Anglo American has created a separate entity for these assets called Thungela, while Glencore still has coal in its portfolio and proposes to run it down responsibly over time. Look at the divergent coal strategies of mining giants Rio Tinto, Anglo American and Glencore. Owners of dirty assets can still raise capital. Nothing nefarious or political here, just capitalism at work. If investments that mitigate ESG risks offer a better risk-adjusted return and investors are increasingly shunning certain companies – be it gun manufacturers or fossil fuel producers – it will affect where money flows.īlackRock’s CEO, Larry Fink, recently said that his company lost about US$4 billion in assets from Republican-led states withdrawing money in 2022, but added US$400 billion overall. ESG ratings seek to capture such factors to enable investors to make better informed decisions.įor asset managers like BlackRock, it’s also about customer demand. Researchers have shown how two gold mines with the same volumes of gold and extraction costs can be valued radically differently depending on local support. This can affect the mine’s profitability. Communities can tie owners up in lawsuits or even block mining access if their concerns go unaddressed. It inherently impacts the environment and surrounding communities. It depends on the risk of the investment and how many investors will take that risk.Ĭonsider mining. The ability of different organisations to borrow and the price they pay is never equal. The notion of equal access to capital flies in the face of one of the central tenets of capitalism. This revealed either a remarkable ignorance about financial markets and the financial risks posed by environmental and social challenges – or he was being cynically misleading to score political points. For the US to be economically competitive, he said “we need our financial system to provide equal access to capital to all kinds of businesses”. Andy Barr, the new chair of the House financial services subcommittee responsible for financial institutions, claimed America’s financial system had been “co-opted by the intolerant left that is intolerant of diversity”. Newly in charge of a Congressional branch, Republicans are taking their quest to Washington, DC. Former vice president Mike Pence wants the the next Republican congress to work to “end the use of ESG principles nationwide”. This was after 19 Republican state attorneys-general told the asset manager in a letter: “Our states will not idly stand for our pensioners’ retirements to be sacrificed for BlackRock’s climate agenda.”Įighteen states have also either proposed or adopted legislation over the past two years restricting state business with financial institutions that use ESG criteria to limit funding to industries like fossil fuels.Īccording to Republican senator Kevin Cramer from North Dakota, banks and asset managers “should ignore calls for ESG and woke capitalism and stick to what they do best”. Public bodies and companies with lower ESG scores can see this reflected in their borrowing costs, and some politicians on the right object to this “interference” with market valuations.ĭeSantis already pledged in December to pull US$2 billion (£1.7 billion) of the state’s investment from BlackRock, the world’s largest asset manager and a key player in the ESG movement. The proposal is that they would no longer be able to work with ratings agencies that value the bonds using the ESG (environmental, social and governance) sustainability criteria that have become commonplace in the world of finance in the past few years. He is proposing to change the rules around how public bodies within Florida borrow from the markets by issuing bonds. Ron DeSantis, Florida’s Republican governor and likely future presidential contender, has opened up a new front in his party’s war on “woke capitalism”.
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