Forbes Column: Navigating The Storm: AI Regulation And The Future Of Business

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In his latest Forbes column, Delve CEO Jeff Berkowitz warns AI tools are filled with potential but also fraught with political, legal and reputational challenges business must consider before adopting or building AI. To understand what those challenges mean for you, read the excerpt below, then head to Forbes.com to read the full article.

Artificial intelligence is here, and it is transforming the world in ways we are only beginning to grasp. As businesses incorporate generative AI into their operations, many will find themselves in an uncharted frontier—a landscape filled with potential but also fraught with political, legal and reputational challenges.

AI’s rapid evolution has drawn the attention of Congress, foreign governments and the European Union regarding concerns about AI advancing at such a pace that they can’t keep up. This can leave businesses that rely on AI in a potentially precarious position.

As someone who helps companies navigate risks, I believe that while regulators might try to narrowly regulate the technology, the rush to regulate could stifle the opportunity for AI to boost productivity. Yet, in the absence of defined rules and guardrails, businesses must make complicated ethical, privacy and other contentious decisions on their own.

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AI’s capabilities will permeate every sector—law, healthcare, financial services, law enforcement, energy and beyond. Companies must keep pace or risk being left behind.

This reality presents a challenge for businesses unaccustomed to navigating complex policy environments, as the rise of AI could lead to governmental and consumer ripple effects that, like many other areas of technology regulation, vary greatly from jurisdiction to jurisdiction. Businesses will have to stay abreast of this patchwork of legislative and regulatory changes and the evolving public attitudes that vary by culture and region.

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Whether your business is building its own AI-enabled tools or leveraging newly available tools built by others, you will need the ability to communicate what AI is and is not to all of your stakeholders, as well as the government entities that can impact your firm.

For businesses, the choice should not be between avoiding AI and risk falling behind or incorporating AI into core processes and face potentially immense political, legal and reputational scrutiny. Instead, businesses must fully understand what is driving this scrutiny and how your firm’s stakeholders—employees, customers, communities, investors and beyond—are likely to respond. This understanding will empower businesses to navigate this complex landscape, manage risks and fully capitalize on the opportunities presented in this rapidly evolving AI era.

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Continue reading at Forbes.com and find out how to understand the political, legal, and reputational risks businesses must navigate as they adopt AI.

Pridelash

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Here’s What You Need to Know

Pride month celebrations may still be going strong, but with widespread backlash towards companies looking to join the party, many are rethinking their RSVP. Last year, companies were called out for being “inauthentic” when it came to Pride-focused marketing, while this year most of the controversy stems from brands being “overly woke.” It’s enough to give you Pridelash. So what’s changed?

Hyperpolarization once reserved for the halls of Congress and around the Thanksgiving dinner table has permeated every facet of American life. This shift is making it increasingly difficult for corporations to navigate whether (and by how much) to embrace social issues. Bud Light, which lost its two-decade long place as America’s #1 beer this month, and Target have lost billions in market value over what used to seem like easy marketing decisions. This shift shouldn’t come as a surprise. Consumers want businesses to be more involved with social issues, but in a highly polarized country, what they believe that involvement should look like is fraught with controversy.

No company is immune. Red state stalwarts like Cracker Barrel and Chick-fil-A have come under just as much fire as in the last several months as firms like The North Face with a strong history of purpose-driven marketing – in Chick-fil-A’s case for a three-year old hiring announcement. Here’s what you need to know to avoid becoming the next target of activists’ “go woke, go broke” mantra.          

The Battle of Could vs. Should Is Heating Up

To borrow a quote from Jurassic Park’s esteemed Dr. Ian Malcolm, companies have been “so preoccupied with whether they could, they didn’t stop to think if they should.” A recent Newsweek poll finds that more than 7 in 10 Americans aged 25-44 supported the expression “go woke, go broke.” It is  a dramatic change in the conventional wisdom that millennials, one of the most powerful consumer and voting blocs, want companies to embrace social issues in their marketing and communications. Meanwhile, a Brunswick Group study found 63% of corporate executives think “companies should speak out on social issues,” but just 36% of voters agree. This divergence has set up a true battle within corporate America on how best, if at all, to engage. Consumers, after all, are not the only stakeholder companies must consider, with pressure from employees, investors, and policymakers complicating firms’ desire to sit out particular debates.

Embracing Social Issues Means Embracing The Consequences

 In a deeply divided nation, corporate activism can present challenges for organizations once reluctant to take public stands on contentious issues. As our CEO outlined in Forbes, “before endorsing broad proclamations, business needs to understand the expected actions these proclamations may entail.” In the 20th Century, corporations were more frequently regional and accessible. Now, many brands are owned by multinational conglomerates more removed from the everyday experiences of those they hope to serve. As a result, contends political reporter Salena Zito, marketing decisions on social and political issues are made more and more “to reflect the alienated world of the owners rather than the consumers who are their bread and butter.” This disconnect means companies take real risk when embracing social issues. Activists advancing their own agenda are looking for every opportunity to call business out for “performative” action. In Bud Light’s case, for example, their actions lost both the consumers they hoped to woo and the ones they already had. In this climate, full consideration of the short and long term effects of going “woke” is more important than ever.

