A watchdog is calling on the Biden administration to investigate whether donations to an organization representing Republican state financial officers have violated the Securities and Exchange Commission’s landmark pay-to-play rule.
The State Financial Officers Foundation (SFOF) — whose members include GOP state treasurers, auditors, and controllers — has led a public crusade against environmental, social, and governance (ESG) investing, or the idea that firms should consider environmental and social considerations or companies’ governance structure when they make investments.
It’s part of a broader campaign against so-called “woke” investments, and is essentially a demand that companies focus their attention purely on short-term profits at the expense of workers, the public, and the future of the planet.
The asset management firm BlackRock has been a central target of this anti-ESG campaign, in part due to its size: Because the firm has trillions of dollars in assets under management, in theory, it has the power to substantially influence corporate behavior. Conservatives don’t want BlackRock pressing companies to be better stewards of the earth — even if that is in everyone’s long-term interest, financially and otherwise.
Campaign for Accountability, a progressive watchdog group, is calling foul over several red states’ decisions to prohibit BlackRock from managing state pension money over supposed concerns about ESG. The group writes in a letter to financial regulators that, despite their boycott of BlackRock, the states continued working with some money managers that have donated to SFOF and offer ESG funds.
“It does not appear that these firms, while sponsoring SFOF, were barred from managing state funds,” the Campaign for Accountability writes in the letter. Now, the watchdog is asking the Securities and Exchange Commission to launch an investigation.
Noah Wall, an executive vice president at SFOF, denies the group’s members have gone easy on its own donors. “The State Financial Officers Foundation does not dictate any decisions made by state officials,” he tells Rolling Stone, adding that the letter’s “premise is factually inaccurate.”
“That said, we are proud of the work being done to protect Americans across the many states represented by our membership,” Wall continues. “From blacklisting banks like Wells Fargo to divesting from asset management firms like BlackRock, financial officers are leading the way in holding companies accountable for putting politics over their customers. Because of their work, most Americans now regard ESG as nothing more than a vehicle to drive a political agenda through economic coercion at the expense of hard-working Americans.”
As The New York Times has reported, conservative groups and fossil fuel lobbyists have worked hand-in-hand with SFOF to challenge climate-related actions. Documents obtained by the Center for Media and Democracy show SFOF holding events and panels at ritzy hotels all over the country, attended by right-wing state treasurers and auditors as well as executives from conservative think tanks, financial firms, and lobbying and consulting firms.
SFOF previously disclosed its financial supporters online, but stopped doing so several years ago. In 2022, the organization said its sponsors included Federated Hermes, Fidelity Investments, Invesco, JPMorgan Chase, and Wells Fargo.
The Campaign for Accountability letter says that, in 2017, South Carolina Treasurer Curtis Loftis (R) “began divesting state portfolios from BlackRock because of BlackRock’s position regarding ESG,” before replacing the firm with another company with ESG interests.
“Fully divested in 2022, Loftis chose Federated Hermes to manage the state’s fund,” the watchdog group writes. “Given Loftis’ stated reason for dropping BlackRock … Loftis’ choice of Federated was surprising given that Federated, like BlackRock, offers ESG funds and has touted its efforts in that regard. A notable difference: unlike BlackRock, Federated was a top donor to SFOF, where Loftis is a member.”
According to the Financial Times, Federated said in 2022 it was ending its support for SFOF, amid pressure from foreign pension funds.
“It is silly to suggest the Treasurer’s participation in SFOF had any bearing on Federated’s selection as the state’s financial investment advisor,” a Loftis spokesperson tells Rolling Stone. “As per state protocols, the State Treasurer’s Office conducted a rigorous Request for Information for investment advisory and management services in 2017 and vetted several renowned firms, considering their past performance, investment team experience, budgetary impact, and interest in ESG investing.”
The spokesperson adds: “The Treasurer attends several conferences each year; some are presented by the left and some by the right, and each conference has financial sponsors. Sponsoring conferences is not a criterion for doing business with the State Treasurer’s Office. Since 2015, Treasurer Loftis has been a staunch opponent of ESG investing because it is easily manipulated, is anti-capitalist, distorts free markets, and serves the woke agenda of financial elites, not the hard-working people of South Carolina.”
The Campaign for Accountability letter requests that the SEC investigate “to determine whether contributions to SFOF have led to preferential treatment of or influenced state financial officers not to divest from investment firms.”
The SEC’s pay-to-play rule bars campaign donations from financial executives to state officials who control pension investment decisions, and it includes an anti-circumvention provision that additionally prohibits “acts done indirectly, which, if done directly, would violate the rule.”
