Environmental, social and governance is increasingly becoming a contested investment strategy, as U.S. states with conservative leadership take aim against financial firms that have activist stances regarding where to place financial bets.
BlackRock Inc., the world’s biggest issuer of exchange-traded funds, and Texas, the top oil-producing U.S. state, recently traded barbs after the state listed 10 firms Aug. 24 that it says boycott energy companies. BlackRock was the only U.S. company on the list. Firms making the list, and the 350 funds named, are “subject to divestment provisions,” according to a statement issued by Texas Comptroller Glenn Hegar.
Hegar accused the companies, which also included European banks Credit Suisse Group and UBS AG, of pushing “a social and political agenda shrouded in secrecy,” as it invests some money according to ESG guidelines.
BlackRock, based in New York, pushed back and said it hasn’t boycotted oil, and that it in fact invested $100 billion in the state’s energy industry on behalf of clients. The company accused Texas of “politicizing state pension funds, restricting access to investments, and impacting the financial returns of retirees,” according to an emailed statement.
Texas is the latest state with conservative leadership to push against ESG investing in order to connect with voters. Florida this month banned its $186 billion pension fund from investing according to ESG factors. Only choices that prioritize “the highest return on investment for Florida’s taxpayers and retirees” can be considered, while eschewing the “ideological agenda” of ESG, according to a statement from Gov. Ron DeSantis.
West Virginia, Kentucky and Oklahoma have also taken aim at ESG investing.
Meanwhile, a string of ETFs have recently become available to investors eschewing socially responsible investing. Strive Asset Management, whose Strive U.S. Energy ETF (DRLL) has nearly $300 million in assets shortly after launch this month, is planning another handful of funds that seek to take advantage of the backlash against social and political investing, Bloomberg reported. The Point Bridge GOP Stock Tracker ETF (MAGA) tracks companies whose employees and political action committees support GOP candidates. Launched in 2017, it has $16 million in assets under management.
Interestingly, it has the second highest ESG rating, an AA issued by MSCI.