ESG flames live on

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Sep 03, 2024 View in browser   By Jordan Wolman With help from Allison Prang THE BIG IDEA Texas State Comptroller Glenn Hegar will be forced to test his anti-ESG law in the courtroom. | Eric Gay/AP Photo DON’T SLEEP ON ESG — Now that we're into the final sprint phase of the 2024 presidential race, it has become clear that "ESG" hasn't become the major campaign issue that some hoped — or feared — it would be. But make no mistake, the war is still raging behind the headlines. On the anti- side: Red-state financial officers recently warned the Business Roundtable, a group whose members are CEOs of major U.S. companies, to knock off the nonsense of environmental, social and governance principles that has amounted to an “abject failure.” The Republican officials in their letter to the business group even pointed to Exxon’s lawsuit against activist shareholders as a template for what companies should do: “The pressure from activists is real, but as Exxon has shown, standing up to bullies is the best way to end the destructive behavior,” the letter reads. “Standing up requires courage and courage is contagious.” Cue the backlash to the backlash. The American Sustainable Business Council has sued Texas officials over the state law that punishes financial firms accused of boycotting fossil fuels, putting them on a blacklist including companies that continue to invest in oil and gas. The left-leaning Washington business group is arguing in federal court that the law is preventing two of its investment firm members from competing for business in the state, which “muzzles” companies and violates the First and 14th amendments. A similar law was struck down in court in Oklahoma earlier this year. Texas Comptroller Glenn Hegar, who along with Attorney General Ken Paxton was named as a defendant in the suit, called the case “absurd.” Paxton didn’t respond to a request for comment. “The plaintiff has filed a purported First Amendment lawsuit that seeks to undermine state sovereignty and force the state of Texas and Texas taxpayers to invest their own money in a manner inconsistent with their values and detrimental to their own economic well-being,” Hegar said in a statement. In here somewhere might be a middle ground of sorts — or at least conservatives approaching the ESG issue with a recognition of the wider ramifications. Louisiana Treasurer John Fleming, who served as former President Donald Trump’s deputy chief of staff, signed the Business Roundtable letter to act as a “counterweight to the hard left.” But he also signaled in an interview that Texas’ hardline approach may not always be the best move. “There’s a potential (for those efforts to go too far),” Fleming said when asked about the opposition to anti-ESG bills that has spread into red states. “Any time you’re eliminating contracts with vendors based on one single criteria that is absolute, you’re going to have unintended consequences. That’s the thing that we worry about. We would much rather work with institutions to encourage them to our position, which is that we don’t believe there should be conservative activism in banks, and we don’t believe there should be liberal activism.” AROUND THE NATION MODIFIED DISCLOSURE — California state lawmakers have sent a bill to Gov. Gavin Newsom’s desk that would modestly tweak a pair of nation-leading climate disclosure laws enacted last year, your host reports. The legislation would give state regulators an additional six months to complete rulemaking for implementing a measure that requires large corporations to disclose their greenhouse gas emissions. That means the Air Resources Board can take until July 1 of next year to finish rulemaking instead of the original Jan. 1 deadline. Disclosures are still set to start in 2026. The move represents an acknowledgement that the agency isn’t on track to meet the initial timeline but is also a rebuke of Newsom’s call for a delay of disclosures until 2028. Senate Budget Committee Chair Scott Wiener, who authored the emissions-disclosure law, used his perch to fend off larger rollbacks sought by Newsom and the California Chamber of Commerce. California’s laws are still facing legal challenges similar to ones that have prompted the U.S. Securities and Exchange Commission to put its disclosure regime on hold. CalChamber has joined the U.S. Chamber of Commerce and other business groups in suing to stop the California laws. That case is set to be heard in federal court on Sept. 9. WASHINGTON WATCH ERIE ENVIRO PUSH — A top U.S. Department of Energy official is set to meet today with representatives from environmental groups that want the Biden administration to withdraw financial support for a Pennsylvania plastics recycling project that they say will harm a vulnerable low-income neighborhood. The green groups are pushing for