The Evolution of the Right-Wing Attacks on ESG

ESG is a financial catch-all term for both how companies disclose information about their impacts on the environment and society, and how investors assess the risks posed by those same disclosures. Short for environmental, social and governance, the term has been around for two decades and the underlying concept of socially responsible investing for at least a half century. However, since 2020, ESG has increasingly become the target of a coordinated, multi-pronged attack from a web of closely linked right-wing political operatives, organizations, and funders with ties to the fossil fuel industry. Their goal: to block financial institutions from assessing the risks posed by climate change.

Under the banner of fighting “woke” corporations, these groups—which have a long history of denying climate science and opposing actions to address the climate crisis—have successfully pushed lawmakers to pass anti-ESG legislation in 19 states, weaponized the offices of state treasurers and secretaries of state against climate disclosures, and primed attorneys general to challenge financial institutions that dare to factor climate change risks into their portfolios.

Organizations spearheading the anti-ESG effort include the Texas Public Policy Foundation, State Financial Officers Foundation, Consumers' Research, Foundation for Government Accountability, Heritage Foundation, and the American Legislative Exchange Council. Funding for the campaign is directly tied to the far-right impresario Leonard Leo, who has committed over $8 million to top organizations leading the anti-ESG charge. Leo described “the ESG movement [as] polluting our culture and assaulting the dignity and worth of people.” He further elaborated that his nonprofit the Marble Freedom Trust, which received a whopping $1.6 billion in 2020 from billionaire Barre Seid, “stands with a growing group of Americans who are fighting to crush leftist dominance in this arena.”

Those opposing ESG efforts and climate disclosure worked across state legislatures to advance what they branded as “energy boycott” bills. Based on model legislation written by Texas Public Policy Foundation’s Jason Isaac and circulated by the American Legislative Exchange Council (ALEC) as the ‘Energy Elimination Discrimination Act’, these bills prohibit state retirement systems, pension funds, and other entities from investing in or doing business with companies that have ESG standards, despite the development of such goals widely being considered standard business practice.

The legislative push found an early footing with conservative state lawmakers but has produced mixed results to date. Since 2021, the groups’ anti-ESG allies in state legislatures have introduced a total of 373 pieces of legislation based on Isaac’s model legislation authored by TPPF and other ideologically aligned groups. However, only 43 of those bills have passed since. Moreover, the 2023-24 legislative sessions suggests the legislative push’s early success may have now largely stalled: while in the 2021-22 legislative session 44 bills were introduced, 5 of which passed into law , of the 161 anti-ESG bills introduced in legislatures during the 2023-24 session, just 6 passed.

These bills have faced intense pushback from business groups, banking associations, and retirement systems who condemn the high cost such legislation has on taxpayers and see it as unnecessary government intervention on state investing practices. In 2023, for example, Texas County and District Retirement System executive director Amy Bishop sounded the alarm over SB1446, warning that “conflicts in the bill would keep [the system] from partnering with some of the best investment managers in the world over issues such as violation of fiduciary duty and protecting competitive advantage.” Bishop likewise estimated that if the bill became law it could cost the retirement system “over $6 billion over the next 10 years.” Nonetheless, during a recent Texas Senate Committee on State Affairs hearing, lawmakers and lobbyists suggested the bill may be reintroduced in the 2024 legislative session.

Some bills have even faced legal and regulatory backlash. In July 2024, a judge permanently blocked Oklahoma’s 2022 anti-ESG after a state retiree challenged it on First Amendment grounds. Similar constitutional concerns have also been raised in Texas. In August 2024, the American Sustainable Business Council sued Texas Attorney General Ken Paxton and Texas Comptroller Glenn Hegar over SB 13, arguing it violates the First Amendment “under a scheme of politicized viewpoint discrimination, based on no legitimate state interest.”

The anti-ESG network has had a particular focus on weaponizing state officials, like state treasurers. For example, anti-ESG funders have spent big to reshape the State Financial Officers Foundation, a 501c(3) non-profit political advocacy organization made up of state treasurers, financial officials, and Republican political operatives.

SFOF convenes Republican state treasurers, comptrollers, and other financial officers through in-person conferences and regular virtual meetings sponsored by corporate members throughout the year. SFOF uses these meetings to coordinate advocacy by state officials in support of right-wing and anti-climate causes. The organization has pushed state treasurers to oppose federal climate policies such as the Securities and Exchange Commission’s rules on ESG disclosure and, more recently, oppose the Financial Accounting Standards Board’s proposal to include greenhouse gas emissions in its accounting principles. SFOF has also organized letters from state officials to regulatory officials, promoted policy issues around energy, and facilitated media exposure for treasurers.

SFOF’s advocacy is closely tied to a web of climate-science-denying political groups, including ALEC, the Heritage Foundation, Consumers’ Research, National Center for Public Policy Research, and Capital Research Center. These groups either sponsor SFOF, sit on SFOF’s leadership board, or both—giving them significant sway over the organization's strategic direction. SFOF's anti-climate action work benefits these groups, as well as others formally aligned with the fossil fuel industry, such as the American Petroleum Institute.

