ESG is a relatively new term that many Idahoans may be hearing about, and asking what is it, and how does it affect them?
ESG stands for Environmental, Social, and Governance. It is a movement to advance public policy agendas through undemocratic means.
Investment managers, financial institutions, insurance companies, and rating agencies are examples of those using ESG ratings to look at nonfinancial or subjective criteria as they measure investment options or the creditworthiness of a company or state.
The E in ESG looks at environmental factors like a company's carbon emissions, air and water pollution, and green energy initiatives.
The S in ESG examines social factors in how a company treats people through their policies on things like employee gender and diversity, customer satisfaction, and company sexual harassment policies.
The G in ESG looks at governance in how a company is run by the diversity of its board members, political contributions, executive pay, and who and what they lobby for.
On the surface, these factors may look like a good thing. The problem is that they are all subjective. Who decides what is good and what is bad?
In November 2021, West Virginia Treasurer Riley Moore led a coalition of officials in 15 states (including Idaho) to act in response to the ongoing and growing economic boycotts of traditional energy production industries by US financial institutions. This was in response to ESG pressures by national environmental groups driving banks, insurance companies, and investment managers to abandon fossil fuels, even though these companies meet all environmental laws set by public policy.
In June of 2021, Texas bashed financial investment firms because they were pledging to curb climate change through their investments. Gov. Greg Abbott signed a bill into law banning state investments in businesses that cut ties with the oil and gas industry.
In Utah, a utility company, which delivers power to approximately 25,000 customers, recently learned its longtime auto insurer wouldn’t renew coverage for their fleet. The utility owns a coal-burning power plant and has stakes in two others. The insurance company is phasing out business with companies that derive profits from coal.
It is not hard to see how these ESG rating criteria can negatively affect Idaho and our industries.
Recently S&P Global Ratings created an ESG report card for states. In response, on May 18th Idaho’s constitutional officers, congressional delegation and legislative leadership sent a letter objecting to these subjective criteria.
On June 7th, Senator Crapo and I will be holding a roundtable with national experts providing more education on ESG for Idahoans. We encourage people from across the state to tune in and learn more about ESG. More information can be found at https://sto.idaho.gov/About/Current-News.