DOE to rescind a conditional loan of $182.6 million in Inflation Reduction Act funding to International Recycling Group. The company plans to build a massive recycling plant in Erie, Pa., that will sell a portion of waste plastics to a steelmaking facility in another disadvantaged community in northwest Indiana. The conflict in a purple part of a swing state that could hold the keys to the White House highlights the difficult task the Biden administration has faced in trying to boost domestic manufacturing alongside a green energy transition while also trying to protect historically overburdened communities. DOE didn’t respond to a request for comment about the planned meeting. But Jigar Shah, director of DOE’s Loan Programs Office, previously told POLITICO that the project is a “win-win all around” because it would create new jobs and address the plastic pollution crisis by diverting waste plastics from landfills and cut emissions by replacing coal as a steelmaking fuel at the Indiana site. But the environmental groups argue that plastics recycling practices are just as dangerous and that the administration should instead invest in more effective climate and waste solutions that reduce reliance on plastics. The meeting with Shah comes a week after 106 environmental groups urged Energy Secretary Jennifer Granholm to pull federal support for the project, your host reports. PRICING PRESSURE — The Biden administration is considering using federal dollars to boost domestic production of critical minerals including lithium and nickel as it aims to counter Chinese dominance of a market for materials to fuel green transition, James Bikales reports. The potential policy shift would allow the federal government to set a price floor for projects and pay the difference when market prices drop below that threshold. The price tag for such a move is unclear, but the goal would be to do more than just help with the initial capital investment by reassuring investors and customers that domestic suppliers can overcome China. Industry groups have been encouraging the administration to up the ante if it’s serious about building out a domestic supply chain. Even if prices stay high enough that the government never needs to disburse the funds, the backstop can help projects secure purchase agreements from customers. Movers and Shakers VERRA’S NEW LEADER — Mandy Rambharos, the new CEO of Verra, one of the biggest actors in the voluntary carbon market, chatted with our Allison Prang about how she plans to rightsize the carbon-credit standard setter after it faced questions over its offsets’ integrity and what to expect as far as market demand going forward. Here are some excerpts from the interview: On how she plans to improve the organization after integrity questions… When you are the biggest player in a particular market, you do usually get most of the criticism, but that aside, some of it is justified. So making sure that we're very transparent and clear on processes we're putting in place to ensure that quality, ensure that integrity, and getting back to that very good reputation that Verra had with most players and still has with a lot of our market. On when the market will see more interest and trust from corporate buyers… There's more and more interest, but they would like us to make it simpler for them, not simply in terms of bypassing governance or integrity or quality, but simply in terms of accessibility. A lot of people don't understand how this world works. On Verra’s relationship with the Integrity Council for the Voluntary Carbon Market… I do think they have an important role to play in being that independent oversight body that would give you the assurance as a buyer. We do perhaps need to have further discussions on some of the criteria and the way they've addressed some of it. YOU TELL US  GAME ON — Welcome to the Long Game, where we tell you about the latest on efforts to shape our future. Join us every Tuesday as we keep you in the loop on the world of sustainability. Team Sustainability is editor Greg Mott and reporters Jordan Wolman and Allison Prang. Reach us all at gmott@politico.com, jwolman@politico.com and aprang@politico.com. Sign up for the Long Game. It's free! WHAT WE'RE CLICKING — The Financial Times looks at ties between an environmental charity created by Amazon’s Jeff Bezos and a nonprofit that sets climate targets. — Lego is planning to switch from fossil fuels to renewable and recyclable plastic to manufacture its signature building blocks by 2032, according to Reuters. — China is trying to get African nations to buy more of their green exports as Beijing faces the prospect of new U.S. and EU restrictions, Reuters reports.   Follow us on Twitter Debra Kahn @debra_kahn Greg Mott @gwmott Jordan Wolman @jordanwolman Allison Prang @AllisonPrang   Follow us

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