Inside John Schroder's 'crusade' against ESG
In October, Tucker Carlson, whose Fox News show is a coveted appearance for Republican politicians, had an unlikely guest: Louisiana Treasurer John Schroder.
Treasurers handle the ministerial duty of investing state trust funds and other pots of money — pools of investments that support education and health care, among other programs. It’s an elected post, but not necessarily a highly political one. State treasurers rarely make national news.
But Schroder had recently announced he was pulling $800 million out of investment funds by BlackRock, the financial giant, over the firm’s environment, social and governance policies. Schroder argued the ESG policies were an attack on oil and gas states.
BlackRock was “using our own money to battle against states like ours who are in the fossil fuel industry,” Schroder told Carlson in his three-minute spot. Carlson, who called ESG a “destructive force,” gave Schroder kudos.
“Good for you,” Carlson said. “You should be proud of acting in the interests of your own voters, and clearly you are. And I appreciate that.”
Schroder’s Fox News turn was a chance to showcase his conservative bona fides ahead of a potential gubernatorial bid that could draw several Republican heavy hitters, in addition to Attorney General Jeff Landry, who is already running.
Public documents show that it was also the culmination of Schroder’s growing relationship with several national conservative groups that have championed the push against ESG investing policies — some of whom hope to gain investments in their own specially designed funds.
According to investment documents, the $561 million in proceeds generated by Schroder’s sale of BlackRock investments so far was rolled into money market funds, some of which are managed by JP Morgan Chase. Ironically, this time last year, JP Morgan was getting the BlackRock treatment. The venerable investment bank was blocked by Schroder and other Louisiana Republicans from managing the state’s municipal bond sales because of its policies around working with gun manufacturers.
A ‘crusade’ against ESG
Definitions of ESG vary, but it broadly centers around investing that takes sustainability and climate risks into account. Bloomberg estimates ESG assets will top $41 trillion by the end of the year.
In an interview, Schroder, a longtime former state representative from Covington who has described his efforts as a “crusade” against ESG, said his push represented a stand for Louisiana’s economy, and wasn’t calibrated for political gain. He said he wasn’t “against the environment” either.
Instead, he said massive corporations like BlackRock are trying to “force our behavior based on their politics.”
“Those who live in Louisiana are abundantly aware of the environmental issues our state faces,” Schroder said in an email. “I am for allowing the energy and oil and gas sectors to lead the energy transformation. They don’t need financial firms to tell them what to do. Let them lead the way.”
At the center of Schroder’s effort is an obscure conservative group based in a Kansas City suburb called the State Financial Officers Foundation. Emails obtained through a public records request show the group has coordinated dozens of letters, media hits and events that Schroder has participated in. When Schroder announced his decision to divest from BlackRock, his staff delivered the story exclusively to Fox, and contemplated offering up SFOF director Derek Kreifels as a “third party validator” of the move. Schroder credited the group in his interview with Carlson.
The conservative ecosystem Schroder has enmeshed himself in also includes the Heritage Foundation and the American Legislative Exchange Council. ALEC’s model legislation around ESG, which would prohibit some environmental, social and governance factors to be considered in state pension investments, appears likely to be introduced in Louisiana’s statehouse next year.
National group gets involved
As Schroder considers whether to join a field of big names running for governor in 2023, he has become chair of SFOF, traveling to several events the organization has put on and getting him exposure in conservative media.
Schroder also played a key role in putting together the group’s meeting in New Orleans earlier this year, where Gayle Benson and Willie Robertson, of “Duck Dynasty” fame and a conservative favorite, were slated to speak.
Benson’s remarks were “apolitical” and unrelated to finance or ESJ, said spokesperson Greg Bensel. She spoke at the request of Schroder’s office, and did so because “she supports welcoming groups to New Orleans.”
In March, Schroder got a proposed letter from Gifford Briggs, the head of the Louisiana Oil and Gas Association, to President Joe Biden about energy policy. Schroder sent it to SFOF, and asked the group to incorporate it into their own letter on the topic. Schroder then signed onto that letter.
In April, Schroder boasted in an email to West Virginia Treasurer Riley Moore, a fellow SFOF member, that he “blocked Citi, BOA & JPMC from almost a billion in bonding business and refunding…WE have moved over 600 million out of BlackRock accounts.”
