Anna Totdahl, Oregon State Treasury
Anna Totdahl, Oregon State Treasury

Anti-ESG legislation is self-defeating by design, said Anna Totdahl, ESG and sustainability investment officer at the Oregon State Treasury. Todahl was speaking at NEXUS 2024, the private equity summit hosted by PEI Group last week.

“There is all this anti-ESG legislation springing up and invariably there is a carve out that says ‘unless it is material to the to the financial performance of the investment’,” she told delegates during a discussion on the politicisation of ESG in the US.

“The point being: that [materiality] is exactly what we are talking about. As more data becomes available, you would be remiss in your fiduciary duty if you didn’t take into account the impact that some of those metrics have on the investment performance, or the expected investment performance, of an investment. So I guess it is a little bit silly.”

Over the past two years ESG has been vilified by certain individuals and groups on the right of US politics. “There’s some people that think ESG is a plot against capitalism,” Carlyle co-chairman David Rubenstein said earlier on the side-lines of the conference. “I don’t see it that way.”

Multiple US states have introduced legislation to prevent investors basing decisions on ESG considerations and to compel them focus only on financial returns. However, given that ESG in the US has historically been viewed through a lens of financial materiality, it is not clear how this changes any fiduciary’s approach.

“To put it in CFA terms – a prudent investor takes into account anything that’s materially relevant to the investment performance,” said Totdahl, “So I think a lot of the angst is really just noise.”

Oregon State Treasury manages assets of around $140 billion across various funds, the largest of which is the $98 billion Oregon Public Employees’ Retirement Fund, which has 28.6 percent of its assets in private equity, 10.2 percent in real assets and 14.2 percent in real estate. Oregon’s state treasurer Tobias Read has previously spoken out about his duty to factor climate risk into the state’s investment decision-making and described anti-ESG legislation as being ‘distinctly anti-free market’. He recently presented a raft of climate-related measures, including a near-term decarbonisation target and climate solutions investment plans, to the investment council for the Oregon Public Employees Retirement System.

The pension does not have a standalone ESG policy, but does refer to the importance of ESG in its overarching statement of ‘fundamental investment beliefs’.

Totdahl described how discussions with fund managers about sustainability have now become guarded. “There is a little bit of a dance that gets done, where they speak in generalities and then sort of suss you out,” she said. “Then if they see that you are open to it, they wade a little bit deeper.”

She also noted that: “a lot of the pitchbooks don’t use the phrase ESG, which is fine. We don’t have to use the word; we can talk about ‘good business sense’.”