State Treasurers Express Concerns to State Street Regarding Environmental and Social-Justice Activism
A group of 17 state financial officers has raised concerns about financial giant State Street Global Advisors and its involvement in promoting environmental and social justice causes. Despite withdrawing from Climate Action 100+ in February, the firm continues to use its managed shares to pressure companies to align with progressive climate and racial agendas. State financial managers argue that State Street is leveraging its assets under management to push for ESG (environmental, social, and governance) issues across portfolio companies.
In a letter dated March 14, state officials accused State Street of pressuring companies to adopt diversity, equity, and inclusion (DEI) policies. ESG, which originated from the United Nations in 2005, involves asset managers pledging to vote the corporate shares they manage to encourage companies to implement the UN’s Sustainable Development Goals.
The state officials are concerned that State Street’s commitment to fighting global warming might conflict with its duty to maximize returns for investors. State Street is a member of various climate-related alliances and initiatives, including the UN-sponsored Net Zero Asset Managers initiative and the Glasgow Financial Alliance for Net Zero. Although the firm has withdrawn from Climate Action 100+, its continued membership in similar groups raises questions about its ability to reconcile these commitments.
Derek Kreifels, CEO of the State Financial Officers Foundation, believes that State Street’s actions are driven by a global push to politicize funds. He argues that these entities are attempting to achieve their goals outside of Congress or the courts because they know they cannot win through traditional means. Kreifels accuses State Street of lying to the public, investors, and pension board members who have a fiduciary duty to manage these funds.
ESG proponents argue that analyzing a company’s exposure to rising global temperatures is crucial for risk analysis. They also believe that a company’s commitment to diversity is an important metric for assessing management competence. State Street’s stewardship program aims to mitigate material risks in its portfolios by proactively engaging and voting on various topics, including ESG factors.
Critics of ESG are skeptical of these claims. They argue that ESG may reduce investment returns due to the avoidance of sectors like oil and gas, which reduces portfolio diversity. Additionally, ESG funds typically charge higher fees compared to passive index funds. State Street’s Chief Investment Officer, Lori Heinel, admitted in a Texas senate hearing that there is no evidence that ESG improves returns. She highlighted that not owning energy companies last year resulted in poor performance compared to broad benchmarks.
State financial officers have urged State Street to consider the financial risks faced by companies when transitioning to green energies before they are technologically feasible and fully affordable. They also raised concerns about the potential consequences for companies that implement equity-based programs or social justice marketing campaigns, such as losing customers or facing lawsuits for violating civil rights laws.
The Epoch Times reached out to State Street Global Advisors for comment but did not receive a response.
In conclusion, State Treasurers are expressing concerns about State Street Global Advisors’ involvement in promoting environmental and social justice causes. They believe that the firm is using its managed shares to pressure companies into adopting progressive agendas, potentially conflicting with its duty to maximize returns for investors. The debate surrounding ESG criteria continues, with proponents arguing for its importance in risk analysis and critics expressing skepticism about its impact on investment returns. State financial officers are calling on State Street to consider the potential financial risks faced by companies and the consequences of implementing equity-based programs or social justice marketing campaigns. It remains to be seen how this conflict between state treasurers and State Street will unfold and if further actions will be taken to address these concerns.
