Last year, when the Missouri General Assembly failed to pass legislation to discourage investments in companies, funds, and banks that promote environmental, social, or governance (ESG) goals, Secretary of State Jay Ashcroft took the matter in his own hands and did so by administrative edict.
Ashcroft is now using his efforts to curtail ESG investing in his bid for the GOP nomination for governor, which will be determined through the Republican primary on August 6.
Most efforts to rein in these so-called “woke” investments are made through legislation in red states, often led by state financial officers (such as treasurers or auditors) and attorneys general, and pertain only to investments controlled by state public pension funds. But in Missouri, Ashcroft holds unusual power as a secretary of state able to regulate all securities.
The rules he introduced on July 30, 2023 — known as 15 CSR 30-51.170 — require a financial adviser or broker to disclose any investment that “incorporates a social objective or other nonfinancial objective” for a reason “not solely focused on maximizing a financial return.”
In addition, individual investors must now provide written consent for ESG-related transactions either at the beginning of their relationship with their financial adviser, when a broker is advising on a sale of a security or commodity, or when a broker is selecting a third party to manage the investments in an individual’s account.
In response, the Securities Industry and Financial Markets Association (SIFMA), the trade association representing broker-dealers, has filed a federal lawsuit challenging the Missouri regulations, alleging that they are “overreaching, subjective, and impermissibly vague,” and preempted by federal securities law. In addition, the group argues that Ashcroft’s regulations are superfluous:
Notably, the new Missouri rules fill no void or blind spot that would protect Missouri investors today. Under existing federal securities laws, broker-dealers and investment advisers are already required to provide investment advice that is in the best interest of their customers. That means firms cannot put their interests ahead of their customers’ interests, and must base their advice on the customers’ individual investment objectives. The Missouri rules are thus unnecessary and create confusion.
In its defense against SIFMA’s lawsuit, the state has already paid $167,000 to the conservative, Kansas City-based law firm Graves Garrett Greim. Ashcroft is asking the state legislature for the authority to spend up to $400,000 in legal fees this fiscal year (which ends on June 30) and another $800,000 in the following fiscal year.
“Secretary of State Ashcroft is acting like he is the legislative branch of the government,” Michael Berg, political director of the Missouri chapter of the Sierra Club, told the Center for Media and Democracy (CMD). “He enacted rules that were rejected by the legislature.”
And, Berg adds, “I believe he will lose in the justified lawsuit against the State of Missouri.”
Running on the ESG Issue
In facing at least three other challengers for the GOP nomination, Ashcroft has made his attack on ESG investing a major issue in his campaign for governor.
His campaign website claims that “the so-called ‘ethical investing’ movement being pushed by progressives, activist shareholders, and proxy voters [drives] investments toward liberal priorities that are in conflict with investors’ interests.” He singles out the Human Rights Campaign, an LBGQT+ lobbying organization, as one of the progressive groups pushing asset managers to use its equality index in making ESG investment decisions, and goes on to complain that “ESG investing opposes fossil fuels, pushes unionization of private companies, pushes radical racial and gender equity over merit,” and attempts to influence “who is chosen to sit on corporate boards.”
Ashcroft is not the only GOP politician ginning up opposition to ESG investments this year. When biotech entrepreneur Vivek Ramaswamy was running for the 2024 GOP presidential nomination, he made the anti-ESG issue a central part of his platform, proclaiming, “Companies that follow ESG principles are killing democracy and shirking their fiduciary duty to turn profits for their investors.”
In his attempt to be the most anti-woke candidate in the GOP presidential primaries, he attacked the big three asset management firms: Vanguard, State Street, and BlackRock.
Calling them “the most powerful cartel in human history,” he lambasted them for pushing a “woke” leftist agenda that prioritizes sustainable investing, social justice, and racial equity in their business and investment practices.
Before entering the presidential race, Ramaswamy cofounded the Ohio-based asset management firm Strive to cash in on the Right’s anti-woke crusade and challenge the dominance of companies that promote ESG investing. The irony is that Strive manages Exchange Traded Funds that include BlackRock, as CMD reported.
In December 2022, Florida Governor Ron DeSantis, another former GOP presidential candidate, directed Florida’s treasury to divest $2 billion in assets from BlackRock. In March 2023, he spearheaded the formation of an “alliance” of Republican governors “committed to lead state-level efforts to protect individuals from the ESG movement.”
In October 2023, Louisiana Attorney General Jeff Landry was elected governor of that state. During his gubernatorial campaign, he joined the anti-ESG fray by providing legal guidance in warning pension fund managers to adhere to the fiduciary duties imposed by Louisiana law — meaning they need to invest exclusively in companies that earn the highest rates of return regardless of any potential negative impact on the environment, social justice, or other ESG considerations.
On March 5 — Super Tuesday — Republicans in North Carolina have an opportunity to nominate State Treasurer Dale Folwell for governor as one of three candidates in the GOP primary there. He, too, is using anti-ESG rhetoric in his campaign by calling for the ouster of Larry Fink as CEO of BlackRock. “BlackRock and Mr. Fink have been using the financial power of their clients to force the global warming agenda by using their proxy voting authority to push companies to ‘net zero’ [carbon] emissions, often in conflict with their fiduciary responsibilities,” he claims.
With state financial officers like Folwell at the forefront of the anti-ESG crusade, CMD launched the website SFOF Exposed in March 2023. It provides a central hub for information on state treasurers and auditors who are members of the State Financial Officers Foundation, along with the other operatives, groups, and funders they work with to manufacture a crisis around responsible investing under the guise of attacking “woke capitalism.”
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