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Speaker 1: Hello, and welcome back to Drilled. I'm Amy Westerbelt. We've

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Speaker 1: talked before on this show about the growing backlash against

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Speaker 1: taking environmental, social and governance or ESG factors into consideration

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Speaker 1: when it comes to investing. The watchdog group Documented first

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Speaker 1: revealed last year that state treasurers were getting in on

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Speaker 1: the action, kicking woke investment firms like Blackrock out of

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Speaker 1: their states. Back then, I wondered when the Attorney's General

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Speaker 1: would show up to join the fray, And now sure

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Speaker 1: enough they are here. The Republican Attorney's General Association RAGA,

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Speaker 1: our old favorite, has come to play in the anti

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Speaker 1: ESG space. But first a quick reminder, why all this

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Speaker 1: upset about ESG all of a sudden in the first place.

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Speaker 1: Good question For a really long time. Oil companies actually

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Speaker 1: kind of loved ESG. It was all very loose and

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Speaker 1: self reported, and it gave them a way to unlock

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Speaker 1: so called green capital. But in twenty twenty one, the

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Speaker 1: Securities and Exchange Commission the SEC looked around and went, huh,

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Speaker 1: there are all these different SEG ratings and some of

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Speaker 1: them seem a little scammy, and no one knows what

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Speaker 1: these disclosures even really mean, these are the kinds of

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Speaker 1: things it's our job to clean up. So we are

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Speaker 1: going to provide formal guidance on climate risk disclosure. And

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Speaker 1: that is when you start to see corporate interests, fossil

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Speaker 1: fueld companies and right wing politicians lose their minds over

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Speaker 1: ESG because all of a sudden they couldn't just write

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Speaker 1: whatever they wanted to in a report. They might have

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Speaker 1: to actually disclose what their real climate risks are. Here

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Speaker 1: is Jesse Coleman, with documented.

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Speaker 2: I think that a lot of this, both the legislative side,

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Speaker 2: this legal strategy, the strategy of using state treasures to

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Speaker 2: pressure asset managers and to attack climate disclosure, all of

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Speaker 2: this is really mostly aimed at SEC Scope three emissions

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Speaker 2: disclosure requirements coming supposedly coming soon in the next couple

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Speaker 2: of months.

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Speaker 1: Even wait, sorry, I'm going to pause to define Scope three.

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Speaker 1: That means how your product's actually being used, not how

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Speaker 1: you're making it, which is a big deal for especially

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Speaker 1: heavy polluting industries like oil and gas companies for example.

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Speaker 2: Yeah, yeah, it's a really big deal, you know, whereas

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Speaker 2: ESG having a non standardized ESG disclosure is no big

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Speaker 2: deal to a major company, the SEC coming and saying

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Speaker 2: how much carbon emissions are you really responsible for? Not

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Speaker 2: just you know what you're claiming you're responsible for, but

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Speaker 2: if you're an oil company, for example, how much carbon

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Speaker 2: are you actually putting in the atmosphere from everything that

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Speaker 2: you've gotten from underground? What is your real impact? And

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Speaker 2: that is a really big deal. It's probably one of

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Speaker 2: the biggest climate policy issues in play right now. So

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Speaker 2: you know, in my opinion, a lot of this anti

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Speaker 2: ESG stuff which doesn't make a lot of sense on

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Speaker 2: its face. You know, these state bills that have passed

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Speaker 2: in some states, have been introduced in a ton of states.

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Speaker 2: The actual thing that those bills are going to do,

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Speaker 2: they're not going to have a really big impact. And

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Speaker 2: sort of this anti trust stuff is very similar in

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Speaker 2: the sense that, you know, the claims are kind of

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Speaker 2: weak and it's hard to say exactly what the impact

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Speaker 2: is going to be specifically. But at the same time,

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Speaker 2: it's building up all of this pressure, and it's building

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Speaker 2: up all of this political inertia that is all aimed

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Speaker 2: at opposing disclosing climate emissions. And that's what this SEC

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Speaker 2: rule would do when it comes out, is that it

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Speaker 2: would require publicly traded companies to disclose those emissions. So

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Speaker 2: you know, in my opinion, that's the real goal is

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Speaker 2: to keep that from happening.

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Speaker 1: You may have heard Jesse mentioned there the words anti trust.

