Many campaign issues in Minnesota are also issues in other races in the country. They were put there by partisan strategists, who believe they can be used to bring the right voters to the polls.
You can see and hear similar talking points about public safety, education, school curricula, and abortion in all state campaigns, including Minnesota’s. Some national Republicans now want to include ESG on the list – or as they call it “woke investing span”
Let’s start with what ESG is. ESG stands for Environment, Social and Governance. It is a term that refers to a movement to think about issues like climate change, equity, and social justice as state and local governments make decisions about where to invest funds, such as the ones used to support employee pensions.
ESG supporters argue that it is financially prudent to avoid businesses that have financial models that are not sustainable, which could lead to lower value in the future.
Opponents, including high-profile Republicans like Texas Gov. Greg Abbott and Florida Governor. Ron DeSantis and Greg Abbott tried to use it to refer to the political left using public money to advance political ends. The issue has been raised in one race in Minnesota so far. The state auditor is one of four state board members. He or she helps to set the policy for how $130 billion of state funds will be invested.
Ryan Wilson, the GOP nominee, stated that he would not play politics with pensions.
So far, Julie Blaha, the DFL Auditor incumbent, has been successful. “We must first put the return on investment before anything else.”
Blaha is not running away from the political fire, unlike some Republicans who are cautiously navigating the issue of abortion. Blaha stated that ESG factors are the current trend in retirement fund investment, both by public and private systems.
span style=”font weight: 400 Even if you don’t care about the environment, you should consider climate change when making investments,” she stated during the WCCO radio debate. There are both significant risks and significant opportunities in the way that climate is changing and how it’s transitioning to energy .”
Blaha blamed “MAGA treasurers and auditors”, who try to discredit ESG investment decisions. It’s common sense and overwhelming evidence. How many people are putting their savings into coal?
Wilson inquired about the best investment in the past six months. Blaha replied that pension funds are not invested for six months but with 10, 20, and 30-year outlooks.
She said, “You can’t be trying to day trade my pension.”
Attacks on “Wake investing”
Blaha, who was first elected to office in 2018, stated that she preferred “dibs”, or the other board members on the issue to Governor. Tim Walz and Attorney General Keith Ellison are Secretary of State Steve Simon. Recently, the board began evaluating how environmental, governance and social factors could influence investment decisions. Mansco Perry, Chief Investment Officer of the State, was directed by the board to eliminate from its investment portfolio all publicly traded companies that derive 25% or more of their revenues from the extraction and/or manufacture of thermal coal span.
The board also commissioned numerous analyses from consultants to determine whether or not it should divest other industries and, if yes, how. It also recently supported federal Securities and Exchange Commission rules to require and make uniform disclosures about climate-related factors for all publicly traded corporations.
It is not an issue in the Minnesota race between Walz or Scott Jensen for governor, but woke investing is an issue elsewhere. Texas has severed ties to 10 private investment firms that incorporate ESG factors into their investments. This includes the largest manager of retirement investments, BlackRock Inc. This was in response to a state law that would sanction investors who abandon oil and gas.
BlackRock has made use of the voting power it holds through its shares to support ESG policies in company management.
Florida Gov. Ron DeSantis forced the state’s investment board in Florida to adopt policies that would force it not to consider ESG factors.
The conservative American Legislative Exchange Council has created a model ordinance called State Government Employer Retirement Act to assist state legislators who wish to prohibit the use of ESG in state investment.
Some states may reject ESG policies for investments. Others are supportive. It appears that there is a line between conservative states opposing ESG policies in investments and liberal states supporting it. Maine had, for instance, ordered that shares in 200 fossil fuel companies be sold by 2026.
Minnesota ESG Consultant:
The report commissioned in Minnesota by Meketa Investment Group referred to Minnesota’s status as “among most engaged U.S. pension plans,” citing the efforts to include ESG factors into its investment beliefs, the push for the SEC to require greater reporting from public companies, as well as the participation of national institutional investors, such as state investment banks, in ESG discussions.
The state does not generally buy or sell stocks, but rather invests in large funds offered by banks and investment houses like BlackRock. Many of these funds will “likely be incorporating assessments climate risks and opportunities,” so the state’s will be incorporating ESG elements “even if it does not change their investment strategy span>
Meketa suggested that the board shift assets to companies that would “benefit long-term shifts towards a low carbon economy,” but it didn’t support complete divestment of fossil fuels like Maine. According to the consultant, this would not decrease overall demand for these energy sources nor reduce carbon emissions directly. It would also remove the board’s proxy voting power, which could be used to replace other investors who do not agree with the board. It could also seperate the state and companies that transition to renewable energy, even if they still own non-renewable assets.
Minnesota’s investment board has been ranked among the most well-managed public investment entities in America. It has reported returns that are in the top 25%, or sometimes in the top 20%, of all public pension plans [PDF]. These returns have declined over the past few quarters, which is a common problem for pension funds. Blaha attributes Minnesota’s poorer-than-average performance primarily to its heavier use of publicly traded companies than other pension plans.
