How the boom in sustainable investing is influencing the way massive companies react to events like the Capitol riots

  • After the violent riot that stormed the Capitol last week, companies across finance, technology, and other sectors rushed to address the insurrection and, later, how they would review political donations.
  • The moves reflect the rise and influence of sustainable investing, or environmental, social, and corporate governance (ESG) investing strategies.
  • As the responsibility of corporate boards comes under closer watch by ESG-minded analysts and money managers, looking for where reputational and other risks lie, companies don't want to look flat-footed. 
  • It is unknown how long many companies' pauses in political giving will last, or whether they will move the needle at all for lawmakers' long-term power. But one thing is certain: they are speaking up. 
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As violent Trump supporters raged at the Capitol in what became a deadly insurrection last Wednesday afternoon, JPMorgan's public relations team shared a statement from the bank's chief executive, Jamie Dimon, with reporters.

"Our elected leaders have a responsibility to call for an end to the violence, accept the results, and, as our democracy has for hundreds of years, support the peaceful transition of power," he said in a statement, "strongly" condemning the violence in Washington, DC. 

At major companies across sectors, top executives quickly released statements denouncing the riot that pro-Trump rioters planned to coincide with Congress confirming President-elect Joe Biden's win in the US presidential election.

Later, spurred by a Sunday report from the newsletter Popular Information, dozens of firms said they would also review their political donation policies in light of the attack that came after some Republican lawmakers said they would not certify Biden's win. Others made more pointed decisions around their political action committees (PACs).

State Street, which oversees its $3 trillion investment arm State Street Global Advisors, for instance, said Monday that it would "not support lawmakers or candidates who demonstrate views or engage in activities that are intended to undermine legitimate election outcomes." Its PAC would not give to lawmakers who "supported last week's efforts to undermine our democracy."

Together, the reams of statements reflect a powerful undercurrent: the rise and influence of sustainable investing, or environmental, social, and corporate governance (ESG) frameworks as a lens for deciding which companies, causes, and people get your money.

Read more: Walmart, Amazon, and other US corporate giants cut off donations to Republican lawmakers who opposed Biden's certification as president

As corporate boards' affiliations and actions come under closer watch than before by activists, ESG-minded analysts, and money managers, looking for where reputational and other risks lie, companies don't want to look flat-footed.

It is unknown how long many companies' pauses in political giving will last, or whether they will move the needle at all for lawmakers' long-term power. But one thing is certain: they are speaking up.

As financial services firms' corporate earnings reports start coming out this week, Cathy Siefert, a director and analyst with CFRA Research, will be watching to see if and how management addresses the political climate.

It likely will not be "front and center" on calls to discuss results, but a growing focus on ESG means not only investment products but firms' manifold relationships with stakeholders are under close watch, she said by phone.

"We hope that the Capitol riot will bring urgency to the social decisions made and actions taken by all stakeholders — companies, investors, employees, and consumers — while underscoring the need to maintain democratic (lower case) principles within the United States," said Meghan Railey, co-founder and finance chief of Optas Capital, a San Francisco- and Austin-based investment advisory firm that oversees $600 million in assets and has an ESG portfolio.  

"Those companies that are now changing their policies in light of the Capital riot are not necessarily bad actors, but their reactive responses indicate that assessing their societal impact is a lower priority compared to more proactive companies," Railey said in an email to Insider on Tuesday without referring to specific firms. 

ESG criteria, in its many forms, can dictate a company's inclusion in a sustainability-focused index or fund, and exclusion can mean losing out on investors' cash. 

Two years ago, S&P Dow Jones Indices removed Facebook's stock from its S&P 500 ESG Index — which several large exchange-traded funds track — because of privacy concerns, "including a lack of transparency as to why Facebook collects and shares certain user information," S&P said at the time. It was added back in May. 

And ESG strategies have grown: RBC Capital Markets analysts said in a Wednesday report that the global sustainable investments market across asset classes was $31 trillion, citing the latest Global Sustainable Investment Alliance data as of 2018. That was up from $23 trillion at the start of 2016.

Jennifer Tonda, the director of institutional trading at 280 CapMarkets, a fixed-income trading platform with an impact-investing focus, said in an email that more companies than before are issuing social bonds to help address issues like racial and social inequalities.

And with Democrats set to control both the House and Senate under Biden, Tonda, who specializes in green bonds, said she expects companies to issue more corporate bonds to "to finance more environmental and social projects."

Learn more about the financial services industry.

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