Public Affairs Needs A Seat In The Room Where It Happens

In this age of digital sleuthing and viral vitriol, everything a business does, or says, is under a microscope. Businesses need to tread carefully when wading into the cultural fray. As we’ve shared before, “companies face new political and reputational risks from activists that have nationalized, digitized, and professionalized their efforts.” That requires public affairs and government relations staff to be at the table when business decisions are being made. No one is better positioned to provide inside expertise on the political and reputational risk taking a side carries. Without their voice in the conversation, corporations will continue to see real (and expensive) consequences for jumping on the social issues bandwagon.

Same Stance, New Backlash

For Pride month this year, some companies did not do anything different than years prior. Target has long leaned into marketing products around celebratory months and Chick-fil-A’s “new” VP of Diversity, Equity, and Inclusion was actually hired in 2021. The thing that differentiates this year’s “woke” backlash is the lens through which these efforts are viewed. State legislatures across the country have thrust transgender rights to the national forefront, and Bud Light brought new activist scrutiny to the forefront this spring. Political and social debates are far from static, and the same position or action in a new context will cause a different reaction. Businesses must pay attention to these shifts and understand their operating environment to avoid a crisis of their own making. It will be hard to predict which way the pendulum will swing next, but companies should be well advised to remain nimble and proactive in today’s politically charged environment.

Avoid Surprise, And The Onslaught

The backlash to corporate social issue engagement will not end when the calendar flips to July. Companies will need to prioritize a holistic and strategic approach if they want to navigate the political and reputational risks to come. That means identifying your existing and potential vulnerabilities, fully understanding your stakeholders and their interests, appreciating the dynamics of the political environment across jurisdictions in which you operate, and building a system to avoid surprises.These steps are part of Delve’s proven playbook, so if we can help you avoid the onslaught, don’t hesitate to reach out.

Primary Concerns

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Here’s what you need to know:

The 2024 Republican presidential nomination race gives a nod to Hemingway this week as the field, which has been building more gradually than any in recent history suddenly looks like it could get crowded. Both Florida Governor Ron DeSantis and U.S. Senator Tim Scott launching campaigns this week and at least five other candidates may join them in the existing field of four. That means primary season is in full swing and if your public affairs operations has not been keeping track, it may find itself behind.

While a crowded field might excite political pundits, corporate public affairs professionals must stay attuned to how the campaign debate could impact their company’s or industry’s reputation and interests. That’s because what happens in the early primary states rarely stays in the early primary states, shaping the national policy debate and even the eventual nominee’s platform. Here’s what you need to know to stay ahead of the emerging candidates and how their thinking on key industries could evolve as they hit the campaign trail.

How Early States Shape The Debate

Even long-shot presidential candidates’ ideas have a history of gaining traction nationally, shifting the Overton window of debate, or even getting adopted by the nominee. Even if these ideas do not make it past Iowa, their champions could remain in contention for Vice President, Cabinet posts, other elected offices, or prominent positions in mass media or at advocacy groups.

In 2024, this trend could become a real challenge for business, as each party is more dominated now by populist and progressive voices who are less friendly to business than even the recent past. Candidates competing in a field for voters’ eyes and ears will use charged issues to attract attention but may in turn bring scrutiny to key industries, including some that are newer to being campaign lightning rods. If not checked early, these issues could evolve from reputational damage to damaging policy. Declared or potential candidates have already called for unspent COVID aid to be clawed back, went after the Silicon Valley Bank for not deserving a bailout, and of course, targeted Disney for going ‘woke.’

In many cases, candidates are responding to incentives like media attention and grassroots accolades. The Republican presidential gauntlet still runs through early states like Iowa, New Hampshire, Nevada, and South Carolina, and a failure to gain traction there will end even the most hyped of candidacies. That means building support among key players in those early states with their own interests and ideas they expect candidates to embrace. That makes these local and state officials and centers of influence just as important to understand and engage as the candidates themselves.

What To Do Before Politics Becomes Policy

Assessing and monitoring the 2024 primary field from the earliest stages is a crucial task for corporate public affairs professionals, and a fast-growing, late-starting field of candidates makes that task more difficult. Here’s how companies and industries with business objectives at risk can act before politics become policy:

