A new term was added to our vocabulary this year: anti-ESG. The definition of this word is clear and means opposed to ESG investing. The anti-ESG movement has occurred at the intersection of politics and investment. For example, Florida adopted a resolution barring the consideration of ESG factors in its investment management practices. Also, Texas blacklisted ten asset managers, including BlackRock, for allegedly “boycotting” the fossil fuel industry. Recently, Senate Banking Committee Republicans released a report titled “The New Emperors: Responding to the Growing Influence of the Big Three Asset Managers,” taking direct aim at BlackRock, State Street, and Vanguard, which manage the majority of index funds and exchange-traded funds (“ETFs”). In this paper, committee Republicans argue that these three big firms use their influence to drive changes at various companies. This is problematic because the law requires that an owner company with at least a 5% stake in another company disclose any attempts to alter said company. BlackRock, State Street, and Vanguard are considered passive investors in the companies they own, so they have only been required to file abbreviated disclosures. This report questions if the big three firms are, in fact, passive investors. If they are not, the report’s authors argue they should be required to file full and complete disclosures. The paper also claims that firms’ participation in the Net Zero Asset Manager’s Initiative (i.e., net zero emissions by 2050) supports the case that companies are active investors seeking to influence the direction in which their funds are invested. Interestingly, after this report was released, Vanguard withdrew its name from the Net Zero Asset Manager’s Initiative. According to Piper Sandler, headline risk, not regulatory risk, is the most likely consequence of this report in the near term. I value ESG investing because these factors have a material impact on price, and I want to know about everything that materially impacts the cost of our investments. Furthermore, ESG investing facilitates the tracking and measurement of non-financial goals, a priority for The Gambrell Foundation’s portfolio. Although my personal and professional views differ from those represented in the above-summarized report, I think reading and understanding divergent perspectives is essential to strengthening our own.
