Republican officials are growing increasingly vocal in their attacks on investing with environmental, social, and governance considerations in mind. That’s compounding scrutiny that ESG-labeled funds and Wall Street’s vast sustainability operations are already facing from investors and regulators.
The pushback from politicians like Sen. Tom Cotton of Arkansas and Allison Ball, the treasurer of Kentucky, are growing more pointed. Midterm elections are this fall, inspiring more frequent rhetoric from lawmakers, and ESG opponents view the Securities and Exchange Commission’s recently introduced climate disclosure proposal as evidence of an investing movement that has gone too far and favors liberal values.
The lasting impact of anti-ESG legislation and political rhetoric remains to be seen.
But they add to an extremely challenging moment for ESG investors and big US banks and asset managers, all of which have heavily invested in ESG products and teams, and could challenge the perception and embrace of ESG in the long run. As broader markets have plunged, investors pulled $2 billion from US equity exchange-traded funds in May, according to Bloomberg Intelligence data, the first month of outflows in three years.
“We believe many of these proposals and policies that ‘push back’ on ESG may impact sentiment more than long-term AUM growth,” Morgan Stanley equity analysts wrote in a June 24 report, adding that states with such proposals and…