  1. Know the Candidates’ Records and Hold Them Accountable: In the early stages of a campaign, candidates will often adjust and contort their positions to gain a leg up and win the support of whichever key players are most important at that time. Understanding candidates’ records and the personal histories that may affect their point of view allows your company or industry to cut through the noise and decipher their true beliefs on important policy issues. In addition to their own personal or professional backgrounds, determining who the candidates are listening to can help inform the positions they eventually take, including formal and informal advisors, donors, and any known close associates. These factors all come together to shape what the candidate is running on, when they engage, and how their approach can impact your company or industry.
  2. Understand How the Campaign Debate Will Unfold and Who Will Shape It: The dynamics of each early primary state — from the issues at the forefront of voters’ mind, the various political and community leaders candidates will try to woo, the interests of vital local industries, and other stakeholders both inside and outside the state — all help set the terms of the debate. To understand these dynamics, corporate advocacy teams should assess the landscape in each state to identify who could define the debate, anticipate the hot-button issues, and position your own for success.
  3. Build a System to Stay Ahead and Avoid Surprise: This week’s change in campaign dynamics highlights how fast the debate can change, and how much wider the range of players who can shape that debate has become. With such speed and volume of information, keeping ahead of not just the candidates but their advisors, surrogates, endorsers, pundits, and numerous third parties can be challenging. That makes a robust and systematic monitoring program a strategic priority to ensure you have actionable, forward-looking insights and the capability to respond quickly to potentially damaging ideas entering the debate.

Taking these steps early will ensure you can anticipate and prepare for policy and regulatory shifts. It also opens avenues for proactive engagement with candidates (and those who could shape their views) on industry-specific issues and aids in reputation management before campaign rhetoric can shape public opinion.

You Don’t Have To Do It Alone

With the presidential primary season heating up, those tasked with defending their organization’s brand or political and regulatory interests need an information advantage that ensures they can educate and inform their organizations on the risks and opportunities, and then take action to shape the debate before it is too late.

With a greatly diminished core of business-friendly political leaders, corporate advocates will have little time to ensure their interests are not vilified by politicians pursuing their White House dreams. At Delve, we are already tracking and assessing the field and the emerging campaign debate. If we can help you put your best foot forward and brave what is expected to be a highly contentious primary season, please reach out.

States Get Ready to Rumble

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Here’s What You Need to Know

As of today, 18 state legislatures have already convened their 2023 sessions, and all but five state legislatures will have assembled within the next two weeks. That means life is going to come fast for state-focused government affairs professionals, who will find a dramatically different and even more sharply divided legislative landscape this year.

Shaped by one of the largest waves of freshmen legislators in years, many of whom were swept into office by the twin tides of populism and progressivism, and with increased one-party rule across more states, 2023 legislative sessions will prove challenging for a range of industries.

Public affairs professionals who have not already built their post-election playbook are starting 2023 behind. Here is what you need to know to stay ahead of this year’s key legislative debates.

2023 State Legislatures Bring Newer, More Polarized Landscapes

More than one in four of the nearly 6,300 state legislators elected last November will be freshmen, thanks to the largest number of open seats in six election cycles and the highest number of primary defeats for incumbents in five election cycles. That shake up will extend to chamber leaders as well – about one-third of them will be new.

Many of these new faces will only fuel what has already been a long march towards more polarized legislatures. In 2023, single party control of states will reach a new high, with 140 million Americans living under Democratic control and nearly as many under Republican control:

  • 48 of 50 state legislatures will feature one-party control across chambers
  • 40 of those states will have trifecta control with a governor from the same party (though in both cases, Alaska’s inclusion is with a caveat)
  • And a new high of 26 state legislatures will feature veto-proof majorities

Such domination by one party in state government mean fewer checks on partisan excesses, straining businesses’ ability to straddle the growing policy gap between red and blue states on a broadening range of issues.

That Polarized Landscape Will Pressure Key Industries from Both Sides

From Fossil Fuel Divestment to Building and Vehicle Electrification and Beyond, States Will Clash Over the Energy Transition Even as They Leverage Federal Funds to Advance It. With billions flowing toward transitioning America towards net zero, expect plenty of clashes at the state level, including whether state pension funds should use their shareholder status to pressure fossil fuel companies to increase climate commitments or divest from fossil fuel entirely, which other states view as an unfair economic boycott. Similarly, building electrification initiatives in the Inflation Reduction Act (IRA) could lead to more legislative bans on natural gas hookups in newly constructed buildings – though some may update building codes to enforce these changes instead. With federal funding to build electric vehicle (EV) charging infrastructure heading to states, more states will consider following California’s lead in banning the sale of new gasoline-powered automobiles, even as other states push back. Other incentives in both the IRA and infrastructure law will encourage states to embrace more renewable energy development, including wind, solar, hydrogen, and nuclear, as well as measures to develop carbon capture, utilization, and storage. Bringing these renewables online will also require states to seek upgrades to the nation’s aging transmission network. Lastly, expect more progressive states to adopt new laws aimed at addressing environmental justice.

States Find Alignment on Tackling Healthcare Cost and Access, Diverge on Reproductive Health, With Many Firms Caught In Between. While the federal government prepares to negotiate prescription drug prices for Medicare participants, 22 states have adopted caps on co-payments for insulin and many others have introduced legislation as part of a broader push cracking down on prescription drug prices. Red and blue states also are finding common ground expanding access to telehealth, though the Supreme Court’s Dobbs decision could drive a wedge on such initiatives as red states restrict access and blue states expand access to abortion pills and procedures. Even for companies outside the health sector, this debate could impact their interests, as some red states look to penalize companies that aid employees skirting their state’s restrictions and blue states expect firms to defy other states’ restrictions.

