Photo courtesy of Felix Stahlberg via Wikimedia Commons.
Many Republicans oppose the investment of public pensions and other funds using ESG principles.
By Sarah Grinnell ’26
Staff Writer
State-level members of the Republican Party have recently accelerated their pushback against Environmental Social Governance considerations in public and retirement pensions, ubiquitously dubbing them “woke” investments, NBC reported. According to NBC, President Joe Biden’s first veto on March 23, which the House failed to override, blocked a bipartisan bill that would have nullified Labor Department rules permitting retirement plans to consider ESG factors.
According to Forbes, ESG first entered mainstream political parlance around 2020. The term broadly refers to the method of conducting a company and its budget in a way that considers “extraneous” issues such as climate change or social impact, according to SmartAsset. In other words, Forbes defines ESG as “a company’s commitment to do more than make a profit, such as actively striving to contribute positively to the environment or social causes and to conduct themselves responsibly,” such as by encouraging sustainability or diversity in their business. For example, SmartAsset explains that a fiscal plan “may explicitly choose not to invest in fossil fuels and dirty industries, or it may proactively invest in renewable energy companies” in an effort for the business to align its values with its financial actions.
However, according to NBC, recent bills and regulations in states like Texas, the “center of the U.S. oil and gas industry,” stand in direct opposition to these goals. For example, Republican Texas state senator Bryan Hughes recently proposed prohibiting pension funds from considering “social, political or ideological factors” in their investments. Despite ESG’s potential to advance equity and social consciousness in big business, many Republicans are decrying it as an “activist liberal agenda” that needs to be expunged, NBC reported. According to USA Today, Florida Governor Ron DeSantis has vocally declared a crusade on “corporate wokeness.” DeSantis stated in an appearance at Florida SouthWestern State College that initiatives like ESG investments “try to impose politics on what should just be economic decisions.” Per USA Today, Desantis, like many other Republicans, is pushing to “block all state investment decisions based on ESG standards.” NBC reported that states like Indiana have passed bills requiring entities such as the Indiana Public Retirement System and the Indiana State Police Pension Trust to “divest from any ESG funds and cease business with offending companies.”
Apart from the perceived threat of an encroaching liberal agenda, ESG is also seen by the GOP as a major threat to the oil, gas and coal industries. USA Today noted that many Red state fossil fuel sympathizers who want to resist the shift to renewable energy will naturally oppose ESG investing. Others, such as Vivek Ramaswamy, author of “Woke, Inc: Inside Corporate America’s Social Justice Scam,” claim that ESG investing is not “motivated by value maximization” and prioritizes social goals at the expense of the economy.
However, despite these objections, ESG has a number of proven financial and social benefits. For example, impact-related or ESG investments “post competitive results” and make a company more attractive to younger workers who are increasingly uninterested in working for corrupt corporations. Evidence also suggests that ESG can help lower operating costs, as Perillon cites a McKinsey study that found those benefits can be “as much as 60 percent.” According to Perillon, since ESG focuses largely on reducing energy consumption and eliminating raw material usage, companies can then save money on utilities and waste fewer resources.
Randi Weingarten, the president of the American Federation of Teachers, argues in an NBC article that “[Red states that have pushed back on the investment of public entities in ESG funds] talk about limited government, the free market” in their justification of curbing ESG considerations, yet these very regulations actually interfere directly with business practices. In fact, according to USA Today, around 63 percent of voters surveyed said the government should not set limits on ESG investments exactly for this reason, because “the consensus among voters surveyed was that companies should be able to exercise discretion to invest in ESG initiatives that benefit society without government interference.”
Likewise, Lisa Sachs, director of the Columbia University Center on Sustainable Investment, notes that the time and money involved in regulating or prohibiting ESG initiatives will only hurt the economy because “limiting the pool of investment options available to pension funds can increase the costs and lower the returns for retirees,” creating “constraints on financial institutions and options” that will particularly impact the retirement funds of teachers, librarians, firefighters and other public service employees.
Furthermore, data shows that ESG investments are what the majority of consumers want. One study, a summary of which was published in Forbes, found that 88 percent of consumers “will be more loyal to a company that supports social or environmental issues,” leading to better stock performance and long-term customer and employee support.
ESG investing is not a perfect system. According to NBC, some investment firms, such as BlackRock, engage in ESG investing despite simultaneously supporting the fossil fuel industry. But ESG investing is shown to not only boost equity and sustainability in business practices but also long-term profit, as Forbes detailed. Considering its recent prominence in the political realm, ESG is likely to remain on the political radar for quite some time despite continued Republican pushback.