Unions Use ESG Investing to Advance Labor Goals

Union membership has declined for decades despite federal laws that favor organized labor. Only one in 10 American workers is now unionized, and the rate falls below 6 percent in the private sector, according to the Washington Examiner. Instead of focusing solely on recruiting new members, unions have turned to activist investing through environmental, social and governance criteria, known as ESG.

The approach, often associated with climate policies, is also used to advance labor objectives, the report said. Unions promote shareholder resolutions that would replace secret-ballot elections with public card-check processes. They also seek "non-interference" policies that restrict companies from communicating potential downsides of unionization to employees.

Union pension funds, which manage hundreds of billions of dollars, are deployed to press companies to adopt these policies. Union officials serve on pension boards that back ESG-based strategies, the report stated. Public pension plans control trillions of dollars and can acquire significant stakes in banks or investment funds.

This financial leverage allows unions to file and support shareholder proposals that favor unionization efforts. When such measures succeed, non-unionized workers lose access to private ballots and employer information during organizing drives. Unionized workers may also see their pension returns affected if funds prioritize policy goals over financial performance.

Research cited in the report indicates that unionized companies can lose 5 to 10 percent of shareholder value due to reduced flexibility and competitiveness. Lower returns at public pensions fall on taxpayers.

Unions also use pension assets to pursue objectives beyond labor relations. The Service Employees International Union has pushed for "racial equity and justice" measures, including holding companies accountable for what it describes as systemic racism.

The AFL-CIO has directed pension managers to support a clean energy transition under ESG guidelines. Amalgamated Bank, described as the largest union-owned bank, allocates resources toward economic, social, racial and environmental justice initiatives that include ending fossil fuel investments.

The report notes that these decisions involve workers' retirement money. Employees contribute to pensions with the expectation of secure financial returns, not political or ideological objectives.

Labor overturned a rule that had advised pension funds to consider climate change and other ESG factors when making investment decisions. Several states have passed laws requiring that investments focus on financial value rather than activism. The report was written by Jarrett Skorup, vice president of marketing and communications at the Mackinac Center for Public Policy.