States Have Big Tech and China in Their Crosshairs – But Their Actions Could Impact Firms Outside the Sector Too. There may be harmony between red and blue states on antitrust legislation targeting Big Tech over content moderation, app stores, and “right to repair”, but businesses outside the sector also could be caught in the middle as some states look to enact digital taxes or other measures that impact a wide array of firms, such as consumer data privacy rights. Closely tied to technology concerns is growing skepticism among state lawmakers regarding China’s presence in their states. At least five states have enacted laws limiting or prohibiting usage of technology products from Huawei and other Chinese makers, and others are considering such laws. Maryland recently became the latest state to ban the use of TikTok and other Chinese platforms on state government devices. These restrictions have gone beyond tech, with six states banning foreign ownership of farmland and others looking to regulate Chinese agricultural land purchases.

Financial Institutions Will Face Greater Pressure from Both Sides of the ESG Debate. 2022 witnessed a surge in red states divesting from banks and asset managers making environmental, social, and governance (ESG) commitments, and this trend will certainly continue into 2023. 19 states are considering such measures, following the lead of Texas, West Virginia, Oklahoma, and most recently Florida. Such actions have influenced Vanguard, the world’s largest mutual fund issuer, to leave the Net Zero Asset Managers (NZAM) initiative, but the state skepticism reaches well beyond the climate debate. Missouri, for example, is leading a 19-state investigation of whether Morningstar’s ESG assessments violate state consumer-protection laws, while Texas and others have launched a similar investigation into S&P Global. Meanwhile, blue states are calling on financial firms to be even more vigilant in enforcing climate goals and arguing for more ESG commitments.

FTX Crash Shifted Crypto Boosting to Crypto Busting. In 2022, a number of states boosted cryptocurrency with legislation often crafted by the industry itself, but FTX’s collapse has shifted support to skepticism as states line up to enact their own laws regulating the burgeoning industry in 2023. In addition to consumer protections and other rules specifically targeted at addressing FTX-like concerns, state legislators are likely to address environmental impact and energy consumption, usage as a form of legal tender, decentralized autonomous organizations (DAOs), property rights, tax structure and compliance, and cybersecurity.

Public Affairs Professionals Must Be Prepared to Navigate These Pressures

With state legislators rolling up their sleeves to enact a slew of policies that will significantly impact a range of businesses and industries, public affairs professionals cannot afford to wait to prepare for the battles that lie ahead. To anticipate these challenges, mitigate the risks, and leverage the opportunities, public affairs professionals will need a playbook to stay ahead. Here at Delve, we are already helping public affairs professionals build their playbooks to ensure they are ready to engage smartly and proactively in 2023 and beyond.

Gridlock’s Glass Jaw

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Here’s What You Need to Know

With a Republican majority in the House and Democrats in charge of the Senate and White House, many in Washington believe legislative activity will grind to a halt come January. But if history is any guide, gridlock and partisanship may not be the only game in town.

After Republicans took control in 1994, they passed and President Bill Clinton signed historic welfare reform, telecommunications deregulation, and health insurance portability and healthcare privacy. In 2013, a Republican House, a Democratic Senate and the Obama White House passed a “long-stalled” farm bill and National Flood Insurance Program reforms. Even after the 2018 Democratic takeover, President Trump signed into law USMCA approval and bipartisan COVID relief legislation.

Why can a split Congress get things done? It comes down to which members of Congress have a seat at the negotiating table, and who shapes the debate both in and outside the halls of Congress. Smart public affairs professionals should analyze and monitor the players and issues with bipartisan potential and prepare for potential laws that will impact their business and industry – for better or worse. With the right playbook, anyone can get ahead of the bipartisan curve. Here’s what you need to know to see compromises before they happen.

Shared Concern over the Digital Economy

Reining in Big Tech. Bipartisanship was on display over the last year as members of both parties worked on legislation to combat what they see as anticompetitive practices among large technology companies. Those seeking to bridle big tech notched a win in September when the House passed bipartisan legislation to bolster funding for antitrust investigations and give state governments greater input on which courts hear federal antitrust cases. Now President Biden is urging the Senate to act on two other bills with support across party lines that would increase competitive protections on big tech platforms.

Potential on Data Privacy Legislation. After several years of negotiations, bipartisan privacy legislation crossed a big hurdle in July when the American Data Privacy and Protection Act (ADPPA) passed the House Committee on Energy and Commerce in a 53-2 vote. Speaker Nancy Pelosi’s opposition to the bill has soured hopes of immediate passage, but advocates are hopeful it can advance in the next Congress.

