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Plain Talk: ESG investing could downgrade North Dakota's credit rating

The ESG movement which is taking the investment world by storm can hurt North Dakota in more ways than one, as state Treasurer Thomas Beadle explains on this episode of Plain Talk.

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Treasurer Thomas Beadle, then a state lawmaker, participates in a floor debate on the floor of the North Dakota House of Representatives Friday, Feb. 10, 2017, at the state Capitol in Bismarck.
Mike McCleary / Bismarck Tribune
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Minot, N.D. — The ESG movement in venture capitalism - the acronym stands for "environment, social, and governance" - is a threat to North Dakota's economic well-being, but not just in the way you might be imagining.

Our state's primary industries — energy and agriculture — are also carbon-heavy industries, which is why our state runs afoul of the "environment" part of ESG. Our state is investing big money into improving the environmental impact of our industries — we created, for example, the clean and sustainable energy fund which is driving money into things like carbon capture projects — but the ESG movement isn't terribly pragmatic.

It's very ideological, viewing only certain types of renewable energy as satisfying the "environmental" component of it the platform.

Which is why the credit rating agency Standard & Poor's just gave North Dakota a "moderately negative" (their term) rating, tabbing our state as a "climate transaction risk."

That's bad for North Dakota, and in more ways than one, as Treasurer Thomas Beadle explained on this episode of Plain Talk. He points out that this sort of rating doesn't just deter capital investment into our biggest and most important industries, it can also drive up the cost of bonding for the state.

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It works like this: since our primary industries are rated a risk, and our state government gets most of its revenues, directly or indirectly, from those industries, then our bonds to build things like highways are seen as a riskier investment. Thus, we have to pay more to borrow that money.

What can our state do about it?

Beadle points to things like the state-owned Bank of North Dakota, and the aforementioned sustainable energy fund (other states are calling this sort of thing a "green bank"), as factors that help, but until national, and international, banks and governments come to realize that market manipulations do not obviate our need for baseload energy, we're stuck with things as they are.

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Opinion by Rob Port
Rob Port is a news reporter, columnist, and podcast host for the Forum News Service. He has an extensive background in investigations and public records. He has covered political events in North Dakota and the upper Midwest for two decades. Reach him at rport@forumcomm.com. Click here to subscribe to his Plain Talk podcast.
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