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Mar 24, 2023

Investors and companies press US authorities to defend sustainable finance

More than 270 signatories want to protect ability to take into account ESG factors

Hundreds of investors, companies and other organizations have signed a statement calling for state and federal policymakers to avoid the types of investment constraints being threatened by political pushback against ESG-related finance.

The ‘Freedom to invest’ statement, released yesterday, was organized by Ceres and the We Mean Business Coalition and to date has more than 270 signatories. These include As You Sow, Boston Common Asset Management, Boston Trust Walden, CalSTRS, Franklin Templeton, New York City Office of the Comptroller, New York State Common Retirement Fund, Patagonia, Sierra Club Foundation, Sierra Nevada Brewing Co, Trillium Investment and Whistle Stop Capital.

Those behind the initiative argue that investors should be free to consider material factors relevant to business sustainability. The signatories assert their commitment to sustainability and addressing the financial impacts of climate change ‘because we factor relevant considerations in our business, investment and risk-management decisions that have a material impact on our own operations and investments.’

They write: ‘Our consideration of material [ESG] factors is not political or ideological. Incorporating these issues into financial decision-making represents good corporate governance, prudent risk management and smart investment practice. We factor financially material considerations, including the impacts of climate change, into our standard investment and risk-management decisions in order to protect our operations and our investments.’

The organizations express support for policy and regulatory actions in line with the Paris climate agreement: ‘Doing so will allow us to better preserve the performance of our companies and our investment portfolios, to help ensure our ability to deliver strong returns for our shareholders and beneficiaries long into the future, and to build a prosperous, resilient and competitive US economy.’

Anne Simpson

The statement was released on Thursday at a Ceres event in New York. Speaking at a press conference, Anne Simpson, global head of sustainability at Franklin Templeton, highlighted the fiduciary duty of firms such as hers. That entails a duty to be prudent with other people’s money, a duty to be loyal and a duty to exercise care, she noted, which in turn requires fund managers and others to consider all material information that could affect returns. Beyond ESG, the aim is sustainable finance, she said, adding: ‘The economics are with us.’

The statement is being released as political noises grow louder against ESG-based investing. There are legislative efforts at the state level, such as in Florida, aimed at restricting sustainable investments and banking practices. At the federal level, President Joe Biden this week issued the first veto of his presidency to block Republican-led efforts to overturn US Department of Labor rule changes clarifying that Employee Retirement Income Security Act fiduciaries may take into account ESG considerations when making investment decisions.

‘As responsible fiduciaries and investors, our goal is to maximize risk-adjusted returns, which requires considering myriad factors that threaten an individual company’s value and the economy as a whole,’ says New York City Comptroller Brad Lander in a statement on the Ceres and We Mean Business Coalition initiative.

‘We are witnessing misinformed, misguided and ultimately dangerous efforts to restrict the decision-making of fiduciaries and prevent them from addressing risks to their portfolios that impact current and retired workers, working families and the global economy.’ 

Brad Lander

Kirsty Jenkinson, investment director for sustainable investment and stewardship strategies at CalSTRS, says in the announcement: ‘Investment professionals assess all risks and opportunities facing their portfolios, such as interest rate changes, supply-chain disruptions and damages from extreme weather events. To ask us to ignore pervasive risks such as the market disruptions caused by climate change and to ignore investment opportunities in the transition to a low-carbon economy is asking us to stop doing our jobs.’

Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...