Restraining the Wild World of Crypto. The recent fall of FTX has encouraged action that could bring order to the world of crypto. Many of the bills worked on during the last Congress were bipartisan, which the industry itself thinks bodes well for the coming divided Congress.

Common Enemies Inspire Common Cause

Everyone Wants to Be Tough on China. The chair of the forthcoming House Select Committee on China, Rep. Mike Gallagher (R-WI), set a bipartisan tone for congressional China policy: “I think it would send a strong signal if we can bring the Democrats along and … pass really good, tough bipartisan legislation that goes after the threats posed by the CCP.” Legislation will likely focus on reducing reliance on Chinese goods and boost trade with Taiwan, in particular onshoring pharmaceutical production, as well as protecting U.S. citizens’ data from being sold or transferred to China and restricting Chinese technology providers’ access to the U.S. financial system.

Cybersecurity Has a Record of Bipartisan Work. Members of Congress in both parties have introduced and passed several bipartisan cybersecurity bills this past year, and the compromise NDAA under consideration this December contains several cybersecurity provisions. There are still differences between the parties on how best to protect life in the digital sphere, but there is likely to still be room for bipartisan work in the next Congress.

A New Green Deal

Permitting Reform May Have Life Beyond Manchin. Both Democrats and Republicans want to see shovels in the ground on their preferred energy projects but a complex permitting process stands in the way. Senator Joe Manchin’s (D-WV) now-stalled efforts never went far enough for Republicans, even as they went too far for progressives (and some state officials). Negotiations are likely to continue into the new Congress, with House Republicans seeking input on the potential reforms. Still, as we’ve noted before, without major changes to NEPA and states’ Clean Water Act 401 authority, energy developers will still face significant permitting challenges.

Advancing ‘All-of-the-Above’ Decarbonization. Rep. Jeff Duncan (R-SC) has released a three-page document indicating what issues he would prioritize atop the Energy Subcommittee, which includes streamlining nuclear regulations, a goal shared by Republicans and Democrats. Likewise, carbon capture technology has support in both parties, with at least some expectation for “smaller bipartisan bills” that provide financing for startups that aim to develop the technology. Lastly, aside from usual compromises on agricultural subsidies and SNAP benefits, the upcoming farm bill reauthorization could allow for bipartisan agreement on funding renewable energy projects in rural America and supporting forestry practices like carbon sequestration.

Addressing Health in A Post-Pandemic World

Strengthening Telehealth Coverage and Other Pandemic Era Regulatory Flexibilities. The pandemic was the opening act for telehealth services. As the Biden Administration considers bringing an end to the public health emergency (PHE), policymakers must decide whether to keep broader telehealth options in place for Medicare and Medicaid – along with other spending and flexibilities tied to the PHE. For example, the “Telehealth Extension and Evaluation Act,” introduced by Senators Catherine Cortez-Masto (D-NV) and Todd Young (R-IN), would address part of the challenge in this post-pandemic world by extending Medicare enrollees’ access to telehealth services.

Targeting Drug Price Transparency. Bipartisan ire over high prescription drug prices has found a new target: pharmacy benefit managers (PBMs) that play a central role negotiating between payers, producers, and pharmacies. Senators Chuck Grassley (R-IA) and Maria Cantwell (D-WA) introduced legislation that makes the Federal Trade Commission (FTC) – which has already launched an inquiry into PBMs – responsible for preventing unfair pricing practices by PBMs. Until consumers see lower prices at the pharmacy register, fixes like this will continue to draw bipartisan attention.

Public Affairs Professionals Need to Prepare

As history shows, even a Capitol Hill divided can yield legislative action. Even beyond the above examples, there are numerous opportunities for compromise in the new Congress. To anticipate the opportunities that may arise and mitigate the risks, industries and organizations need a playbook to stay on top of the action.

Biden Goes Global

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Here’s What You Need to Know

It is the grand tradition of presidents who lose control of Congress to lean into foreign policy matters in which they can act with fewer legislative constraints. President Joe Biden wasted no time following this tradition, heading around the world before the votes were fully counted. His itinerary provided a glimpse into where his administration will focus abroad, spanning the 27th United Nations Climate Change Conference (COP27) in Egypt, G-20 Summit in Indonesia, and ASEAN Summit in Cambodia, the last of which included a high-profile meeting with Chinese President Xi Jinping.

While The White House’s recently released National Security Strategy “leaves more questions than answers about the White House’s approach to global crises,” in this era of heightened geopolitics, public affairs professionals cannot wait to see how Biden tackles foreign policy in the next two years. Biden will be under pressure from a GOP-controlled House regarding assistance to Ukraine and U.S.-China relations, but countless other international debates garnering less attention will impact a wide range of industries. Here is what public affairs professionals need to know as they prepare for Biden going global.

