Q&A of the Day – Anti-ESG Banks
Each day I feature a listener question sent by one of these methods.
Email: brianmudd@iheartmedia.com
Social: @brianmuddradio
iHeartRadio: Use the Talkback feature – the microphone button on our station’s page in the iHeart app.
Today’s Entry: Hi Brian, I just found your email address in an article when looking for information on banks that don’t use ESG standards, but I didn’t find a list of those banks. This is something I haven’t paid enough attention to until now but I’m trying to do better.
I’ve been happy with my Discover cash back credit card for years because they’ve always been good about catching fraudulent charges and texting me immediately after I use the card. However, I just found out, from a Blaze Media article, that Discover is being acquired by Capital One and, after reading the article, I realized that Discover is already “on the ESG bandwagon”. Do you have a list of banks, credit unions, and especially credit card companies, that are not ESG compliant? I live in a small rural town in Pennsylvania so my bank choices are limited but if I can find a different credit card company, that would be great.
Bottom Line: This is a topic I’ve covered multiple times in recent years as it’s an issue that’s rapidly evolved over that time as well. Today’s note comes on the heels of a significant development in the ESG era. It’s something that I highlighted in yesterday’s Top 3 Takeaways. The two biggest banks have reversed course on their ESG initiatives. JPMorgan Chase and BlackRock have dropped out of the UN’s climate alliance known as the Climate Action 100+ in addition to State Street Financial. These three major banks leaving the UN’s ESG initiative is a huge development in what’s been growing backlash in this country against ESG standards and often the global interests, a la the World Economic Forum and the United Nations, that perpetuate them.
Led by Florida, eleven states passed anti-ESG laws last year that mandate state investment decisions are to be made without consideration for social, political and ideological interests. The growing anti-ESG sentiment was also reflected in Gallup polling last year which showed that while many Americans aren’t very informed about what ESG is, or what it represents in business, among those who are most are opposed to it when making investment decisions (48% to 41%). Following the announcement of the corporate defectors from the UN’s climate program, Florida Agriculture Commissioner Wilton Simpson issued this statement: I was proud to stand with 11 other state agriculture commissioners demanding accountability from America’s largest banks over their commitments to left-wing, anti-agriculture, ESG-driven, and anti-consumer climate policies from the United Nation’s Net-Zero Banking Alliance. If these banks had their way, they would unilaterally force America’s farmers and ranchers — through the threat of withholding capital and financing — to adopt ‘green’ infrastructure, technology, and equipment. We will not stand idly by and allow unelected individuals and woke institutions to make unchecked decisions that would intentionally cripple American agriculture and threaten our food security and national security.
However, in attempting to address today’s question...the answer is that the issue of attempting to infer whether banks are engaged in ESG practices isn’t an easy one. For example, in leaving the UN’s Climate program JPMorgan Chase offered this statement: The firm has built a team of 40 dedicated sustainable investing professionals, including investment stewardship specialists who also leverage one of the largest buy side research teams in the industry. Given these strengths and the evolution of its own stewardship capabilities, JPMAM (JP Morgan Asset Management) has determined that it will no longer participate in Climate Action 100+ engagements. So, what does that mean exactly? It’s hard to know. It could mean that they intend to continue with ESG practices based on the team that they’ve assembled rather than taking orders from the United Nations. And that’s part of the broader point about banks and businesses generally when it comes to ESG practices. It’s often subjective. As I mentioned just over a year ago when covering this topic: A KPMG study found 68% of all banks had incorporated ESG criteria into their policies including lending standards. How many Americans do you think realize they’ve potentially received loans, or have been rejected for them and/or have had the terms dictated based upon ESG criteria? But it’s been happening with over two-thirds of them most recently. So... which banks are the most likely to be part of the 32% holding out? Smaller banks. Regional and local banks. And it was on that note that following the passage of Florida’s law I was able to offer a list of banks for the first time that don’t adhere to ESG criteria. All banks and credit unions chartered within the state of Florida are bound by the state’s law. The same is also likely true of state-chartered banks and credit unions in the other ten states with similar laws which are Alabama, Arkansas, Indiana, Kansas, Missouri, Montana, North Carolina, New Hampshire, Texas and Utah.
As it applies to today’s question and the desire to find a credit card company that perhaps better reflects your values, that’s further complicated due to a credit card processing company that sits behind the bank sponsored credit card. In other words, it’s possible that a bank sponsor of a card wouldn’t use ESG considerations but that the processing company behind the card would. Given that there’s so much subjectivity in addressing this topic, I’ve developed a vetting process for the extent to which major companies are involved in prioritizing ESG standards within their operations.
A cottage industry of anti-ESG investment firms has emerged. Of those, Strive Asset Management, co-founded by Vivek Ramaswamy, has become the best performing of the bunch. As Strive notes: Fiduciaries, legally obligated to focus solely on financial returns, are incorporating non-pecuniary factors under the guise of considering environmental, social, and governance (ESG) risk factors. We do not intend to let the economy continue down this path. We aim to increase long-run capital market realized returns and assumptions by restoring free market capitalism by leading companies to focus on excellence.
Given the firm’s mission and focus I feel they offer insight into which major companies haven’t entirely sold out to ESG considerations. On that note here are major financial banks that Strive invests in via their ETF’S:
- Bank of America
- Blackrock
- Citigroup
- Citizens Financial
- Fifth Third Bancorp
- First Citizens
- M&T Bank
- JPMorgan Chase
- Wells Fargo
And these are credit card processors they’re invested in:
- American Express
- Capital One
- Mastercard
- Visa
There are names on this list that might surprise some as they’ve been associated with using ESG criteria previously. Specific to today’s note, you’d mentioned you were concerned about Captial One’s merger with Discover. You’ll notice that Discover isn’t on Strive's current list of investments, but Capitol One is. Perhaps that merger may resolve the concerns for you.