Climate activists with Stop the Money Pipeline hold a rally in Recent York City to induce corporations to finish their support for the proposed Line 3 pipeline project and stop funding fossil fuels and forest destruction, April 17, 2021.
Erik McGregor | LightRocket | Getty Images
In October, Scott Fitzpatrick, then-treasurer of Missouri, announced his state would pull $500 million out of pension funds managed by BlackRock.
He said he would move Missouri’s money away from the asset manager since it was “prioritizing” environmental, social and governance investing over shareholder returns. Fitzpatrick, a Republican who won election because the state’s auditor in November, used his office as treasurer to focus on BlackRock after years of criticizing Wall Street for a perceived turn toward investing focused on climate and social issues.
As he homed in on BlackRock, Fitzpatrick quietly held a financial stake in an enormous fossil fuel company that would suffer from the broader adoption of different energy. Fitzpatrick and his wife owned a greater than $10,000 stake in Chevron during each of 2022 and 2021, based on his latest financial disclosures filed with the state.
Fitzpatrick is amongst a gaggle of powerful Republican state leaders who’ve waged similar fights against environmentally conscious investing as they held personal investments in, or saw political support from, the fossil fuel industry.
A handful of state financial officers who’ve similarly attacked ESG practices owned stock or bonds in oil, gas or other fossil fuel corporations in recent times, based on the most recent state financial disclosure reports reviewed by CNBC. A number of the state officials have received campaign donations from fossil fuel corporations or their executives.
State leaders face possible conflicts of interest once they have a probability to see financial gains from the fossil fuel industry as they use their offices to defend the sector — or in some cases move their state’s dollars away from clean-energy investments, government ethics experts told CNBC. Because the officials ramp up their criticism of Wall Street investment practices, an absence of state laws requiring regular stock disclosures makes it difficult for the general public to watch what personal stake their representatives could have within the actions they absorb office.
Brandon Alexander, the chief of staff to the Missouri auditor’s office, told CNBC in an emailed statement that Fitzpatrick’s publicly traded securities are either in a trust or qualified retirement accounts which can be managed by a financial advisor.
“Apart from employer sponsored retirement accounts (the whole lot of that are invested in goal date funds over which he has no control), all of Auditor Fitzpatrick’s publicly traded securities, are held in a trust or in qualified retirement accounts that are actively managed by a financial advisor to whom he gives no direction,” Alexander said. “He has never ‘had private briefings tied back to the fossil fuel industry’ nor does he personally direct or execute trades himself. Auditor Fitzpatrick stands by his criticism of the ESG movement, especially because it pertains to the appliance of ESG standards within the management of public funds.”
Unlike members of Congress, state financial officers in lots of cases only should disclose their stock ownership every year. In some states, they would not have to disclose their investments in any respect. In contrast with federal lawmakers, in addition they would not have to file regular records disclosing their recent trades.
Not one of the officials mentioned on this story engaged in illegal conduct. However the indisputable fact that they’ve investments that could possibly be helped by their high-profile campaigns against ESG investing may create trust issues with the people they represent, says ethics experts.
“This can be a problem that now we have elected officials on the federal and state level which can be simply not willing to avoid personal financial conflicts of interest,” Richard Painter, who was the chief White House ethics lawyer within the George W. Bush administration, told CNBC in an interview. “You can have someone own stock in an organization and pursue policy that may gain advantage that company. What’s good for Exxon Mobil’s stock is just not necessarily good for America.”
Painter said that owning such stock is just not illegal for state based leaders. Congressional lawmakers are also allowed to own stock however the 2012 STOCK Act disallows members of Congress to make use of non-public information to realize a profit and prohibits insider trading.
One other government ethics expert also cited an appearance of conflict as a problem for public officials.
“If an official has a financial interest in an organization or an industry, it is affordable to query whether that interest impacts how they approach their government work,” Donald Sherman, a senior vp and chief counsel for watchdog group Residents for Responsibility and Ethics in Washington, told CNBC in an interview.
The fight against ESG investment standards has grow to be a core issue for some Republicans on the federal and state level. Lots of those officials have used their positions to focus on corporations they imagine are too politically energetic or, in some cases, are hurting certain industries, corresponding to fossil fuels.
Within the case of state financial officers, they’ve the ability to shift public assets or pension funds away from certain firms and to other institutions.
Vocal ESG critics have fossil fuel ties
Georgia’s state treasurer, Steve McCoy, was appointed by Republican Gov. Brian Kemp in 2020. He was amongst state financial officers, including Fitzpatrick in Missouri, who last 12 months co-signed a letter to President Joe Biden opposing policies that promote ESG. The Biden administration has promoted environmentally conscious investing, and the president used his first veto on a measure that might have shot down a Labor Department rule that promoted ESG policies.
The letter said the state officials “imagine the White House needs to be spearheading a call to speculate in American energy as an alternative of pursuing ESG initiatives that divide American energy businesses and discourage investment in these reliable energy industries.” The group went on to say that “freedom is the important thing to addressing climate change. The depth and breadth of American innovation is unparalleled globally, including the event of green technologies. Nevertheless, oil, gas, coal, and nuclear are currently probably the most reliable and plentiful baseload power sources for America and far of the remaining of the world.”