From Climate to Covid, Biden Can Use the Multilateral Stage to Advance His Agenda

Delivering Climate Aid to Developing Countries. At COP27 last month, Biden renewed his pledge of $11 billion to assist developing countries in the energy transition, even after these funds were left out of the Inflation Reduction Act this summer. A Republican-led House is unlikely to provide any funding, but Administration officials hope to leverage federal development agencies like the Export-Import Bank and the International Development Finance Corporation and a carbon credit system U.S. climate envoy John Kerry unveiled at COP27 to circumvent Congressional opposition.

Negotiating the WHO Pandemic Accords. Biden recently appointed Ambassador Pamela Hamamoto, who served as President Obama’s envoy to U.N. agencies in Geneva, to represent the U.S. in negotiations of the WHO’s proposed Pandemic Treaty. The accord – which the WHO is looking to have finalized by May 2024 – seeks to more effectively respond to future global health emergencies, and is likely to include several provisions impacting the pharmaceutical industry and other health innovation, as it could include intellectual property waivers, mechanisms to transfer technologies, and disclosure requirements in public procurement contracts.

Pressuring Countries to Enact a Global Minimum Tax. Having secured a 15% corporate minimum tax on many large firms in the Inflation Reduction Act, expect Treasury Secretary Janet Yellen to pressure other nations to keep their commitment to enacting their own minimum tax on multinational corporations – an early Administration ‘win’ on the global stage.

Great Wall of Congress May Force Biden to Stay Tough on China with a Little Help from Some Friends

Warming up to Xi, but not recoupling. Biden’s G20 meeting with Xi highlighted his desire “to find ways to work together on urgent global issues,” but the President has shown little sign of slowing efforts to disentangle critical American industries from Chinese supply chains. His administration recently announced new export control measures restricting China’s access to chips and chip-manufacturing equipment, and the Commerce Department will soon release preliminary finding in a prominent Chinese solar panel dumping case that could spur tariffs on imports when the President’s two-year moratorium ends.

Transforming Trump’s Tariffs into Biden’s Tariffs. The Biden Administration has so far maintained the Section 301 Tariffs that levied duties of up to 25% on hundreds of Chinese imports for national security reasons. However, the statutorily required four-year review of these duties, as well as ongoing legal actions and the December 31 expiration of several product exclusions, gives the Administration the opportunity  to reassess which products should remain protected. The comment period for the four-year review is open until January 17. With strong pressure from Biden’s base to maintain protectionist policies and both parties keeping the heat on China, expect firms to increase their lobbying efforts as decision time approaches.

Coupling With Taiwan. This month, the U.S. began talks with Taiwan aimed at strengthening trade and economic ties, with hopes for a pact as soon as next year. China has condemned the trade initiative,  which would be a boon to the U.S. agriculture and technology sectors, as Taiwan is the sixth-largest export market for U.S. food and agricultural products and the number one manufacturer and exporter of semiconductor chips in the world. The pact has the potential to ease the ongoing chip shortage.

Strengthening Indo-Pacific Ties. In the wake of the historic and encompassing Regional Comprehensive Economic Partnership (RCEP) trade agreement between the ten ASEAN countries and their six regional trading partners, including China, the Biden Administration will need to consider how it approaches trade liberalization in the Indo-Pacific. The recent Indo-Pacific Economic Framework may be a start, but it is far from a full-fledged free trade deal and India, a major player in the region, hasn’t signed on to its trade pillar, despite a recent visit by Treasury Secretary Janet Yellen. Biden has also been pushing for a digital trade agreement in the Indo-Pacific. Such an agreement would signal the U.S.’s commitment to strengthening ties in the region, especially economically, with an industry that is of strategic interest and commercial value.

Balancing Climate and Energy Security in European Relations

Boosting LNG Shipments to Europe…Or Retracting? Biden is trying to thread the needle between assuaging European allies who seek more LNG imports to supplant their reliance on Russian natural gas and the environmental justice advocates in his political base who disapprove of additional fossil fuel infrastructure. Biden has pledged to expand LNG exports to the EU to 50 billion cubic meters by 2030, though members of Congress from his own party are objecting, and some European officials are becoming perturbed by American “profiteering.”

Carbon Border Tax and Cleantech Subsidies Could End Biden’s Transatlantic Climate Camaraderie. Biden came into office hopeful for a Transatlantic alliance in climate policy, but it could become a climate clash as the EU enters the final stages of adopting a tax on carbon-intensive imports from countries – including the U.S. – that do not meet their imposed carbon emissions standards, starting in 2026. The tax will impact U.S. manufacturers of aluminum, steel, electricity, cement, and fertilizers that export to the EU. Here at home, Biden has indicated support for a carbon border tax of our own, and Senator Sheldon Whitehouse (D-RI) introduced legislation to do so in June. Meanwhile, European officials are becoming increasingly incensed by the domestic cleantech manufacturing subsidies and incentives embedded in Biden’s Inflation Reduction Act.

As Latin America Goes Left, Will Biden Go Along?