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Speaker 1: That is where the Republican Attorney's General Association comes into

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Speaker 1: the picture. Back in June twenty twenty one, a guy

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Speaker 1: named Jason Isaac, who spearheads the Texas Public Policy Foundations

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Speaker 1: work on energy, went to a meeting of the American

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Speaker 1: Legislative Exchange Council Aleck with an idea for a legal

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Speaker 1: strategy that he thought could take ESG down. Documented shared

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Speaker 1: audio from that meeting with us.

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Speaker 3: Yeah, so earlier a couple of months ago our state affairs.

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Speaker 3: The committee voted nine to nothing, so brought by partisan support,

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Speaker 3: every single member voted in support to give the committee

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Speaker 3: sub poena authority. So they have sent out letters to

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Speaker 3: these financial institutions to get some paper documents to find

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Speaker 3: out where this collusion is happening. We anticipate truckloads of

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Speaker 3: documents being delivered, and so we look forward to the

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Speaker 3: Texas Public Policy Foundation to going through those meticulously because

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Speaker 3: we believe that there is and we actually partner with C.

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Speaker 3: Boyd and Gray Boyd and Gray Associates law firm out

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Speaker 3: of Washington, DC. Corporate collusion, liability risk for the ESG

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Speaker 3: agenda to charge higher fees and rig the market. We

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Speaker 3: believe that there's antitrust violations. This is really kind of

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Speaker 3: geared towards our attorney's general to lay the the foundation

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Speaker 3: for antitrust violations on this corporate collusion. Find out the

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Speaker 3: connections with the Glasgow Financial Alliance for net zero, which

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Speaker 3: has over I think one hundred trillion dollars under managed

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Speaker 3: assets in their cartel. That's colluding for this two degrees,

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Speaker 3: this net zero, this Paris accord all rooted in decarbonization,

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Speaker 3: which is net zero. So I hope our committee gets

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Speaker 3: a ton of paperback from these large financial institutions and

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Speaker 3: they get hammered in the corps and our attorneys general

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Speaker 3: around the country file anti trust violations.

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Speaker 1: So yeah, cartel's colluding for decarbonization. What the hell is

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Speaker 1: he talking about here? We're going to try to answer

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Speaker 1: that question right after this quick break and we're back.

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Speaker 1: So after COP twenty six in Glasgow, insurers and asset

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Speaker 1: managers both formed groups focused on ESG. In both cases,

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Speaker 1: these firms were saying, look, all sorts of environmental and

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Speaker 1: social factors can impact our bottom line, and we would

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Speaker 1: like to know what those risks might be so we

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Speaker 1: can factor that into our decision making around what to

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Speaker 1: ensure and what to invest in. But according to Isaac,

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Speaker 1: these firms talking to each other, issuing joint statements about

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Speaker 1: what kind of information they'd like to see from companies.

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Speaker 1: That's colluding to rig the market. In the wake of

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Speaker 1: that twenty twenty one ALEC meeting you heard Isaac talking

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Speaker 1: at before, not only did Texas continue with the investigation

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Speaker 1: Isaac mentioned, but Arizona Attorney General Mark Bernovich opened an

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Speaker 1: investigation into ESG investing, and RAGA coordinated a letter to

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Speaker 1: various asset managers and politicians, with more than a dozen

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Speaker 1: attorneys general signed on stating their concern that ESG investing

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Speaker 1: might actually be an anti trust violation. Here's Jesse Coleman again.

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Speaker 2: We started to see, you know, some of the bright

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Speaker 2: lights of the Republican Attorney's General Association file various kinds

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Speaker 2: of legal attacks on ESG issues, whether that's you know,

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Speaker 2: going directly after asset managers and asking them questions about

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Speaker 2: their net zero commitments or that's you know, going directly

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Speaker 2: after ratings agencies and you know, saying that you're boycotting fossil.

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Speaker 1: Fuels, and they seem to have coalesced around this idea

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Speaker 1: of painting esg as some sort of like corporate collusion,

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Speaker 1: you know, building an antitrust case. Can you explain what

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Speaker 1: the thinking is there? What they're trying to prove.

