of disclosure, you are preventing markets from working as they should.”
I appreciate the simplicity of the investment board’s decision to focus strictly on “monetary factors”. But that’s probably an oversimplification.
And it’s a strange time to fight financial disclosures related to climate change. The effects of our warmer climate are showing up regularly around the world – record heat in California, water in Pakistan from heavy rains and melting ice, rivers in Europe drying up.
But this is of course not an organic movement against taking ESG factors into account in investments. The conservative American Legislative Exchange Council has campaigned against efforts by banks and other institutions to divest from fossil fuel companies.
This year, Texas banned financial firms that boycott fossil fuel companies from doing business with state or local governments. On August 24, the Comptroller released a list of 10 companies and 348 investment funds that can no longer do business with the state because they would boycott fossil fuel companies.
From her car, Yee referred to how she had withdrawn state money from investments in Unilever, the company that owns the Ben & Jerry’s ice cream brand. It did so because Ben & Jerry’s announced its intention to no longer sell ice cream in occupied Palestinian territories such as the West Bank.
She argued that this violated state law that prohibits companies that boycott Israel from doing business with Arizona.
But I see it in a different way: this divestment from Unilever resembles the divestment efforts of companies that violate environmental standards. I asked Yee if it was not an ESG type factor but coming from the political right.
“It is protection against discrimination and anti-Semitism,” she replied.
This seems to me, however, to undermine the argument that Yee and the investment board are strictly concerned with “pecuniary factors” in state investments. After all, she didn’t decide to divest from Unilever for financial reasons.
If we can care about corporate decisions on whether to sell ice cream in the West Bank, then surely we can take into account whether a company is helping to flood or grill the planet.
Contact columnist Tim Steller at [email protected] or 520-807-7789. On Twitter: @senyorreporter