Navigating a Tricky Relationship with Mexico. Even if the border crisis headlines the bilateral relationship with Mexico, the country is also the United States’ third largest trading partner. Mexican President Andrés Manuel López Obrador (AMLO) has rocked the USMCA boat with some of his recent protectionist moves, including talk of nationalizing energy production and restricting GMO corn. While possibility of an all-out trade war seems unlikely, the Administration will have to choose how hard to push back against potential violations of the USMCA, and whether to prosecute potential treaty violations through relatively untested official channels, or keep things unofficial.

Freeing Hydrocarbons Even If the People Aren’t Free. The Biden Administration recently allowed Chevron to resume operations in Maduro-controlled Venezuela even as Senator Marco Rubio (R-FL) claims the Administration tried to oppose an Inter-American Development Bank loan supporting Guyana’s development of its energy infrastructure. As Congress shifts hands, expect more scrutiny of how Biden approaches energy production in the region.

Ensuring Access to Present and Future Resources. Newly elected leftist governments mean access to natural resources may be less certain: Colombia’s Petro seeks to leave oil behind; Peru’s Castillo has pushed to increase taxes on mining companies; Brazil’s Lula promised, in contrast to his opponent, to keep Brazil’s state oil company public; and Chile’s Boric contemplated a public lithium company. Indeed, Argentina, Bolivia, and Chile are discussing a “Lithium OPEC.” The Biden Administration has signaled its commitment to free enterprise in the region, but how willing it is to push back on these policy shifts is unclear, and ensuring access to these resources could conflict with Biden’s climate agenda in the region. While Biden has unveiled a framework for regional economic cooperation similar to its Indo-Pacific proposal, his administration has yet to demonstrate real enthusiasm for new or strengthened trade agreements in either region.

Biden’s Middle East Dilemmas

Pressuring Saudi Arabia on Oil Supply. After Saudi Arabia announced its support for OPEC’s cuts in oil production by two million barrels per day despite Biden’s attempt at mending ties with the de facto Saudi ruler, Biden declared there would be consequences. Potential repercussions could include military support reductions, arms sales cancellations, and enacting the “NOPEC” bill, which would classify OPEC as an illegal cartel and subject its members to U.S. antitrust enforcement. With mixed signals on whether OPEC will increase production soon, expect this relationship to remain as volatile as oil prices.

Reengaging In Nuclear Talks with Iran. With the U.S. condemning Iran’s brutal attacks on human rights protestors, Biden faces a challenging new dilemma: how can he continue his efforts to revive the Obama-era nuclear deal amidst some of the most widespread protests against the regime’s brutality in ten years? There are indications he has put the deal on the shelf for now, but a renewed deal was a key campaign pledge eagerly sought by many of his advisers.

Responding To Netanyahu’s Return. With Benjamin Netanyahu returning as Prime Minister of Israel, Biden will be working with a new (again) leader of the U.S.’s most important Middle East ally. The relationship between Biden and Netanyahu is decades-old and fraught with disagreements, including over the aforementioned 2015 nuclear deal with Iran, the necessity for a two-state solution, and the status of Israeli’s disputed territories. Now, as Netanyahu works to form a government, Biden’s Justice Department has launched “a rare, if not unprecedented” probe into a Palestinian-American journalist’s death, despite an already concluded inquiry by the State Department that found no intentional wrongdoing. Biden and Bibi are also likely to disagree over the value of the Abraham Accords, which the latter negotiated and views as the key to regional security. Yet the Biden Administration has displayed skepticism if not hostility to the Accords and their value in the region, even as they open trade and economic development between key countries in the region.

Critical Industries Have a Lot at Stake

Facing a divided Congress, President Biden will go his own way a lot more in the next two years, wielding the “phone and pen” of executive action on domestic policy and spending more time on foreign policy matters in which he has more autonomy to act. To advance and protect their organizations’ business and policy objectives, public affairs professionals should be prepared for the impact that Biden’s actions abroad may have for their industry, and how different interests and stakeholders can shape and influence those actions.

What Josh Hawley Gets Right

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Here’s What You Need to Know

“Washington Republicanism lost big Tuesday night,” was Sen. Josh Hawley’s (R-MO) blunt assessment of last Tuesday’s election results. At first blush, it seems out of step with most assessments but digging deeper into which candidates won on what campaign messages, Hawley may be more right than many in Washington would like. In fact, it was a pretty good night for candidates at the extremes – as long as they were running in the right places.

Across the country, our analysts found that 88 of the 129 statewide races that can have significant impact on businesses and industries (U.S. Senate, Governor, Attorney General, and Treasurer) featured either or both a populist or progressive expressing skepticism if not outright hostility towards business. A populist or progressive has won or is leading in 69 of those races — more than three-quarters of races on which one or both appeared on the ballot.

In just 63 days, Congress and all but five state legislatures will begin their work. That means public affairs professionals cannot wait to prepare for what’s to come. Here’s what you need to know about the newly elected officials swept into office by the twin tides of populism and progressivism.

Meet the Faces of the Twin Tides

When the final ballots are counted, public affairs professionals will face redder red states and bluer blue states, straining even further the ability of businesses to achieve policy consensus and certainty. Here’s how this dynamic played out in the campaign.