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Speaker 2: The allegation is that a lot of large asset managers

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Speaker 2: get together in a shadowy cabal and they plan to

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Speaker 2: collude to reduce carbon emissions. The reason that these groups

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Speaker 2: are alleging anti trust violations is that anti trust violations

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Speaker 2: are very scary to companies. If a jury finds you

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Speaker 2: guilty of an anti trust violation, it's very expensive and

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Speaker 2: it's a pretty hard bar to meet. And most experts

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Speaker 2: are saying that the anti trust allegations that are coming

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Speaker 2: from these people that are opposing climate policy, you know,

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Speaker 2: they probably don't have a light to stand on, but

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Speaker 2: a lot like slap suits and other kinds of legal

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Speaker 2: tools that are used to silence people. Just defending against

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Speaker 2: an anti trust allegation is very very expensive, So you know,

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Speaker 2: you see companies really backing away from participation in these

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Speaker 2: kind of global groups that are trying to address climate

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Speaker 2: emissions and trying to address investment in the fossil fuel

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Speaker 2: industry by large asset managers.

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Speaker 1: In twenty twenty two, ALEC once again held a meeting

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Speaker 1: with a session on how to handle ESG at the

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Speaker 1: state level, and again the antitrust strategy was from and center.

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Speaker 1: This time Isaac was in the room cheering on new

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Speaker 1: proponents of the strategy, including Will Hild with Consumers Research,

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Speaker 1: which is funded by former Federalist Society president Leonard Leo.

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Speaker 1: Paul Watkins, who used to work in the Arizona Attorney

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Speaker 1: General's office and now runs an outfit called Fusion Law

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Speaker 1: advising on these sorts of strategies. Andy Puster, former CEO

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Speaker 1: of the food conglomerate that is home to Wendy's and Hardy's,

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Speaker 1: and Catherine Gonzalez with the Heritage Foundation. Puster kicked off

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Speaker 1: by comparing ESG investors to not kidding here the Nazis.

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Speaker 4: I want to tell.

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Speaker 5: You, ESG investing is socialism and chief's clothing. This is

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Speaker 5: the challenge of your generation. My father's generations challenge was

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Speaker 5: the Nazis, who, by the way were of course very

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Speaker 5: proud socialists. The challenge of my generation was the Communists,

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Speaker 5: who were of course very committed socialists. The challenge of

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Speaker 5: your generation is ESG investing, and it's more insidious than

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Speaker 5: communism or the Nazis. It's more insidious, it's more devious.

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Speaker 5: You almost have to respect how comprehensive this horrible thing

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Speaker 5: they're doing is so E s G environmental, social and governments, Like,

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Speaker 5: how bad could that be? Right? It sounds so innocuous,

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Speaker 5: but it's a ruse. It's a ruse to conceal the

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Speaker 5: fact that it's a direct threat to our founding principles.

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Speaker 5: It's a threat to our democracy.

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Speaker 1: Hild and Watkins kept it focused on the strategy.

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Speaker 6: And if you clear, Paul, this is this consortium, is

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Speaker 6: these companies coordinating their activities. They get in rooms and

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Speaker 6: they talk about they're going to set a policy across

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Speaker 6: the market. Now, it's been a while since I was

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Speaker 6: in law school, but when I was there, that was

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Speaker 6: any trust one oh one.

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Speaker 2: And then that's its way.

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Speaker 7: You see US senators saying this is potentially criminal anti

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Speaker 7: trust liability.

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Speaker 2: You see AG saying that they're going.

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Speaker 1: To investigate, and again I have yet to speak with

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Speaker 1: a single legal expert who thinks that this strategy could

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Speaker 1: actually win in court. But like we said before, that

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Speaker 1: is not necessarily the point. It's already having a chilling

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Speaker 1: effect on investment firms and insurance companies in these net

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Speaker 1: zero groups, and now that Republicans have control of the House,

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Speaker 1: it's the focus of a series of Oversight Committee hearings too.

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Speaker 1: The first one happened back in May and featured the

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Speaker 1: attorneys general of Utah and Alabama as witnesses. Here's John Reyes,

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Speaker 1: Attorney General of Utah.

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Speaker 8: But ever since the signing of the Paris Agreement, there's

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Speaker 8: been an open conspiracy to bypass Congress using the power

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Speaker 8: of horizontal agreements by key players in our financial system.

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Speaker 8: Some of these groups are Climate Action one hundred, the

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Speaker 8: Glasgow Alliance for Net Zero, which include the largest asset managers, banks,

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Speaker 8: and insurance companies globally. These horizontal organizations seek to use

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Speaker 8: their collective market power over tens of trillions and assets

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Speaker 8: to force burden some changes on American companies.

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Speaker 1: The Democrats witness During this hearing, Illinois State Treasurer Michael

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Speaker 1: Freerris gave a great and completely non climate related example

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Speaker 1: of where ESG can safeguard profits.

