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In One Chart: Republican lawmakers likely to target ‘woke capitalism’ after the midterm elections, analysts say

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As Republicans campaign to take back control of Congress in November’s midterm elections, analysts are offering forecasts for what a divided Washington would deliver.

There’s a 40% chance that Republicans will win a grip on the U.S. House, a 35% chance that they’ll take over both chambers of Congress and just 5% odds that they’ll grab the Senate but not the House, according to Isaac Boltansky, director of policy research at BTIG.

In each of those scenarios, GOP lawmakers then will “focus on ‘woke capitalism,’ budget deficits, and other messaging bills that could draw contrasts on the campaign trail,” Boltansky wrote in a note earlier this month.

“There will still be a window for some targeted legislating (e.g., stablecoins, retirement security), but very little legislating will occur outside of the key deadlines.”

The BTIG analyst’s predictions are shown in the chart below.

BTIG

‘Woke capitalism’ tends to be a term that critics use to refer to ESG measures
ESGU,
-0.71%

ESGV,
-1.13%

in investing, meaning portfolios that are built around environmental, social and governance issues like climate change or diversity.

Florida Gov. Ron DeSantis is among the high-profile Republicans who has made statements on this topic, saying in a July news release that the ESG movement “threatens the vitality of the American economy and Americans’ economic freedom by targeting disfavored individuals and industries to advance a woke ideological agenda.”

Opinion: Ron DeSantis ramps up attack on ‘woke capital’ with ESG crackdown

Also see: Jamie Dimon says stopping oil and gas funding would be ‘road to hell for America’

Stifel’s chief Washington policy strategist, Brian Gardner, also has forecast that Republicans will take action on “woke capitalism” if they make gains in the midterms.

“In addition to investigations of the executive branch, congressional Republicans will likely hold hearings on the social-media industry
SOCL,
-0.88%
,
technology
IYW,
-1.20%

and national security, as well as woke capitalism. Investors should expect significant pushback from Republicans against environmental, social and governance (ESG) policies — both as mandated by government regulators and as self-imposed by the private sector,” Gardner said in a note earlier this month.

“Republican-chaired House committees will have CEOs of companies that actively engage in social policy testify and defend their positions.  Although much of this will be smoke, there will be significant heat at the state level where Republican governors, state treasurers and comptrollers will use political levers punish firms that refuse to do business with a state’s key industry.”

The Stifel analyst sees such hearings taking up “most of Congress’s attention,” so legislating “could be limited to ‘must pass’ items such as government-funding bills.”

Influential Democratic Rep. Alexandria Ocasio-Cortez of New York has pushed back on the use of the word “woke,” tweeting that it has become a derogatory term for “civil rights & justice” — and that “making up a ‘woke’ problem results in putting civil & voting rights on the backburner.”

Meanwhile, one expert on the fund industry, VettaFi’s Todd Rosenbluth, recently told MarketWatch’s Christine Idzelis that ESG is “serving as a stand-in for people who are looking for something to rail against,” but there doesn’t need to be “a battle” because investors can just ignore ESG products and instead buy traditional funds. 

See: ‘They’re making this a battle’: ESG is a slice of ETF industry that’s under fire

Also read: ESG investing industry is likely to become less transparent as regulators crack down over ‘greenwashing’

Yuval Levin, an expert at the conservative-leaning American Enterprise Institute, also has offered predictions for what GOP lawmakers in Washington will focus on if they score gains in the midterms, saying in June that there could be moves on a gas-tax holiday, the child tax credit and crime.

“You’re also going to see a lot of posturing and a lot of messaging bills where Republicans just try to put Democrats in a tough place looking to 2024. It’s hard to avoid thinking that that’s a lot of what a Republican Congress would end up doing,” Levin added.

Betting market PredictIt is currently giving a 76% chance for the House flipping to the GOP, and just 41% odds for the Senate turning red.

Now read: Political ad spending is breaking records: Here’s where the money is going in critical Senate races

And see: Democrats raise more money than Republicans in 9 out of 10 competitive Senate races, channeling voter ‘energy’ after Roe overturned

Plus: If this seat flips red in the midterms, Republicans will have ‘probably won a relatively comfortable House majority’

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