Rising energy prices and pressure from Republican lawmakers are blunting some of the momentum behind the corporate push toward environmental, social, and governance principles, which in general favor investment in green energy over fossil fuels.

Green groups and other ESG backers have made headway in shaping the investment environment in recent years, including since President Joe Biden's inauguration. At the same time, record fuel prices have driven the Biden administration and other governments with green ambitions to encourage more investment in oil and gas, and with red states threatening to cut ties with ESG-focused fund managers, a number of such firms have been more aggressively defending their fossil fuel-related investments and promising more.

BILLIONAIRE MONEY MANAGER LARRY FINK BECOMING TOP CONSERVATIVE ADVERSARY

Financial giant BlackRock, which manages a $10 trillion asset portfolio and has been a face of the corporate ESG push, is one of the firms Republican leaders in Texas and West Virginia have called out by name when justifying efforts to restrict state investments in businesses that sever ties with fossil fuel companies.

In February, as Texas prepared to roll out its new law to that end, BlackRock executives wrote officials and industry leaders in the top energy-producing state to ensure that the firm would "continue to invest in and support fossil fuel companies." The letter also cited holdings in Texas-based oil giants such as ExxonMobil and ConocoPhillips.

Weeks earlier, BlackRock joined a $15.5 billion venture to purchase a stake in a firm that controls Saudi natural gas pipelines.

Chairman and CEO Larry Fink defended the decision, saying in December that “responsibly-managed natural gas infrastructure has a meaningful role to play in this transition,” which is similar to the case many Republicans and industry groups make in favor of natural gas.

Other firms have set out to prove their oil and gas credentials to Texas, including JPMorgan Chase. Stacey Friedman, the firm's executive vice president and general counsel, said JPMorgan Chase offers products and services to fossil fuel ventures and "intend[s] to do so in the future."

The reputational change in fossil fuel investments is visible across Fink's annual letters to CEOs.

In 2020, Fink used his must-read letter to focus on climate change, saying the matter was becoming a “defining factor” in BlackRock’s assessment of companies. After the letter, several corporations announced plans to slash their carbon footprints, showing the sway that Fink has over the financial world.

Fink's 2022 letter similarly acknowledged that "the tectonic shift towards sustainable investing is still accelerating," but it included several clauses not included in the two preceding editions.

Businesses "cannot be the climate police," he said, stressing that government needs to lead the way with regulations and disclosure requirements.

"We need to pass through shades of brown to shades of green," he also said of the pursuit of net-zero greenhouse gas emissions, adding, "To ensure continuity of affordable energy supplies during the transition, traditional fossil fuels like natural gas will play an important role both for power generation and heating in certain regions."

Other power players have also used their bully pulpits to target ESG.

Peter Thiel, the co-founder of PayPal and a prominent venture capitalist, has railed against the movement toward ESG. During a conference on Bitcoin in Miami earlier this year, he defended cryptocurrency and trashed finance leaders such as Warren Buffett, Jamie Dimon, and Larry Fink for their embrace of ESG investing principles.

“The finance gerontocracy that runs the country through whatever silly virtue signaling slash hate-factory term like ESG they have, versus what I would call, what we have to think of as a revolutionary youth movement,” the billionaire said.

Thiel, who has recently pumped millions of dollars into the campaigns of conservative populists such as J.D. Vance in his successful bid for the Republican nomination for a U.S. Senate seat in Ohio, went on to say that he believes companies with ties to Bitcoin are being targeted by ESG firms.

“Perhaps the real enemy is ESG,” Thiel quipped.

Thiel isn’t the only tech billionaire speaking out against the growth of the ESG movement and its place in the financial ecosystem.

Tesla founder Elon Musk, who is attempting to purchase Twitter, has recently been harshly criticizing ESG, going so far as to say he is becoming increasingly convinced that “corporate ESG is the Devil Incarnate.”

Earlier this month, he became incensed when the S&P 500 ESG Index, a catalog of companies that meet certain ESG measures, dropped Tesla (the world’s largest electric vehicle producer) but kept oil giant Exxon Mobil on the list.

“Exxon is rated top ten best in world for environment, social & governance (ESG) by S&P 500, while Tesla didn’t make the list!” Musk tweeted. “ESG is a scam. It has been weaponized by phony social justice warriors.”

S&P Global said there were “many reasons” behind the decision to drop Tesla. It cited accusations of racial discrimination and poor working conditions at a Tesla factory in California and the company’s handling of an investigation into deaths and injuries associated with Tesla self-driving vehicles as factors.

“While Tesla may be playing its part in taking fuel-powered cars off the road, it has fallen behind its peers when examined through a wider ESG lens,” said Margaret Dorn, head of ESG indices in North America at S&P Global.

The pressures against ESG principles are not unique to the U.S. Banks in the United Kingdom, where green energy is flourishing at the direction of the British government but prices have also ballooned over the last six months, have been getting new signals to justify backing fossil fuels.

A new energy strategy drawn up by the Conservative government and put out in April prioritizes carbon-free energy but also provides a place for new oil and gas development.

"The importance of these fuels to the transition and to our energy security, and that producing gas in the UK has a lower carbon footprint than imported from abroad,” the government's announcement said.

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The Biden administration and other governments in Europe insist they're not letting up on green policies and that, in fact, the energy crisis means the shedding of fossil fuels should happen even quicker to avoid price shocks from the volatile oil market.

In the U.S., the Securities and Exchange Commission has pushed ahead with new ESG climate-related disclosure rules, even while the administration has asked Wall Street to help increase production. The commission also on Wednesday put forward two new proposals aimed at tightening the rules surrounding investment funds that prioritize ESG.

"It's a time for oil and gas companies to work with Wall Street to unleash our productive capacity," a senior administration official told reporters on March 8. "Price signals are giving every incentive that producers need to invest in America's energy security, our energy reliability, our energy sustainability."

Environmental groups have been a consistent counterforce, dissuading the Biden administration from encouraging more oil and gas production and lobbying the SEC to go further with its proposed climate disclosure rule.