Romney would want info on future outlook of any company he might buy. So why is he objecting to ESG? George Pyle asks

Bond rating agency has every right to figure all factors into their ratings, despite what Marlo Oaks and Utah Republicans say.

Republicans are supposedly the party of business, of the free market and the right to take calculated risks and reap earned rewards.

You’d never know that from the newest bogeyman that Utah Republicans want us to be afraid of so they can continue to dodge responsibility for any real work.

In a long, harsh and heavily footnoted letter to one of the world’s largest debt rating agencies - S&P Global - a Who’s Who of Utah elected officials have taken sharp exception to something called ESG.

That stands for environmental, social and governance, factors used by credit rating firms and big-time investors to assess the risk attached to corporate and government bonds.

(It is also apparently part of a pattern where Republican culture warriors frighten us with three-letter threats. First CRT, or critical race theory. Now ESG.)

Rolled in with the rest of a bond rating, it is not that different from the kind of credit rating an individual has, an educated guess on how likely a borrower is to repay debts, on time and in full. A better rating makes it easier to borrow money -- for a car or a house or a power generating station or an Interstate highway -- on the most favorable terms.

It’s complicated and, at the high-finance level, unavoidably subjective. But investors in corporate or government debt might reasonably want to know all they can about the issuer of that debt. Not only how it is doing now but also how its prospects might be affected by environmental changes (drought, extreme weather, air quality), social dynamics (population growth, educational attainment, disposable income) or governance (internal management and the impact of government regulations). That includes both the effects the company or government has on the world and the impact the world has on the issuer of the debt.

Utah’s public officials, most visibly State Treasurer Marlo Oaks, have jumped on the anti-ESG bandwagon, ridiculously claiming that it is some kind of left-wing plot to steer the financial world away from certain kinds of investments for political rather than financial reasons.

In a May 8 commentary published in the Wall Street Journal, Oaks dismisses ESG considerations as “ideological.” He objects to how they measure state and corporate finance prospects against regulatory and market pressures toward such things as demand for net-zero carbon emissions.

What Oaks fails to note is if that is the way the market - pushed by government - is moving, it would be financial malpractice for S&P not to figure that into its ratings.

The April 21 letter to S&P Global is signed by Oaks, Gov. Spencer Cox, Lt. Gov. Deidre Henderson, Attorney General Sean Reyes, State Auditor John Dougall, Utah’s entire congressional delegation, Senate President Stuart Adams and House Speaker Brad Wilson.

“We categorically object to any ESG ratings...” our elected worthies wrote, “and demand that S&P withdraw those credit indicators and cease to publish any ESG factors, ratings, indicators, or other scoring system related to or referencing Utah.”

On the surface, Utah’s complaint about bond ratings is sort of like Scarlett Johansson objecting to being judged on her looks. She’s more than that, of course, but in the movie business, it matters a ton.

Ever since the state was first rated, in 1965, Utah has had an AAA rating from S&P, the highest there is. The company notes future hazards to Utah’s fiscal health, such as long-term drought, but also gives the state credit for taking steps to face that problem, along with general good management. If anything, S&P might not be sufficiently skeptical of the boondoggle Lake Powell pipeline, and might see only the upside of the state’s rapid population growth.

In its reply to state leaders, S&P noted that it was improper for an entity whose credit is being rated to tell the company how to do its job. Kind of like you telling TransUnion that it isn’t fair for them to point out that you haven’t had a paycheck in 18 months.

Clearly, banks and institutional investors have a perfect right, if not a clear fiduciary duty, to worry about whether Utah’s ability to pay its debts might be affected by, say, the disappearance of the Great Salt Lake, the trickle once known as the Colorado River, the increasing number and intensity of wild fires hereabouts.

S&P ratings do not carry the force of law. Any investor can look at the data and narrative (much of it is free online) and they can take or leave it if they please.

Objecting to this practice makes about as much sense as the blowback the Cracker Barrel restaurant chain is getting from people who are bothered by the menu now offering meatless sausage, even though the meaty kind is still on offer and people don’t have to eat the substitute if they don’t want to.

It is hard to imagine that Bain Capital boss Mitt Romney would argue that he should be denied information on the status and likely future of any company he might want to buy. But that’s exactly what Utah Sen. Mitt Romney, in signing Oaks’ letter, is saying.

George Pyle, reading The New York Times at The Rose Establishment.

George Pyle, opinion editor of The Salt Lake Tribune, would like his work to be rated on the number of obscure pop culture references he works in.


Twitter, @debatestate