McCoy is one among the state financial officers who held an investment in fossil fuels. He had a stake within the industry as recently as 2020 — though changes in disclosure rules mean he has not had to reveal his assets more recently.
McCoy disclosed in 2020 that he owns bonds in fracking company Halliburton and a stake within the U.S. Oil Fund, an ETF that tracks the benchmark price of U.S. crude oil. The disclosure says that these stakes are either “greater than 5 percent of the overall interests in such business or investment, or [have] a net fair market value of greater than $5,000.”
The 2020 disclosure was the last time McCoy filed a document showing his investments. Some states, including Georgia, do not require officials who hold key state positions to file full disclosure forms, and require those leaders to publish only a one-page affidavit, based on Haley Barrett, a spokeswoman for Georgia’s Government Transparency and Campaign Finance Commission.
Two of McCoy’s affidavits filed with the state say virtually nothing about his business dealings and stock holdings. McCoy’s most up-to-date affidavit, from 2022, shows his titles as treasurer and as a member of a wide range of boards, including the state Depository Board.
McCoy also needed to sign a press release to substantiate that he has taken “I actually have taken no official motion as a public officer within the previous calendar 12 months which had a fabric effect on my private, financial or business interests.” That affidavit and a 2021 version of the document doesn’t say whether McCoy currently owns any stocks within the fossil fuel industry.
When asked about what the state ethics commission does to confirm if those signed statements are accurate, Barrett said in an email that “once these documents have been filed with our office and reviewed, there’s a chance to find out if there are any discrepancies within the filings. Investigations could be initiated internally through our office or by a 3rd party criticism.”
McCoy and his office didn’t return requests for comment.
McCoy is removed from the one ESG critic who has a financial or political interest in fossil fuel corporations.
Texas’ state comptroller, Glenn Hegar, argued in letters to money managers last 12 months that he believes firms corresponding to BlackRock, HSBC and UBS are boycotting the energy industry, saying in a press release on the time that he believes “environmental crusaders” have created a “false narrative” that the economy can transition away from fossil fuels. Hegar co-signed an open letter in 2021 with other state financial officers that was addressed to the U.S. banking industry and defended the fossil fuel industry.
“We’ll each take concrete steps inside our respective authority to pick financial institutions that support a free market and are usually not engaged in harmful fossil fuel industry boycotts for our states’ financial services contracts,” the letter reads.
He also co-signed the 2022 letter to Biden from a slate of other state financial officers defending the fossil fuel industry.
Hegar has since escalated his campaign against the institutions. Hegar sent letters to fellow state money managers arguing that they’ve not done enough to chop ties with BlackRock and other firms that he said boycotted the oil and gas industry, Bloomberg reported in February.
Within the lead-up to his anti-ESG push, Hegar owned stock within the oil and gas industry. In 2021, the Texas comptroller and his spouse owned between 100 and 499 shares of Devon Energy and as much as 99 shares of ConocoPhillips, based on his latest financial disclosure.
His financial records from the entire previous years since he became state comptroller in 2015 don’t show any stock in these two corporations or within the fossil fuel industry at large.
Hegar’s political ambitions have also seen a lift from the oil and gas industry — a dominating force in Texas. During his 2022 reelection, Hegar received donations from a variety of PACs and executives from the oil and gas business.
His campaign received $10,000 last 12 months from Ben “Bud” Brigham, the chairman of oil and gas development company Brigham Exploration, based on state campaign finance records. The PACs of Chevron, ConocoPhillips, Devon Energy, Calpine Corp. and Valero Energy were amongst Hegar’s fossil fuel donors during his run for reelection last 12 months, based on state records.
Hegar and his office didn’t return requests for comment.
Jimmy Patronis, Florida’s chief financial officer, has been railing against ESG investment standards since across the time he was reelected to the position in November. Patronis was also among the many co-signers of the 2022 letter to Biden defending the fossil fuel industry.
By December, Patronis announced that the Florida Treasury would start divesting $2 billion of assets managed by BlackRock. In an interview on CNBC’s “Squawk Box” in February, Patronis explained the choice.
“The underside line: I’m seeing dollars are being siphoned off. I’m seeing individuals, like [BlackRock CEO Larry] Fink and others which can be using the state of Florida’s money for a social agenda,” he said.
He added: “I just care about returns. And I’m not seeing that.”
Heading into 2022, he also had a financial interest within the fossil fuel industry.
Patronis owned 100 shares combined of Exxon Mobil and Chevron — the 2 largest gas corporations on this planet — at the tip of 2021, based on his most up-to-date publicly available disclosure.
His personal interest in fossil fuel corporations has grown in recent times. In 2018, he disclosed only about 10 shares of Exxon and didn’t list any Chevron stock.
The document was the primary time since 2018 that Patronis listed investments within the sector.
Frank Collins III, the state’s deputy chief financial officer, told CNBC in a press release that Patronis believes ESG efforts are a part of a campaign to decimate the oil and gas industry. He said Patronis doesn’t personally make trading or investment decisions for the state’s retirement systems.
“The CFO wants great returns for those in Florida’s retirement funds, nothing else. While the ESG movement has been on a campaign to erase America’s oil and gas industry from the map, those industries were making returns for investors,” Collins said.
