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Kentucky Republicans accept money from sustainable investors, but pass anti-ESG legislation

Solar panels on top of on Mall St. Matthews in Louisville.
Ryan Van Velzer
More than 1,400 solar panels are on the on Mall St. Matthews in Louisville.

Kentucky Republicans have spent the last two years pushing back against corporate environmental, social and governance goals while accepting funds from pro-ESG companies to renovate and expand the party’s headquarters.

The Republican Party of Kentucky Building Fund has accepted nearly $1.85 million in contributions since October from companies that embrace sustainable investment practices.

Corporations including Pfizer, Microsoft, Delta Airlines and Comcast have environmental, social and corporate governance goals, according to their websites. Each donated from $50,000 to $1 million dollars to the Kentucky GOP party building fund, which is allowed to accept unlimited contributions after a law approved by the GOP-led legislature in 2017.

In total, nearly 78% of the contributions received since last October came from companies with ESG policies, according to a Louisville Public Media analysis. Many of the country’s largest financial companies and corporations have begun using ESG standards as another means to evaluate financial performance.

Though ESG is a broad term, ESG policies include investment practices that account for risks or opportunities that aren't recognized in traditional financial models. For example, companies that make investment decisions based on climate change’s forecasted impacts.

While these standards are sometimes considered non-financial indicators, they help investors better understand companies’ bottom lines by examining their impact on the environment, people and power structures.

These principles, also known as socially responsible investing, have become a flashpoint in politics over the last couple years with Republicans in Kentucky and across the country decrying them as “woke” politics that go beyond the financial decisions companies should be making in the interest of investors.

Republican Attorney General Daniel Cameron claimed “victory” last year when the asset management firm Vanguard withdrew support from a group pledging to reach net-zero carbon emissions.

Kentucky’s GOP-led Legislature passed a bill last year blacklisting investment firms that are choosing to boycott fossil fuels. State Treasurer Allison Ball has since compiled a list of 11 financial companies that she says must end their boycotts or face divestment.

This year every single Republican lawmaker except Rep. Kim Banta of Ft. Mitchell voted for House Bill 236, which prohibits fiduciaries looking after state retirement systems from considering environmental, social, political and ideological interests.

In a committee hearing, bill sponsor Rep. Scott Sharp of Ashland said he brought the legislation forward to ensure fiduciaries responsible for the state’s retirement systems are not making decisions using ESG principles.

“A lot of these big investing companies that manage large amounts of money are using this,” Sharp said. “When you think about ‘ESG,’ think socialism, because that’s what it basically comes down to.”

Sharp did not return a request for comment on this story and neither did five other co-sponsors of the bill.

Rep. Steve Rawlings, a Republican from Burlington and co-sponsor of the bill, told LPM News that he does not see a contradiction between accepting political contributions from companies with pro-ESG policies and banning state fiduciaries from using the practices themselves.

“Well I don’t think it correlates directly because if you think about it no political party that I know of, Republican or Democrat, would return funds to a Fortune 50, a Fortune 500 company like AT&T, Delta, Microsoft,” Rawlings said.

Unlike some other elected Republicans in Kentucky, Rawlings says he believes ESG can be an important policy, especially when it comes to things like investments in alternative energy. But Rawlings said he’s heard that financial companies have seen poor returns on ESG investments and doesn’t want the same thing to happen to Kentuckians.

“Investment in these kinds of industries, I think it’s 20 years in the future,” he said. “I think it’s way too early when you have sound investments in oil and gas right now in traditional industries and traditional sources.”

Researchers at New York University looked at 1,000 different studies on the subject and found 58% of corporate studies focused on operational metrics saw a positive relationship between ESG policies and financial performance, 13% showing neutral impact, 21% showing mixed results and 8% showing a negative relationship.

They also found ESG investments provide protection during social and economic crises, and that sustainability initiatives at corporations drive better financial performance through innovation and improved risk management.

Another recent study from the global consulting firm Bain and Company found that ESG activities have no strong negative correlations with financial outcomes while benefiting the planet and society.

“Our findings indicate that positive ESG outcomes are a trait of successful companies and that sustainability measures correlate with better financial performance,” according to the report.

Donations to the Republican Party of Kentucky Building Fund

Unlike contributions to candidates, corporations can contribute unlimited amounts of money to state building funds for both Republicans and Democrats.

Between Oct. 24 of last year and March 20, 2023, the Republican Party of Kentucky Building Fund received a dozen contributions totaling more than $2.3 million.

Nine of the 12 contributions came from companies that have ESG policies listed on their websites totaling $1.85 million.

One of the other contributions came from an individual and the other included $500,000 from Nwo Resources Inc., a company for which LPM could not find information about its ESG policies. A spokesperson for the Cincinnati Insurance Company said its $22,041 contribution to the fund was paid to satisfy an insurance claim.

Companies with ESG policies that contributed to the building fund include AT&T, Microsoft, Pfizer,Altria Client Services LLC, Delta Airlines, Metropolitan Life Insurance Co. and Comcast Corporation.

The companies did not return a request for comment.

In a statement, the Republican Party of Kentucky did not directly speak to why they accepted funds from companies with pro-ESG policies while supporting anti-ESG legislation.

Instead, a spokesperson pointed to a recent Wall Street Journal poll that shows a majority of Americans don’t believe corporations should take stands on corporate and political issues.

“We solidly stand behind our Republican officials and the legislation they pass, especially when it comes to pushing back against ESG practices,” said Sean Southard, spokesperson for the Republican Party of Kentucky.

Ryan Van Velzer is the Kentucky Public Radio Managing Editor. Email Ryan at rvanvelzer@lpm.org.

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