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Speaker 7: The more data we as investors have, the better informed

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Speaker 7: our decisions are when selecting investments over the long term.

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Speaker 7: ESG is about looking at a wider range of risks

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Speaker 7: and value opportunities that have we can have a material

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Speaker 7: financial impact on investment performance. For example, if you're investing

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Speaker 7: in a pharmaceutical company, it's thinking about whether that company

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Speaker 7: has exposure to massive lawsuits because of its role in

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Speaker 7: the opioid epidemic. Our approach is to integrate material ESG

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Speaker 7: factors into investment decisions along with many other considerations. We

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Speaker 7: are not ignoring traditional financial factors like profitability and credit worthiness.

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Speaker 7: We are integrating more data into our decisions to give

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Speaker 7: us a better idea of risk and growth prospects.

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Speaker 1: Ferris also pointed out that limiting the information investors can

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Speaker 1: get about the companies they're investing in is the exact

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Speaker 1: opposite of a free market idea.

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Speaker 7: This pushback is anti free market and anti investor. It

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Speaker 7: is misleading, and it is harmful. It harms retirement savers, pensioners,

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Speaker 7: working people, businesses, and harms America. This coordinated campaign is

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Speaker 7: focused on ESG investing most people don't know what ESG is.

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Speaker 7: ESG is data. ESG is simple, the additional information that

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Speaker 7: investment professionals use to assess risk and return prospects. It

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Speaker 7: is about value, not about values. In order to maximize returns,

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Speaker 7: an investor must be able to manage and mitigate risk.

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Speaker 7: The more data we as investors have, the better informed

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Speaker 7: our decisions are when selecting investments over the long term.

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Speaker 7: ESG is about looking at a wider range of risks

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Speaker 7: and value opportunities can have a material financial impact on

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Speaker 7: investment performance.

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Speaker 1: Last week, the House Oversight Committee held its second hearing

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Speaker 1: on this subject, calling on none other than Jason Isaac

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Speaker 1: himself to testify.

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Speaker 9: I'm Jason Isaac. I'm the director of Life Powered, a

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Speaker 9: national initiative of the Texas Public Policy Foundation to raise

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Speaker 9: America's energy IQ and I live a high carbon lifestyle,

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Speaker 9: and I think the rest of the world should too.

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Speaker 9: So why I refer to the ESG agenda as the

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Speaker 9: China ESG Agenda. It does very little to help Americans.

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Speaker 9: It does everything to help the Chinese Communist Party and

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Speaker 9: again making energy expensive, scarce and government controlled. This body,

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Speaker 9: the United States Congress, has not ratified to the Paris Treaty.

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Speaker 9: It is not the law of the land here in

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Speaker 9: the United States. But to force an American entrepreneur to

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Speaker 9: admit that his company will comply with that is just

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Speaker 9: mind blowing to me.

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Speaker 1: Whether the committee will hold a third hearing remains to

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Speaker 1: be seen. I'm not sure the Anti ESG Bench of

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Speaker 1: Experts rules that deep. Plus, while these ideas might get

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Speaker 1: folks at an ALEC meeting riled up, they're remarkably unpopular

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Speaker 1: with American voters, including the majority of Republican voters. New

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Speaker 1: Mexico Rep. Melanie Stansbury made that point at last week's hearing.

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Speaker 4: What I find particularly strange about this conversation is that

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Speaker 4: over sixty three percent of American voters actually opposed directly

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Speaker 4: oppose any kind of government interference in investing strategies, and

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Speaker 4: the vast majority of Republicans oppose it as well. And

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Speaker 4: you know, when you look at the bigger picture, when

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Speaker 4: you look at what the American people are actually asking

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Speaker 4: Congress to do, asking businesses in the private sector to do,

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Speaker 4: almost seventy percent of Americans are in support of actions

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Speaker 4: to address climate change, to transition to a clean energy economy.

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Speaker 1: Whether the SEC will be swayed by the antitrust argument

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Speaker 1: remains to be seen. That's it for this week, Thanks

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Speaker 1: for listening, and we'll see you next time. Drilled is

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Speaker 1: an original Critical Frequency production. Our producer is Sarah Ventry.

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Speaker 1: Sound design, mixing and mastering are by Peter Duff, who

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Speaker 1: also wrote our original score. Our First Amendment attorney is

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Speaker 1: James Wheton at the First Amendment Project, and the show

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Speaker 1: is reported, written and hosted by me Amy Westervelt