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'It's Just Noise': CRE Dismisses Rising Anti-ESG Rhetoric Amid Calls For Climate Risk Transparency

Political backlash against environmental, social and governance investing is on the rise amid calls by the Securities and Exchange Commission to mandate climate reporting, with several prominent Republican leaders pushing back on what they call a new front in the "woke agenda."


A proposal released by the SEC in March would require publicly held companies to report climate-related risks, emissions and net-zero transition plans. If finalized, the move would increase transparency and provide an apples-to-apples comparison for investors making decisions based on a company’s environmental, social and governance performance, SEC Chair Gary Gensler said in a statement.

“ESG encompasses a wide variety of investments and strategies,” he said. “I think investors should be able to drill down to see what’s under the hood of these strategies.”

But the SEC proposal comes as a slew of right-wing politicians and other high-profile figures take aim at ESG, tying the investing strategy to the nation's broader culture wars.

Commercial real estate, an industry that has led ESG efforts as one of the largest contributors to global carbon emissions, has largely shrugged off the rhetoric so far. That rhetoric has ratcheted up in recent weeks, with some opponents going so far as to penalize companies that promote environmental or social action.

Florida Gov. Ron DeSantis announced in late July he plans to introduce a bill that would prohibit Florida State Board of Administration fund managers from considering ESG factors in their investment decisions on behalf of the state. That same week, he implemented a similar limitation on the state’s pension system.

“The leveraging of corporate power to impose an ideological agenda on society represents an alarming trend,” DeSantis said in a statement. “From Wall Street banks to massive asset managers and big tech companies, we have seen the corporate elite use their economic power to impose policies on the country that they could not achieve at the ballot box.”

A few days later, in early August, Missouri Attorney General Eric Schmitt launched an investigation into whether financial services firm Morningstar Inc. violated a state consumer protection law through its evaluation of ESG issues. Around the same time, billionaire business magnate Elon Musk labeled ESG "a scam”  and “the Devil Incarnate," and former Vice President Mike Pence accused large investment firms like BlackRock Inc. of pushing a “radical ESG agenda.”

Neither DeSantis nor Schmitt responded to Bisnow’s requests for comment. 

Florida Gov. Ron DeSantis is a leader of the anti-ESG movement.

The anti-ESG movement is gaining traction in right-wing media and through the creation of so-called anti-ESG funds, like Strive Asset Management's U.S. Energy ETF, or exchange-traded fund, and the God Bless America ETF, which told the SEC it intends to screen out companies espousing "political activism and social agendas at the expense of maximizing shareholder returns."

Proponents of corporate sustainability in commercial real estate, however, dismiss claims ESG injects politics into corporate decision-making, citing the number of companies that measure, collect and report this information voluntarily. The 100 largest REITs by equity market cap share their ESG efforts publicly, and 78% of those firms reported their carbon emissions in 2021, up from 38% in 2017, according to Nareit.

Most of the ESG reporting in place at Kilroy Realty Corp. is already in line with the SEC proposal, Senior Vice President of Sustainability Sarah King said. These procedures predate the political firestorm engulfing ESG, she said.

“We’ve been doing this for 10-plus years, and that’s through many different political administrations,” she said. “What Kilroy has found is that we’re doing this because it’s the right thing to do and because it’s the right business decision for us.”

Investors are prioritizing sustainability when making capital decisions, so a system that standardizes the reporting process and sets a minimum requirement makes sense, said Partner Energy President and co-founder Tony Liou, whose consultancy focuses on sustainable engineering and real estate strategies.

“Shareholders are asking for this,” he said. “More and more folks are interested in and take climate change seriously. It’s a risk for your business when you’re not addressing these things.” 

Critics who say ESG prioritizes a political agenda at the expense of financial gain are ignoring data that shows emissions control and reduced carbon risk can lower operating costs, increase rents and building values, and improve occupancy and retention, said Marta Schantz, senior vice president of the Urban Land Institute’s Greenprint Center for Building Performance. 

“Sure, we want to slow climate change; we want to save the planet,” she said. “But more specifically, climate affects your bottom line, and savvy, smart real estate leaders know that and incorporate sustainability integrally in the way they run their companies.”

What's more, the U.S. is catching up to what is already moving full steam ahead globally, PwC Advisory Real Estate Partner Katherine Huh said. The rest of the world doesn't view ESG as political, she said, and in most other nations, climate risk regulations have been in place for years.

“I can’t think of one client that is not already thinking about and acting on a lot of the things the regulations are calling for,” she said. “Perhaps this is new and politically charged in the U.S., but it’s not in any other country.” 

Regulatory changes often follow tremendous periods of growth in the United States, and monitoring climate risk is no different, Liou said. What is happening today isn't dissimilar to the child labor laws put in place following the Industrial Revolution, he said.


The difference today is that instead of forcing companies to change the way they do business, the SEC is simply requiring companies to disclose their climate risk.

“This is arguably the more democratic way of doing it,” he said. “Disclose it, and people who care can judge for themselves. The people who value [ESG] can invest in it. If not, so be it.”

Despite widespread support for ESG initiatives, opposition from the vocal minority can hurt the cause, especially if those voices gain more power, Liou said. Pence and DeSantis are both rumored to be running for president in 2024, virtually assuring ESG will be a prominent campaign issue.

“It does make a difference — politics is never harmless,” he said. “How people win nowadays is inflammatory statements.” 

Commercial real estate accounts for 39% of global emissions, which makes transparent ESG reporting especially critical, Huh said. Companies worldwide have made huge steps toward reducing their carbon footprint, and she doesn’t see political backlash reversing that progress anytime soon. 

“It’s just noise,” Huh said of criticism by ESG naysayers. “I would not place a bet that we do not move in this direction no matter what. Some of these opposers may slow down progress, but it’s not going to stop.”

CORRECTION, AUG. 25, 3:12 P.M. CT: A previous version of this article included an incorrect title for Katherine Huh.