TD Cowen Managing Director talks ESG investing amid political backlash, climate change

TD Cowen Managing Director John Miller joins Yahoo Finance Live to discuss increased scrutiny surrounding ESG investing, how politics are impacting ESG, climate change, and the outlook for investors.

Video Transcript

[AUDIO LOGO]

- Investments aiming to improve environmental, social, and governance outcomes, also known as ESG, continue to face increased scrutiny, largely Republican states fueling the anti-ESG movement in the United States. Now, since the start of 2023, 26 states have proposed new ESG-investing-related bills, many proposing multiple forms to restrict ESG investing with state assets. That's according to a Morgan Lewis study analysis.

Now, Florida Governor Ron DeSantis has been among the most vocal critics. In December of 2022, Florida announced it was taking $2 billion out of the management of BlackRock, marking one of the largest anti-ESG divestments thus far. Though despite the backlash, with some critics accusing companies of practicing what they call woke capitalism, TD Cowen believes ESG investing continues to move towards the mainstream. In a new report, TD Cowen Washington Research Group provides a roadmap with key themes and policy areas that will be the most material to ESG investing and the best ideas by sector.

Joining us now to discuss is John Miller, TD Cowen managing director. Good to have you on the show here. And we mentioned politics, which is one of these themes that you said is really going to be dominating the space here. Walk us through the other themes as well and how much they're going to be impacting ESG investing.

JOHN MILLER: Sure, absolutely. So it's really interesting how much politics has come into the play within ESG. At TD Cowen, we see ESG as a process, not a product, as an investment framework.

And one part of the report today really highlights four main themes we expect to see for the rest of the year through 2023 and into 2024. And so the first is, yes, this is clearly politicized in the US. And that's something asset managers and lending institutions just have to deal with. You can't fight that. You have to deal with that as a problem going forward.

Some other interesting themes in this space are just disclosure, mandatory disclosure and reporting, that's coming. No matter how much individuals can kick and scream about what the SEC is proposing around climate risk, maybe human capital management later than that, even in the United States doesn't move, the rest of the world is. And there will be a default towards a global standard likely coming out of Europe. So mandatory disclosure is coming.