'Woke Capitalism' in the Arizona Treasurer Campaign

Longtime Hill Heat readers know that state treasurers are crucial actors on climate change. Last Monday night’s televised debate between Arizona Treasurer Kimberly Yee and her opponent, Democratic state senator Martín Quezada, spent almost all of the 30 minutes arguing about climate financial policy. Yee mocked Quezada for purportedly wanting to use the treasurer’s office to “save the planet,” while Quezada defended taking climate risks into account as a sound investment strategy. The contest is likely to be competitive, along with all the other races for statewide office in this swing desert state, from US Senate to governor, attorney general, and secretary of state.

Yee has been one of the most active members of the State Financial Officers Foundation (SFOF), a corporate-sponsored organization of Republican state treasurers that is coordinating aggressive attacks on climate financial action and framing Environmental, Social, and Governance (ESG) investing as “woke capitalism.” In the past year, SFOF has pushed seven states to adopt anti-ESG bills, which are causing financial institutions to retreat from their (largely rhetorical) climate commitments, have proven difficult to implement, and turn out to be very costly. Arizona is actually one of the few states where SFOF’s model legislation has been introduced but successfully stopped, but that hasn’t prevented Yee from ramping up her attacks on climate risk analysis and instituting a policy that proscribes the use of ESG analysis in state investment decisions.

Thus, in his opening statement, Quezada pointed out that “woke capitalism” has become Yee’s “entire platform.”

Anti-Choice Extremism

Quezada also tied Yee’s extremism to other Arizona candidates, saying,

Quezada was referencing Arizona Republicans’ slate of Trump endorsees and 2020 election deniers for statewide office, including GOP Senate nominee Blake Masters, the fascist mentee of Peter Thiel. As the only incumbent running for statewide office on the Republican ticket, Yee has tried to avoid association with the MAGA forces at the top of the ticket. However, it turns out that Thiel is also a driving force behind Yee’s dangerous “woke capitalism” narrative.

Yee’s record against abortion rights is as extreme as any other Arizona candidate. While in the state house in 2012, Yee sponsored a 20-week abortion ban that was later struck down by federal courts. In 2013, a spokesperson for Planned Parenthood condemned the bill as defining pregnancy weeks before conception in a Salon article that cited Yee as one of the five most anti-abortion lawmakers in the US. Yee also sponsored a mandatory ultrasound bill as a state legislator, and cheered the Supreme Court’s Dobbs decision when it was being argued.

Just like Masters, Yee very recently scrubbed her “pro-life” credentials from prominent display on her campaign website, although she continues to link to her June 24 statement celebrating the Dobbs ruling.

Furthermore, the SFOF has also been advised by the consulting firm of Leonard Leo, the architect of Dobbs.

Anti-ESG Hypocrisy

It wasn’t long in the debate before Yee made the ridiculous claim that higher gas prices are the “direct result of ESG policy.” Characterizing the “ESG agenda” as an “attack on the energy sector,” Yee made the bizarre assertion that the Biden administration was instructing financial institutions not to finance the energy sector through U.S. Special Envoy for Climate John Kerry. Yee likely derived this theory from a SFOF-drafted letter that she signed early on in the Biden administration. It’s unclear what relationship Yee is drawing between the global surge in energy prices observed as the economy has recovered from the pandemic and a widely used investment practice that has been around since 2004. But energy analysts have cautioned that anti-ESG measures like Yee’s “will spark upheaval and chaos in energy and finance markets.”

One notable debate point centered around whether Yee’s anti-ESG position is hypocritical, in light of her move last year to withdraw Arizona’s investment in Ben and Jerry’s parent company Unilever over their decision to stop selling ice cream in the Occupied Territories.

When asked if it was “prudent” to allow her moral views to shape state investment strategies, Yee insisted that she was merely implementing state law in making that decision. Later, however, she boasted that she has “increased our investments in Israeli bonds because I support Israel.”

Pressed by the moderator as to whether this was a contradiction of her earlier commitment not to allow her political views to inform investment decisions, Yee backtracked, and insisted that she increased investments in Israeli bonds because they offered high returns. 

Diminishing Returns

Quezada warned that prohibiting Arizona’s treasurer from using ESG analysis would prevent “diversification” and hurt the “safety” of Arizona’s pension funds. Indeed, including ESG factors in risk analysis has proven useful in anticipating bankruptcies, signaling future stock market volatility, and predicting stock market declines. It also puts the state at a disadvantage in comparison with states such as Oregon, whose treasurer recently spoke out against SFOF’s anti-ESG attacks, and with states like Maryland and California that are incorporating climate risk into their investment decisions. Illinois Treasurer Mike Frerichs linked to a thorough list of studies showing that climate risk disclosure and analysis is correlated with stronger financial performance.

The experience of the states where SFOF’s model laws are in place show that Quezada’s warnings are warranted. A study by two economists found that after certain financial institutions were excluded by Texas, “the remaining banks may enjoy increased market power due to barring banks with certain social and environmental policies from the market.”

SFOF’s laws are also driving up the cost of debt servicing. The same study found that Texans paid an estimated $532 million in higher interest rate payments in the law’s first eight months. In September, the Texas law forced a small school district south of Dallas to cancel a bond deal and pursue more costly financing.  

Quezada is also correct to warn about the safety and soundness issues presented by Yee/SFOF’s anti-ESG position. Former Deputy Treasury Secretary Sarah Bloom Raskin recently warned that anti-ESG laws like Texas’ “endanger global financial stability by encouraging risky loans to energy firms.” Last year, the Financial Stability Oversight Council issued a report identifying climate change as an “emerging and increasing threat” to the financial system, and the Federal Reserve, OCC, and FDIC have each since taken actions to develop a climate risk supervision framework.

When SFOF has their fall meeting in DC next month, they will further strategize thwarting climate progress and undermining the Biden administration’s climate financial agenda. Voters heading to the polls over the next month should take note.

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