Indiana Attorney General Todd Rokita has warned there will be penalties for investment firms that consider climate change or other “wake” criteria when managing the state’s pension fund.
Mr. Rokita’s notice is part of a political war GOP-led states are waging against Wall Street banks and financial firms that integrate environmental, social and governance or ESG policies into their money decisions that conservatives say do they jeopardize clients’ returns in order to advance a left-wing agenda.
Mr. Rokita, a Republican, believes firms like Blackrock, one of the largest investment firms in the world, may be undermining state laws that prevent institutions that administer the Indiana Public Retirement System (INPRS) from investing for anything other than the greatest rate of return to do.
“ESG goals, however you think about them, are no more important than a financial investment,” Mr. Rokita told the Washington Times. “It is illegal in Indiana to regard anything other than financial returns as a supreme fiduciary duty, at least with respect to the public employee pension system.”
Mr. Rokita and elected Republicans in other states are examining the ESG policies of financial institutions that do business with their state governments. He said Blackrock should be “very careful about what they do because they may be breaking Indiana law.”
He added that he had not found any wrongdoing at any company.
Blackrock, which has become the poster child for the anti-ESG movement, declined to comment.
It was one of several financial firms booted out of state by West Virginia, and Texas has threatened to do the same. The company has also been the target of a multimillion-dollar campaign launched by a conservative group fighting “awakened capitalism” and accusing Blackrock CEO Larry Fink of “weaponizing” pension funds by using his “influence to push through a radical agenda”.
Blackrock has said accusations of boycotting fossil fuels are false, anti-competitive and just plain “bad for business”.
ESG proponents argue that considering factors beyond profit is a moral imperative for companies. In some cases, such as climate change, investing in fossil fuels comes with greater financial risks, they say.
Proponents also point to negative consequences for taxpayers in states with anti-ESG policies. Texas will pay up to $532 million in additional interest on $32 billion in loans in just eight months, according to a study by the University of Pennsylvania’s Wharton Firm, as its anti-ESG law shatters major insurers Municipal bonds left the state to flee school and the Board of Governors of the Federal Reserve.
“It’s scaremongering,” Mr. Rokita said.