Sen. Eric Schmitt (R-MO) came into the
Senate
on a wave of anti-
ESG
sentiment and intends to advance the cause, which was a feature of his tenure as
Missouri
‘s top legal official and has become a defining political issue.
The freshman lawmaker, who just left behind his post as attorney general to join the Senate, was instrumental to the flourishing campaign state-level Republican elected officials carried out over the past few years against ESG, short for environmental, social, and governance. It’s a broad set of principles that emphasize corporate policies to slow climate change and advance social goals, such as increased diversity.
The Biden administration is favoring the adoption of ESG with its own regulatory agenda, including one such
Labor Department rule
that would allow retirement plan managers to weigh environmental and social issues when making investments, a reversal of Trump-era rules restricting such considerations on the grounds that they don’t prioritize investor returns.
Schmitt
joined
the full Republican caucus and Sen. Joe Manchin (D-WV) on Wednesday in supporting a resolution under the Congressional Review Act to repeal the rule, saying regulators and companies want to “change the rules of the game” by implementing ESG.
“People can make their own individual decisions about what they buy and what companies represent; that’s fine,” Schmitt told the Washington Examiner in one of his first interviews since being awarded committee assignments on Wednesday.
“But when you’re managing other people’s money and you have a fiduciary responsibility to get the best return, that’s where this thing has gone off the rails,” he said.
Corporations adopt ESG principles to guide investment decisions and inform the setting of longer-term goals to reduce their greenhouse gas emissions in the hope of limiting climate change.
For financial firms, those decarbonization plans generally involve reducing investment in fossil fuels and related ventures, such as gas pipelines, something Schmitt and other Republicans say is a dereliction of their fiduciary duty to maximize returns.
Environmental and green investment groups insist that corporations, especially big financial firms, must phase out investments in fossil fuels more aggressively to slow climate change, arguing that sea level rise and extreme weather present material risks to investors.
The Biden administration has advanced multiple rules that would be integral to guiding this “transition” away from fossil fuels and to renewable energy, including a climate change disclosure rule from the Securities and Exchange Commission that would require companies to disclose their emissions footprints in regulatory filings.
SEC Chairman Gary Gensler has said climate disclosures are an extension of the commission’s historic mandate on corporate disclosures and that the commission has always “stepped in when there is significant need for the disclosure of information relevant to investors’ decisions.”
Schmitt and his formerly fellow Republican state attorneys general spent much of the last two years
fighting the administration over such rules
and launching investigations into major banks and fund managers over their adoption of ESG or related policies that favor green energy and disfavor investments in fossil fuels, including coal, oil, and natural gas.
Before the election, Schmitt’s office
led an investigation
into the “big six” U.S. banks over their involvement in an international green energy banking alliance, arguing it hurts their states.
Schmitt and 18 other attorneys general issued civil investigative demands for documents related to JPMorgan Chase, Citigroup, and others over their participation in the United Nations’s Net-Zero Banking Alliance — a coalition of global banks that voluntarily commit to aligning their portfolios so as to be net-zero by 2050 in accordance with the Paris climate agreement.
Schmitt said at the time those commitments would work against Missouri’s interests, including its agriculture industry, a top 10 producer of soybeans, corn, cotton, and rice.
“The logical consequence for them to have a carbon neutral portfolio by 2050 is they will stop lending money to farmers and diesel trucks on their farms,” Schmitt said, elaborating further in the interview. “This is nuts, and it fundamentally undermines capitalism.”
A host of Republican-led states, including Missouri, have divested billions of dollars from BlackRock and other select fund managers over their implementation of ESG-related considerations.
Senate Republicans finalized committee assignments Wednesday, securing Schmitt a spot on Armed Services.
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He will also sit on the Commerce, Science, and Transportation and Joint Economic committees.
