ESG legislation is anti-business, will cost Arkansas retirees money

by Grant Tennille ([email protected]) 3,295 views 

Entrenched, single-party rule is dangerous to Democracy for many reasons. One of the most insidious is that absolute authority enables the powerful to create their own reality and justify almost any action.

Since Jan. 9, Gov. Sarah Sanders and her loyalists in the General Assembly have been engaging in exactly this sort of gaslighting: creating a narrative that classroom teachers and librarians are indoctrinating students to pass a new law allowing book banning; spinning a yarn that our public restrooms are overrun with transgender folks targeting children to justify a new law effectively banning some Arkansans from public conveniences; or declaring that wild-eyed socialists have taken over American corporations to pass a new law preventing the state of Arkansas from investing taxpayer assets in those companies.

House Bill 1307 by Rep. Jeff Wardlaw, R-Hermitage, would require the state of Arkansas to divest holdings in financial instruments or companies that employ Environmental, Social Justice or Governance (ESG) criteria in their investment strategies or management decisions. Legislatures in Red states are passing these bills as part of a crusade against so-called “wokeism” in American society. Proponents of the bill have told us it’s really about Arkansas values, that Arkansas dollars shouldn’t go to investment funds that won’t invest in gun companies or oil companies. The problem is that performative stunts like this rarely hit their mark.

Morningstar, the respected U.S. research and financial services firm, recently released its list of the top ESG-rated companies, worldwide, for 2023. Of these 974 global enterprises, 17 are oil and gas producers, 12 operate refineries and pipelines and 20 are in metals and mining. While there are no firearms manufacturers on the list, likely because there are only a handful of publicly traded gunmakers, seven aerospace and defense companies made the list.

What may surprise some Arkansans is that 65 of the 974 global concerns have ongoing operations in Arkansas and employ Arkansans. Some, like J.B. Hunt Transportation Services and Windstream Services, were born here. Others, like Cummins, Inc. and Deere and Company are so ubiquitous in the Natural State that they almost feel like Arkansas companies.

You may be confused about how corporations such as Hunt and Deere or Carrier and Terminix could possibly end up on a list of so-called “woke” companies. Is there anything more “Arkansas” than 18-wheelers, giant tractors, frosty cold A/C and killing pests?

Where are the artisan cheesemakers and the vegan facemask collective on the list? Isn’t that the kind of socialist bull we’re talking about, here?

Turns out, no.

The business of America is still business. Companies like Anheuser-Busch InBev and Yeti made the list, but not because they are trying to convince us to stop eating beef or go to drag shows. They made the list because they are trying to predict the future, preserve shareholder value and guarantee profitability into the next generation. Successful businesses have always done this. ESG just provides a new lens through which corporate strategists and actuaries can look at their own companies, their markets and the world.

Brown-Forman, the massive distiller of Jack Daniels, made the list. This company is entirely dependent on an endless supply of fresh, clean water to continue its business. It seems perfectly reasonable that the future of water in Tennessee – its availability, regulation and purity – is an area of intense scrutiny for the company. If what they learn leads them to improve their efficiency, reuse and discharge policies, all in the name of keeping the Jack Daniels brand strong for another century, does that mean that Brown-Forman is “woke” or “smart?”

ESG is nothing new. What is new is this politicization of business activity.

If we follow Rep. Wardlaw’s logic, Arkansas’ public retirement systems and its treasury, should divest holdings in financial instruments that employ ESG criteria because of our values. Rep. Wardlaw recognizes that this action could cost the Arkansas treasury and its retirees millions of dollars. Taking money from older people who need it to make a hollow and nonsensical point doesn’t seem consistent with any Arkansas value.

And while we’re talking about Arkansas values, let’s talk about hospitality. As I mentioned earlier, of the 974 top-rated ESG companies in the world, 65 have a presence in Arkansas, paying taxes and employing Arkansans. What are they going to think if Gov. Sanders signs HB 1307, sending a clear message that Arkansas doesn’t value them or their business?

Let’s not find out. It’s time to get back to reality and kill HB 1307.

Editor’s note: Grant Tennille is the chairman of the Democratic Party of Arkansas. He served as executive director of the Arkansas Economic Development Commission under Gov. Mike Beebe. The opinions expressed are those of the author.