Not made in Oklahoma

Volkswagen takes the offramp to Canada, passing the state due to ESG policies

Oklahoma failed to convince German automaker Volkswagen to construct a factory in the state earlier this month.

The Volkswagen group ultimately decided to construct the plant in Ontario, Canada. A spokesperson for the company said Volkswagen ultimately chose the location for its tax incentives, proximity to raw materials, and access to clean energy, according to The Oklahoman. Another factor that influenced the carmaker’s decision was Canada’s strong ESG practices.

ESG (environmental, social, and governance) refers to investment practices that account for non-financial factors as a part of business analysis. For the most part, ESG is mentioned in contexts of sustainability and transparency.

Days after Volkswagen’s decision, Gov. Kevin Stitt, alongside another 18 Republican Governors, released a Joint Governor’s Policy Statement denouncing ESG practices, and President Joe Biden’s March 23 decision to veto Congress’ disapproval of the Department of Labor rule relating to “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholders Rights.”

The rule states retirement plan fiduciaries may account for climate change and other ESG factors in selecting retirement investments and determining shareholder rights. House republicans failed Friday to tally enough votes to override the veto.

The Joint Statement from the nineteen governors said that maximizing shareholder value should be the only motivation for corporations, fiduciaries, and funds, rather than the proliferation of ESG practices, which the statement refers to as “woke ideology.”

“The proliferation of ESG throughout America is a direct threat to the American economy, individual economic freedom, and our way of life, putting investment decisions in the hands of the woke mob to bypass the ballot box and inject political ideology into investment decisions, corporate governance, and the everyday economy,” the statement said.

The coalition of governors pledged to lead state-level efforts to protect taxpayers from ESG influences in state systems, and to protect citizens from ESG influences in the financial sector. “Among other actions, this may include blocking the use of ESG in all investment decisions at the state and local level, ensuring that only financial factors are considered to maximize the return on investment, protecting retirees and taxpayers alike,” the statement said in regards to ESG in state systems.

The statement suggested that, in order to protect the financial sector, states should prevent the consideration of “Social Credit Scores”, something the statement defines as “banking and lending practices aimed to prevent citizens from obtaining financial services like loans, lines of credit, and bank accounts.”

“This may also include stopping financial institutions from discriminating against customers for their religious, political, or social beliefs, such as owning a firearm, securing the border, or increasing our energy independence,” the statement clarifies.

Proponents of ESG practices say that corporate activism is the American Economy’s best chance at offsetting its own detrimental impacts. Harvard Professor of Business Administration George Serafeim wrote in a 2020 edition of the Harvard Business Review that ESG practices have both moral and practical benefits.

“The most fundamental reason to try to raise your company’s ESG performance is that all human beings—in and out of corporate settings— have an obligation to behave in prosocial ways. But apart from the moral case, there are very real payoffs for focusing on ESG issues. And those extend beyond the benefits companies might enjoy because of productivity increases due to higher employee engagement, or sales increases due to more loyal and satisfied customers.”

Serafeim wrote that an ESG focus can reduce capital costs, boost shareholder satisfaction, and improve and protect a firm’s valuation as more global regulators and governments mandate ESG disclosures.

Governors Stitt, DeSantis, and other signees said Serafeim’s characterization is incorrect, and that ESG practices jeopardize retirement savings for millions of Americans in the pursuit of “far left priorities.”

Oklahoma lawmakers are finding themselves frustrated as state economic success is being increasingly determined by the ability to attract mega-projects. Volkswagen isn’t the first automaker to consider Oklahoma for a new factory. In 2020, electric automaker Tesla considered a site in Tulsa before ultimately deciding to build in Austin.

If the trend continues, and companies continue to adopt ESG practices, Republican politicians like Stitt and DeSantis will have to decide between wooing potential progressive economic partners or doubling down on the status quo of financial reporting. The Joint Statement suggests they will choose the latter.

The emergence of ESG practices and the politicians opposing them signify a burgeoning political frontier: state and federal investments. For better or worse, Democratic state governments are beginning to favor investments that promote ESG practices, and Republican state governments are directing asset managers to avoid investments in corporations that promote ESG practices and sustainability. The next decade will almost assuredly see a rapid increase in the politicization of state and federal government trusts, deposits, and funds.

Bill restricts physical punishment in schools

Continued from Pg. 1 punishment to be used. The United States is one of only three developed countries that still allows corporal punishment in schools, while the practice is entirely banned in 128 countries.

“Through most of my school career they had corporal punishment,” Evan said. “Every year, until you turned 18, they would send a piece of paper home with you for your parents to sign: to either give them or to deny them permission to spank you with a paddle. My parents signed the paper giving the school permission to smack me every year until I turned 18. They always threatened to smack you, but I’d only ever heard it done for something maybe two times.”

The U.S. Supreme Court has always ruled that corporal punishment in schools is constitutional. In the 1977 ruling for Ingraham v. Wright, the court acknowledged the historical tradition of corporal punishment in U.S. schools, as well as the common-law principle that the action is permissible as long as it’s “reasonable but not excessive.”

If HB 1028 becomes law, it will be enacted on Nov. 1.