RCI's Guide to Politicized Capitalism: State Pushback and Non-ESG Investing

Part of RealClearInvestigations' Guide 
to Politicized Capitalism 
(Home page and overview here)

On This Page: How States and Investors Are Opposing ESG
(See also: Environmental, Social and Governance Investing)

In October 2022, 19 Republican-controlled states launched an investigation into six major U.S. banks over their involvement with the United Nation's "Net-Zero Banking Alliance." According to Missouri Attorney General Eric Schmitt, the Alliance – consisting of 119 banks controlling 39% of global banking assets – intends "to starve companies engaged in fossil fuel-related activities of credit," resulting in "the killing of American companies that don't subscribe to the woke, climate agenda." Months later, the related Net-Zero Insurance Alliance would collapse under similar pressure.  Such efforts to combat ESG represent the next stage of a campaign already unfolding within the states, as detailed below:

• Florida: Gov. Ron DeSantis announced a series of legislative proposals and administrative actions targeting ESG including:
  • Prohibiting big banks, credit card companies, and money transmitters from discriminating against customers for their religious, political, or social beliefs.
  • Prohibiting State Board of Administration (SBA) fund managers from considering ESG factors when investing the state’s money.
  • Requiring SBA fund managers to only consider maximizing the return on investment on behalf of Florida’s retirees.
• Texas: State Comptroller Glenn Hegar pressed more than 100 financial companies – including asset management giant and leading ESG proponent BlackRock, private equity powerhouse Blackstone, and top investment bank JPMorgan Chase – on whether they were engaged in a “boycott” of energy firms, which would preclude Texas government entities from investing with them.
• Utah: State Treasurer Marlo Oaks liquidated $100 million in BlackRock funds. Officials wrote credit ratings company S&P objecting to its publishing of state ESG scores as part of its credit ratings, which it argued "politiciz[ed] the ratings process" and could "unfairly and adversely" impact the market for its bonds. 
• Idaho: The state Senate passed legislation that would bar public investing entities like pensions from weighing ESG characteristics above more strictly economic ones, and the House is considering legislation that would prohibit investment boycotts of industries often targeted by ESG proponents, such as energy and mining.
• Wyoming: Several state senators introduced a bill that would have banned financial institutions from discriminating based on ESG metrics, though it died in committee.
• Kansas: Several state representatives similarly introduced a concurrent resolution to study such potentially discriminatory ESG standards, and draft legislation "protecting" Kansans from them, which also died in committee.
• West Virginia: The state Board of Treasury Investments has pulled funds from BlackRock, which has great influence over billions of dollars in public retirement and other investments. The state barred five major financial institutions – BlackRock, JPMorgan Chase, Goldman Sachs, Morgan Stanley, and Wells Fargo – from new state business after the state determined the firms were boycotting the fossil fuel industry.
• Louisiana: Pulled $794 million in funds from BlackRock, State Treasurer John M. Schroder asserting that its ESG push “would cripple our critical energy sector.”
• Arkansas: Pulled $125 million from BlackRock, a spokeswoman for State Treasurer Dennis Milligan citing the office's aversion to “BlackRock's active global political activity (handpicking companies that aligned with their ESG beliefs and beliefs we feel most Arkansans are opposed to).”
• Missouri: Pulled $500 million from BlackRock, State Treasurer Scott Fitzpatrick emphasizing his belief that there is a "massive fiduciary breach ... taking place" in the way of BlackRock's prioritizing of "a woke political agenda above the financial interests of their customers." 
• South Carolina: State Treasurer Curtis M. Loftis, Jr. announced he would pull $200 million from BlackRock by the end of 2022.
• Arizona: Attorney General Mark Brnovich has said his office is probing “unlawful market manipulation” with firms banding together “to compel companies to shut down coal and natural-gas plants.” As Brnovich puts it: “Your retirement funds are likely helping facilitate these political campaigns to advance far-left policy goals, with consumers bearing the costs of increased energy prices."

Related: The conservative Heartland Institute provides a map of state anti-ESG actions among its resources on the movement.

Non-ESG Investing

With the financial services industry dominated by those hewing to the ESG agenda, the universe of alternatives is relatively small. RealClearInvestigations’ found the following conservative-to-neutral investment and financial entities:

• 2ndVote Advisers: Prioritizes shareholder returns over political activism, seeking to allow investors to invest “without offending their values.”
• Strive Asset Management: Ohio-based asset management firm whose mission is to restore the voices of everyday citizens in the American economy by guiding companies to focus on excellence over politics.
• Kingdom Advisors: Searchable network of Christian financial advisors committed to providing "biblically wise financial advice." Partner organizations include several asset managers.
• AlignPay: Freedom-oriented payment processor aimed at protecting users “from the threat of ‘cancel culture.’”
• Notable Investment Vehicles & Indexes
  • Exchange Traded Funds:
    • 2ndVote Society Defended ETF (EGIS): Consists of companies that do not oppose the Second Amendment, border security, or law enforcements.
    • 2ndVote Life Neutral Plus ETF (LYFE): Consists of companies that do not support abortion.
    • American Conservative Values ETF (ACVF): An “actively managed diversified large-cap core ETF seeking to boycott as many companies hostile to conservative values as possible, while remaining confident that it can provide large-cap performance and risk.”
    • Point Bridge America First ETF (MAGA): Consists of companies supportive of Republican candidates as demonstrated by employees and political action committees.
    • Strive U.S. Energy ETF (DRLL): Fund seeks “broad market exposure to the US energy sector,” with Strive seeking to “unlock value…by mandating companies to focus on profits over politics.”
    • Inspire's Family of Faith-Based ETFs: Touting itself as the "world's largest faith-based ETF provider," Inspire Investing offers a slew of "biblically responsible" investment options.
  • Indexes:
    • Society Defended Index (“SDI”): Excludes companies that oppose the Second Amendment, border security, and support for law enforcement.
    • Life Index (“LIF”): Excludes companies that support abortion.
    • Shareholders First Index (ESGN): Consists of companies that prioritize their duties to shareholders over political activism or social policy agendas, scoring “Neutral” in a variety of areas.
    • American Freedoms Index (AMF): Excludes companies that “oppose, censor or restrict First Amendment rights concerning religion, expression, assembly, the right to petition, and other fundamental constitutional rights.”