Political spat over climate risks in investments gets hotter

ST. PAUL, Minn. (AP) — The political fight is only getting fiercer over whether it’s financially wise or “woke” folly to consider a company’s impact on climate change, workers’ rights and other issues when making investments. 

Republicans from North Dakota to Texas are ramping up their criticism of “ESG investing,” a fast-growing movement that says it can pay dividends to consider environmental, social and corporate-governance issues when deciding where to invest pension and other public funds. At the same time, Democrats in traditionally blue states like Minnesota are considering whether to make ESG principles an even bigger part of their investment strategies. 

In ESG, the E component standing for “environment” often gets the most attention because of the debate over whether to invest in fossil-fuel companies . In the wide-ranging social, or S, bucket, investors look at how companies treat their workforces, thinking a happier group with less turnover can be more productive. For the G, or governance aspect, investors make sure companies’ boards keep executives accountable and pay CEOs in a way that incentivizes the best performance for all stakeholders.  

The ESG industry has scorekeepers that give ratings on how well companies do on such environmental, social and governance issues. Poor scores can steer investors away from companies or governments seen as bigger risks, but that could also in turn make it more expensive for them to borrow money and hurt them financially.