SFOF supports and coordinates attacks on climate policy in a variety of ways, including:

• coordinating state treasurers to oppose federal nominees and file official regulatory comments;

• producing and promoting advocacy letters;

• advancing attacks on specific asset managers based on their climate policy;

• providing public relations and media guidance;

• and promoting pro-fossil fuel legislation.

In August 2024, Campaign for Accountability issued a complaint to the SEC asking the agency to look into whether SFOF “violated the agency’s pay-to-play prohibition on political contributions by certain investment advisers.” The complaint alleges state treasurers' and SFOF members’ gave preferential treatment to SFOF corporate sponsors over other corporate entities.

SFOF is now looking to advance its anti-climate push by focusing on public pensions and state investments. The Public Fiduciary Network (PFN), a new project out of SFOF, touts itself as a “right of center” organization providing resources and support to those overseeing state pensions and funds. PFN’s July 2024 meeting agenda obtained by Fieldnotes shows sessions with names like “ESG, Industry Bias & How To Protect Fiduciary Duty”and “Pension Exposure to ESG Investments,” as well as a discussion around “opportunities to raise the profile of PFN issues with pension boards across the country.”

With its state legislative efforts stalled, the anti-ESG movement turned to state attorneys general and secretaries of state to advance their anti-climate agenda.

Attorneys General

In June 2021, the Texas Public Policy Foundation—in concert with Boyden Gray & Associates, a GOP legal group with a long history of supporting climate science denial—published a white paper outlining how antitrust could be used as a legal strategy to undermine ESG initiatives. A little over a year later, during a July 2022 meeting hosted by ALEC, TPPF’s Jason Isaac pitched state lawmakers and other attendees on a multi-part strategy to build an antitrust case and encouraged lawmakers to embolden attorneys general to pursue it.

Since 2021, state attorneys general have followed suit. They’ve used antitrust allegations to pressure companies to leave voluntary climate finance coalitions and have even launched investigations into how ESG practices may violate antitrust laws. On August 29, 2024, two dozen attorneys general sent a letter to 25 asset management firms questioning the firms over their ESG policies and support of climate-forward shareholder proposals.

These actions have had a chilling effect on companies, several of which are choosing to leave climate finance coalitions over fear of potential litigation. They have also stifled federal action on climate change. As Bloomberg reported, the SEC both quietly dissolved its climate and ESG enforcement task force ​​and “dropped ESG from a list of priorities for its examiners checking investment firms for compliance with agency rules.” At the same time, the SEC’s proposed climate disclosure rule has faced gridlock thanks to legal challenges and backlash from the anti-ESG movement. The rule is currently pending judicial review.

Secretaries of State

In states where anti-ESG legislation failed, the rightwing Foundation for Government Accountability (FGA) shifted its focus to encouraging secretaries of state to implement anti-ESG measures. A Florida-based think tank, FGA is woven into a much larger web of political groups secretly funded through the State Policy Network, and it is now playing an expanding role in the fleet of dark money organizations driving efforts to attack ESG policy. FGA has significant ties to Leonard Leo, who has bankrolled the anti-ESG campaign. In 2020, FGA received $2 million from the Leonard Leo-tied 85 Fund. And in 2021, FGA contracted with Leo’s media relations operation, CRC Advisors, which has played a crucial role in coordinating Leo’s anti-ESG efforts.

In Missouri, as the legislature considered bills targeting ESG in the 2022-2023 legislative session, FGA was in frequent contact with Missouri Secretary of State Jay Ashcroft. As CNN reported, "emails show the group strategized with the secretary of state’s office for weeks leading up to Ashcroft proposing his own such rule" in January 2023, which was codified several months later. FGA later appeared to take credit for drafting Missouri's rule, and cited it as a model in a draft memo titled, "What Secretaries of State Can Do to Challenge the Threat of ESG."

The FGA-crafted rule forces clients to sign a consent form every time their financial advisers use ESG disclosures to guide investment advice, and is aimed at making the use of ESG disclosures more onerous. The outcome is similar to the aim of the seven anti-ESG bills that the Missouri legislature failed to pass in the 2022-23 session, which likewise sought to create hurdles to the use of ESG through complicated consent mandates. In short, then, FGA successfully pushed its anti-ESG agenda through regulation after it had failed to pass through the legislative process. In August 2024, however, the rule was struck down in federal court. As the Associated Press reported, the Missouri Chamber of Commerce and Industry’s interim president Kara Chorches applauded the move, saying the rule “would have placed an unnecessary burden on investment firms – small and large – doing business here in Missouri.”

While the anti-ESG movement has faced public opposition and legal challenges from the business community, organized attacks on climate disclosure and ‘wokeism’ at large are likely to continue to ramp up.

An influx of money and resources can be expected to fuel the anti-ESG movement’s next phase. As the Financial Times reported, Leonard Leo has committed $1 billion to “‘crush liberal dominance’ across corporate America and in the country’s news and entertainment sectors.” Leo is clear in his commitment to attacking ‘wokeism’ and has described how he would “increase support for organisations that call out companies and financial institutions that bend to the woke mind virus spread by regulators and NGOs, so that they have to pay a price for putting extreme leftwing ideology ahead of consumers.”

Leo has further committed to withholding his continued support from organizations that fail to “operationalize or weaponize the conservative vision,” making it all the more likely that groups leading the anti-ESG movement will do what Leo asks and grow even more aggressive in the years to come.