Jordan subpoenas climate group for alleged ‘collusion’ and antitrust violations

Jordan subpoenas climate group for alleged ‘collusion’ and antitrust violations

On Wednesday, Rep. Jim Jordan (R-Ohio), the head of the GOP-controlled House Judiciary Committee, demanded documents from the climate group As You Sow as part of a broader investigation into climate-conscious investing.

Jordan accused the group of an illegal conspiracy in the name of advancing a left-wing political agenda.

“Corporations are collectively adopting and imposing left-wing environmental, social, and governance [ESG]-related goals,” Jordan wrote.

“The Committee is concerned that As You Sow appears to facilitate collusion that may violate U.S. antitrust law.”

In antitrust law, collusion happens when market competitors secretly and illegally work together to fix prices, either by formal agreement, dividing up markets or restricting supply.

The letter marks an escalation of long-running Republican attacks on the ESG movement, a campaign that The Hill has reported likely originated with and was funded by the fossil fuel industry. The movement is an outgrowth of “socially responsible investing” that seeks to account for the costs — to the environment, to the public good and to social justice — traditionally left off of corporate balance sheets.

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One Republican-led bill opposing ESG passed in March but was the subject of President Biden’s first veto. Other legislation in the same vein is unlikely to go anywhere due to Democrats’ control of both the Senate and the White House.

The committee still has the power to probe the ESG movement, however

As You Sow President Danielle Fugere said Wednesday that her organization would “answer reasonable questions.”

But she said “the subpoena is flawed, with demands that are inapplicable to As You Sow, and is so broad as to be virtually unbounded.”

She added that “the antitrust allegations at the heart of the Committee’s argument twists both the facts and the law.”

As You Sow is part of a broad civil society and financial services movement that seeks to help society reach climate goals by engaging with corporations, rather than government.

“Corporations are responsible for most of the pressing social and environmental problems we face today,” the group writes on its website.

“We believe corporations must be a willing part of the solutions. We make this happen.”

By “making this happen,” Jordan argued, As You Sow and other organizations may be committing financial crimes.

On Aug. 1, the Judiciary Committee similarly accused a network of financial groups of “potentially violating U.S. antitrust law” in their attempt to cut corporate fossil fuel emissions.

How? “By entering into agreements to ‘decarbonize’ corporations and reduce emissions to net zero,” Jordan and three other Republican representatives wrote.

The achievement of such emissions reductions would mean “potentially harmful effects on Americans’ freedom and economic well-being,” Jordan added.

As You Sow is one of several organizations that the committee has targeted with subpoenas as part of its probe into the ESG movement.

Jordan also sent subpoenas in August to Institutional Shareholder Services and Glass Lewis, the world’s two largest proxy advisory firms — consultancies that advises shareholders on how to vote on resolutions at shareholder meetings; Engine No. 1, a small hedge fund that led the successful 2021 campaign to replace members of ExxonMobil’s board, who it argued were insufficiently prepared to adapt the company to face the risks of climate change; Arjuna Capital, an investment firm focused on ESG investing; and Trillium Asset Management, an activist investor group that seeks to push companies it invests in towards a lower carbon footprint.

In their August letter to Trillium, House Republicans implied that the company’s unwillingness to invest in fossil fuels was part of a broader strategy they argued would undermine the economy.

Jordan and the committee members criticized Trillium executives for their calls for steep declines in fossil fuel use to reach net-zero emissions by 2050. That benchmark is widely considered by both climate scientists, the U.N. and much of the financial industry to be the minimum viable goal to achieve a safe climate.

Calling that goal itself “draconian” and “radical,” Jordan’s committee charged that following it would “deprive businesses of investments and consumers of choices.”

“The potential consequences for American freedom and economic well-being are far-reaching,” they added.

By working together to push companies to lower their carbon footprints, the Judiciary Committee alleged, Trillium was acting “coercively” on consumers, who were deprived of the option to choose fossil fuel power.

Quoting a 1983 Supreme Court decision, the committee members argued that “any [c]oercive activity that prevents its victims from making free choices between market alternatives is inherently destructive of competitive conditions and may be condemned.”

ESG advocates — a group that includes most of the Democratic Party — argue that the reverse is true: Climate-concerned investors need the information these organizations fight to obtain if they are to have any choice at all.

“ESG, in essence, is a free-market, organic, investor-driven movement, to ask firms to disclose information about the factors associated with their future cash flows or cost of capital,” Columbia University accounting professor Shivaram Rajgopal told the House Oversight Committee in June.

Investors “would be derelict of their fiduciary responsibility if they did not consider the material factors while making an investment decision,” which included climate factors, Rajgopal added.

Fugere of As You Sow argued Wednesday that the House Judiciary Committee was operating under a bold new legal theory: that shareholders requesting or acting on information about a company’s consideration of climate risk was a violation of antitrust law.

Making that argument, she argued, “inappropriately injects the Committee’s judgment into private sector business decisions.”

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