In recent months, several states have taken legislative, administrative, and/or regulatory steps to oppose the proliferation of environmental, social, and governance (ESG) investment metrics. On January 3, Kentucky officially joined the anti-ESG fray, when its treasurer, Allison Ball, released a list of 11 financial firms (BlackRock, Inc., BNP Paribas SA, Citigroup Inc., Climate First Bank, Dankse Bank A/S, HSBC PLC, JPMorgan Chase & Co., Nordea Bank ABP, Schroders PLC, Svenska Handelsbanken AB, and Swedbank AB) the Bluegrass State accuses of engaging in “energy company boycotts.”
According to Ball, “When companies boycott fossil fuels, they intentionally choke off the lifeblood of capital to Kentucky’s signature industries.”
She added, “Traditional energy sources fuel our Kentucky economy, provide much needed jobs, and warm our homes. Kentucky must not allow our signature industries to be irreparably damaged based upon the ideological whims of a select few.”
In 2022, Kentucky passed a law requiring the treasurer to compile a list of all financial firms that boycott fossil fuel companies and do business with the state. Per the law, if those firms do not cease their energy company boycotts, they will be susceptible to divestment if they have direct or indirect holdings with any state government entity. In other words, if any of the 11 financial firms listed above do not abruptly (within 90 days) disavow their allegiance to ESG, they will no longer be able to conduct business with any state agency. And, all of their current holdings in state pension funds will be immediately divested.
As Ball points out, energy company boycotts could devastate Kentucky’s already lackluster economy. “The energy sector represents 7.8% of total state employment or 143,994 jobs. These natural resources account for 94.5% of Kentucky’s electrical power generation. In 2021, Kentucky used its electrical power to heat more than half of Kentucky homes, while boasting the 12th lowest average electricity prices in the nation,” Ball writes.
In essence, Ball is simply trying to protect the livelihoods of Kentuckians who work in fossil fuel-related fields while also trying to ensure that electricity rates do not skyrocket for hard-working Kentuckians because a cabal of financial firms are hellbent on eliminating affordable and reliable fossil-fuel-based energy with unaffordable and unreliable “green” energy.
Unfortunately, there is only so much leverage at Ball’s disposal as she attempts to play hardball with these woke investment firms. In all, Kentucky controls about $7.9 billion across its various state retirement systems. About $1 billion of that total amount is invested with BlackRock, the chief purveyor of ESG investing. However, BlackRock is the country’s largest money manager, with nearly $10 trillion in assets. While I am sure that BlackRock is not happy to possibly lose $1 billion due its ESG activities, I am also fairly certain that this alone is far from a game-changer when it comes to the big picture battle against ESG.
On the other hand, for those who value individual liberty and prefer free-market (shareholder) capitalism as opposed to centralized economic planning and crony (stakeholder) capitalism, this is definitely a step in the right direction.