The U.S. state fund is the nation’s 14th largest nonfederal investment fund and 38th in the world. The state also did a great job in restoring the fund’s health – it has 82.2 percent of the money required to cover future payments, which is the 14th highest rate among states.
Blaha stated that she was pleased when Wilson brought up the topic during the radio debate. It is a “real” issue in the campaign, and it gave Blaha a chance to verify some of the claims about ESG factors in public investment. This is not just a matter for states with Democratic governors. It’s also not just for governments. She said that all are doing this to decrease exposure to companies that may lose value and invest in companies that will increase in value.
span style=”font weight: 400 I would like to believe that Goldman Sachs does this for good environment reasons.” she stated. Blaha stated that she did not agree with Youth Climate Change’s request to sell oil stocks immediately because it would be against the board’s fiduciary obligations. Blaha also stated that companies like Youth Climate Change could help develop alternative energy sources, just as companies that make gas-powered cars are helping to advance electric cars.
She supported a key recommendation by the board’s consultant, that the board invest with a net zero carbon footprint and “while keeping investment in our back pocket for extreme situations.”
The Republicans are the majority
Wilson stated that he became aware of the issue when he looked into the duties and responsibilities of the auditor, but decided to concentrate on it after hearing from firefighters and teachers who expressed concern about their pensions. He stated that ESG investing is less about maximising returns than it is about supporting political ideals regarding climate change and equity.
He said that he spoke in an interview saying that span style=”font weight: 400 Return on investment must be first.” He said that although the state pension system is in good health, he was concerned about its long-term viability if it makes decisions that affect financial returns.
span style=”font weight: 400 I think we should let the chief investment officer (and the manager) be unleashed in order to get the highest-possible return. The state board of investment doesn’t have to tell the chief investment officer to remove certain assets from the table. We don’t need to have a partisan thumb on our scale.
He said that span style=”font weight: 400 I’m not saying that they shouldn’t consider environmental concerns.” He said, “It’s not that we shouldn’t require them to consider one set of concerns with higher priority than the other.” The board should not make that decision on its own.
Farmington Republican State Rep. Pat Garofalo will be the House Ways and Means chair if the GOP wins control of the House in November. He said that he was aware of the problem nationally but is less concerned about Minnesota as the state continues its superior investment returns.
Garofalo stated that as long as the rate of return is higher than average, people will be patient with their decisions and be tolerant. “That said, the first sign that wokism has hurt our state’s pension funds, and lowered our return on investments, is going to be some issues .”
Garofalo stated that there are times when a state can decide not to invest or to make investments for public policy reasons. He cited the Russian divestment movement, which led the Legislature to direct the state to stop making investments in Russia. The state has long since decided to stop investing in tobacco companies and businesses that are involved in Sudan or Iran. Garofalo stated that these decisions should be made directly by the Legislature and not by a board of four members.
span style=”font weight: 400 What we don’t want is to use that as a baseline for some woke shitheads to take all of our pension funds and invest them in solar roadways or other boondoggle schemes,” he stated.
ESG is also being considered by bond-rating agencies
In Minnesota, ESG is also used in a different way. The state submits to large rating agencies for bond ratings before it goes to the bond markets to raise funds for capital construction projects, such as roads, bridges, and college buildings. The ratings agencies assess the state’s financial condition, including the likelihood that it will not be able to repay bond buyers.
Minnesota had announced in August that it retained its AAA rating from Fitch, S&P Global Ratings (formerly Standard & Poor’s), and was upgraded by Moody’s from AAA to AAA. These are all the highest ratings and this is the first time that a state bond offering has received a triple-triple from the rating houses since 2003.
S&P Global has recently added ESG to its portfolio of information for bond buyers.
Minnesota was given scores of 2 in each of the three areas it was assessed. This is considered neutral by the agency. The agency said that the factors had “no material influence on our credit ratings analysis for Minnesota.” However, there are three lower scores – 3, 4, and 5 for very negative, moderately negative, and extremely negative. Minnesota’s score is high, even though it’s not considered “positive.” S&P reported that scores for most states ranged from 2 to 3.
The state Office of Management and Budget pitches its ESG performance to rating agencies when it makes presentations. It highlighted the recent creation of Gov. Tim Walz, Climate Change Subcabinet, Governor’s Advisory Council on Climate Change 2019, and Climate Action Framework in 2019 were featured.
Some states have criticized these types of assessments. Four top Utah officials sent a protest letter to S&P. It is potentially harmful to the entities being rated and deeply counterproductive.
The Minnesota Office of Management and Budget refused to provide any comment from its finance department on the issue.
Patrick Hogan, spokesperson for Wrote: “Per S&P the ESG analysis does not have any impact on Minnesota’s credit rating so it is a non-story.”