The reference was to the state Bond Commission, which Schroder chairs, voting to block CitiBank, Bank of America and JP Morgan Chase from state financing deals because of objections to their gun policies.
“That’s excellent, John!!! Great work!!!” Moore responded.
In May, Kreifels emailed the treasurers in the group, thanking several of them for signing onto a letter commenting on a proposed U.S. Department of Labor rule. Schroder responded, “put me in coach!!”
BlackRock faces pressure
Schroder’s war on ESG has largely centered around climate change considerations that huge fund managers like BlackRock are factoring into investment decisions.
But emails and Schroder’s letter suggest his office realizes that BlackRock's stance on companies’ ESG policies isn’t quite a war on fossil fuels. Schroder’s letter noted: “as your representatives said during our recent meeting … BlackRock currently invests in oil and gas companies.” But he added that the firm’s “public messaging” on the topic has made clear they are a “champion for ESG investing.”
In an email early this year, Schroder’s top investment advisor, John Broussard, also noted that BlackRock continued to invest in fossil-fuel companies despite news reports about its commitment to ESG policies. Broussard told Schroder that he has “learned to distrust a lot of so called news venues” and cited a letter from BlackRock CEO Larry Fink that rejected the idea of divesting from entire sectors like oil and gas.
In an interview, Broussard said he realizes BlackRock is a huge owner of oil and gas stocks, but he took issue with the way they vote their shares, citing their support for an activist investor in Exxon.
Public records show Schroder’s office has moved a portion of the BlackRock money into JP Morgan Chase – the firm that Schroder and other Republican officials voted to bar from a bond refinancing deal because of what they saw as the firm’s anti-gun policies.
Asked why he’s okay with investing with JP Morgan now, Schroder said his office never set a policy to never do business with JP Morgan. Broussard said his office parks the money in whichever money market fund has the best rate, and that it varies wildly from day to day.
Even the definition of ESG is contentious, said Ann Lipton, a Tulane Law professor who studies corporate governance. It can be construed as a moral view of investing, or a way of analyzing financial risk as the planet warms.
Lipton said fund managers would be foolish not to take climate change into account when investing. For instance, some fuels, like coal, are being “regulated out of existence,” making long-term investments in them risky if not foolhardy.
“It’s almost overtly irrational to not look at what we’re seeing in the world and say there aren’t really extreme financial implications from climate change,” Lipton said. “We live in New Orleans.”
Lipton said BlackRock and other big financial institutions realize they’re facing danger from political pressure. One concern among the anti-ESG crowd is that BlackRock is using its large stake in companies to side with climate activists on board decisions.
Trump pick emerges
The rise of anti-ESG sentiment, meanwhile, represents opportunity for some money managers.
This summer, Schroder got a pitch from Andy Puzder, an unsuccessful Trump nominee for Labor secretary who has rebranded himself as a crusader against “woke” investing. ALEC is pushing model legislation he helped create in statehouses across the U.S.
In an email to Schroder, Puzder praised the treasurer’s statements slamming ESG, and asked the Republican to consider investing with Puzder’s own firm, 2ndVote Advisers, which launched its inaugural funds two years ago. Puzder noted that Arizona’s treasurer, Kimberly Yee, had invested public money with 2ndVote.
The company has a ratings system for the political stances of companies, ranking them from 1 (liberal) to 5 (conservative). Their marketing materials tout investing “in alignment with our investors’ personal values and to maximize their returns.”
The index Puzder is pitching to Schroder invests only in companies that are “neutral” on their political ratings.
Schroder, whose office is still considering the pitch, invited Puzder to Baton Rouge this fall to speak to legislators about ESG. Puzder visited with officials in Baton Rouge in mid-September, a meeting attended by LSU business professor Don Chance, whom Puzder touted as an economist for 2ndVote. Chance didn’t respond to multiple requests for comment.
Puzder said in an interview that he joined 2ndVote, which was founded by former U.S. Rep. Diane Black, R-Tennessee, and her husband David Black, because he believes ESG policies are an “unfair tax on working people” and said there should be a “traditional focus on investors’ returns,” especially with pension funds. Puzder is the executive chairman of the group.
Steven Procopio, head of the nonpartisan think tank Public Affairs Research Group, noted ESG funds are relatively young, in investment terms. It’s difficult to say whether they will perform more poorly over the long term, as critics claim.
“The honest answer is, we don’t know,” he said. “These are not things that have been around for 20 years.”