Koch Industries and its funding vehicles funnel millions to groups that are decrying “woke capitalism” and attacking the investment giant BlackRock for its leading role in ESG investing. Yet that hasn’t stopped the company’s subsidiaries from partnering with BlackRock to invest in technology startups.
An investigation by the Center for Media and Democracy (CMD) has uncovered $425 million in joint investments made by BlackRock and subsidiaries of Koch Industries. In 2021, Koch’s private equity firm Koch Disruptive Technology joined BlackRock in investing a combined $200 million in Maryland-based cybersecurity startup Dragos. And that same year, Koch Strategic Platforms, another of Koch’s private equity companies, joined with BlackRock to lead an investment of $225 million in KORE, a wireless telecommunications company.
Meanwhile, groups funded or controlled by Koch are attacking on a new front in the Right’s culture wars, vilifying corporations committed to ESG investing and making BlackRock and its CEO Larry Fink their poster child in the manufactured crisis.
Environmental, social, and governance (ESG) investing refers to a set of standards used by socially conscious investors to consider investments in light of their impact on society, social justice, and the environment. In recent years, investment firms are increasingly offering ESG funds to their clients and investing public pension money in funds that consider ESG criteria.
As one of the world’s largest investment firms, BlackRock is also one of the leading investors of public pension funds that publicly prioritizes ESG investing. “Investing with consideration for climate change, diversity, gender and pay equity, the welfare of employees, and the impact of technology on society—broadly lumped together under the ESG banner—has become a big focus of asset managers and companies in recent years, with BlackRock leading the charge,” according to The New York Times.
GOP lawmakers and other state officials have called for BlackRock and other firms that utilize ESG investing principles to be barred from state pension investments and state contracts. Support for this blacklisting comes from the shadows through Koch-funded groups like the American Legislative Exchange Council (ALEC), the Republican Attorneys General Association (RAGA), and The Heritage Foundation, as well as Koch’s astroturf operation Americans for Prosperity (AFP).
ALEC has circulated three model bills targeting ESG investing and hosted speakers at its meetings to amp up the Right’s outrage against it.
The State Government Employee Retirement Protection Act, adopted by ALEC as a model bill last April, would severely restrict the consideration of ESG factors in the management of state, local, and university public pensions.
Two other proposed ALEC bills have sparked internal controversy within the organization. The Energy Discrimination Elimination Act would prevent financial firms that divest from oil, gas, and coal companies from receiving state government contracts or managing state funds, CMD first reported. In December 2021, lobbyists from Charles Koch’s AFP Foundation and Koch Companies Public Sector voted to approve the model bill through ALEC’s Energy, Environment, and Agriculture (EEA) task force, but the full board did not adopt it.
In December 2022, ALEC’s EEA and Commerce task forces voted to approve the even more extreme Eliminate Political Boycotts Act, which would bar companies with 10 or more employees from receiving state contracts if they take into account any “social, political, or ideological interests” to limit their business relations with fossil fuel energy, logging, mining, or agriculture businesses, CMD first exposed. But on Jan. 20, ALEC’s board voted to send the bill back to the EEA task force for further consideration.
With or without ALEC’s final blessing, these bills—or iterations of them—are being pushed through state legislatures with the help of Republican financial officers who are members of the right-wing State Financial Officers Foundation, a group of special interest to Koch’s Stand Together.
ALEC has also joined with AFP, Heritage Action, and more than 100 other right-wing officials and groups to support federal legislation that would prevent the Department of Labor from adopting a rule allowing federal pension fund managers to consider ESG criteria in making investments. AFP’s press release argues that the proposed rule “eviscerates fiduciary obligations in practice and undermines Congressional intent by encouraging retirement fund managers to inject environmental, social, and corporate governance (ESG) goals into their investment decisions rather than making decisions that will protect and grow Americans’ hard-earned retirement savings.”
AFP also “strongly opposes” a proposed Security and Exchange Commission (SEC) rule that would require publicly traded companies to disclose both their carbon emissions and the climate-related risks they face.
Meanwhile, RAGA, which is heavily bankrolled by Koch Industries, has gone all out to block ESG investing—and BlackRock in particular. Last August, 19 of the group’s AGs sent a letter to BlackRock’s CEO accusing the firm of using “the hard-earned money of our states’ citizens to circumvent the best possible return on investment” and “to pressure companies to comply with international agreements such as the Paris Agreement that force the phase-out of fossil fuels, increase energy prices, drive inflation, and weaken the national security of the United States.”
RAGA also opposes the SEC’s proposed climate rule and has formed an ESG Working Group with its policy arm, the Rule of Law Defense Fund (RLDF), that likely coordinates anti-ESG actions taken by individual Republican AGs.
RAGA held an “ESG and State Engagement” panel discussion at its 2022 Fall National Meeting in November, and that same month, RLDF’s president spoke as part of a panel on “Legal Argument for Fiduciary Responsibility” at the SFOF’s national meeting in Washington, D.C.
The Koch-funded Heritage Foundation also partners with SFOF to oppose ESG practices and provides major funding for its work on the issue. At a spring 2022 conference, Heritage gave SFOF a platform to promote its work on three different panels and awarded the group a $100,000 Innovation Prize for being on “the forefront of fighting the left’s push for so-called environmental, social, and governance (ESG) standards.”
Despite Koch’s funding of groups intent on obstructing climate progress, he has simultaneously been making big investments in environmentally conscious companies likely to be part of an ESG investment portfolio, as CMD reported last month.
In late November 2021, Koch Engineered Solutions, another Koch subsidiary, bought DEPCOM, a company involved in all phases of large solar projects, including land purchases, engineering, procurement, construction, and ongoing support. And at the end of 2021, Koch Strategic Platforms made a $150-million investment in GameChange Solar, which designs, manufactures, and installs solar panel racking systems and is among the top producers of energy from solar in the U.S.
Evaluations of ESG investing are mixed, but when researchers from the New York University Stern Center for Sustainable Business and Rockefeller Asset Management analyzed over 1,000 relevant research papers from 2015–20, they found that a majority of the studies indicated ESG investing leads to either neutral or improved financial performance. The meta-analysis points out that “improved financial performance due to ESG becomes more marked” over time.
Koch Industries was founded in 1940 by Charles and David Koch’s father, Fred, and 83 years later has become a major player in the fossil fuel industry that is still running refineries built decades ago. However, the conglomerate invests for the long-term and is increasingly hedging its bets by investing in new technologies and alternative energy.
David Armiak contributed research to this report.