26 of 35 U.S. Senate races featured populists or progressives, who won or are leading in 18 of those races. A number of those newly elected Republican Senators will attempt to out-Josh Hawley Josh Hawley, while newly elected Democratic Senator John Fetterman may become a model for full-throated progressive candidates. Indeed, Fetterman plans to “crack down on the big, price gouging corporations that are making record profits while jacking up prices for all of us … by prosecuting the executives of these huge corporations,” while Hawley’s new junior colleague from Missouri, Eric Schmitt, made clear in his campaign, “I’ve taken on Big Tech, Big Insurance, Big Pharma, Big Banks, Big Government. I’ve never been afraid of the tough fights.”


  • Sen.-Elect Katie Britt (R-AL)
    “Globalists in D.C. have put us last for decades, and I am eager to set them straight and stand up for truly fair trade.”

  • Sen. Marco Rubio (R-FL)
    “These corporations … should not look to the Republican Party for support. … Business and good government don’t have to be at odds. But if executive elites think they can force the rest of the country to support their insane policies, they have another thing coming.”

  • Sen.-Elect Eric Schmitt (R-MO)
    “I’ve taken on Big Tech, Big Insurance, Big Pharma, Big Banks, Big Government. I’ve never been afraid of the tough fights. Missourians deserve a strong voice in the Senate who will take on the powerful on behalf of the people…”

  • Sen.-Elect Ted Budd (R-NC)
    “Big Tech bias has gone too far in suffocating the voices of conservatives across our country. If these companies want to continue to receive legal protection, they should be forced to play by a fair set of rules in good faith. I’m extremely proud to join Sen. Hawley in this fight.”

  • Sen.-Elect JD Vance (R-OH)
    “If you’re fighting the American nation state, if you’re fighting the values and virtues that make this country great, then the conservative movement should be about nothing if not reducing your power, and if necessary, destroying you.”

  • Sen. Alex Padilla (D-CA)
    “With the growing consolidation of corporate power and increasing inequality amid record corporate profits, it’s evident that corporate greed is what’s increasing costs for American families …”

  • Sen. Raphael Warnock* (D-GA)
    “Big corporations are raking in record profits while Georgians are forced to pay record prices. The business practices of a few corporations with overwhelming influence on our economy cannot be ignored.”

  • Senate Democratic Leader Chuck Schumer (D-NY)
    “The bewildering incongruity between falling oil prices and rising gas prices smacks of price gouging and is deeply damaging to working people. The Senate is going to get answers …”

  • Sen. Ron Wyden (D-OR)
    “Rather than investing in their workers, mega-corporations used the windfall from Republicans’ 2017 tax cuts to juice their stock prices and reward their wealthiest investors and their executives through massive stock buybacks.”

  • Sen.-Elect John Fetterman (D-PA)
    “It’s time we crack down on the big, price gouging corporations that are making record profits while jacking up prices for all of us … by prosecuting the executives of these huge corporations …”

*Race will be decided in a runoff election.

16 of 36 Gubernatorial races featured populists or progressives, who won or are leading in 9 of those races. While not a numerous in races for Governor, populist and progressive governors are very prominent in the political discourse. Most notably, Republican Governor Ron DeSantis made clear in his re-election that “In Florida, our policy’s going to be based on the best interest of Florida citizens, not on the musings of woke corporations.” Across the country, Democratic Governor Gavin Newsom claimed, “Big oil is ripping people off at the pump … that’s why we need a price gouging penalty to hold them accountable and get these profits into your pockets.” After last Tuesday, they won’t be alone in their competing visions for their states and the country, or the pressures those visions place on companies and industries.


  • Gov. Ron DeSantis (R-FL)
    “In Florida, our policy’s going to be based on the best interest of Florida citizens, not on the musings of woke corporations.”

  • Gov. Kevin Stitt (R-OK)
    “ESG is kind of rewriting how you invest. Instead of focusing on value for your shareholders, it’s more of a political agenda… It breaks down the free market principles of capitalism that we’re used to in investing and so it’s anti-American.”

  • Gov. Greg Abbott (R-TX)
    “Some Wall Street CEOs are divesting from fossil fuel businesses. That’s a two-way street. Texas is passing laws to divest from those woke businesses. We have the 9th largest economy in the world & we will use it to protect energy jobs in Texas.”

  • Gov. Kathy Hochul (D-NY)
    “I’m the only candidate for Governor of New York who is committed to cracking down on polluters, cutting carbon emissions, and treating climate change like the crisis that it is. Our environmental progress is at stake in November.”

  • Gov.-Elect Josh Shapiro (D-PA)
    “Shady corporations are taking advantage of Pennsylvanians. As our economy opens back up, they’re raising costs — and all for their own profits. I’ve taken on the powerful and well-connected my entire career. I’m not stopping now, and I’ll continue that fight as Governor.”

  • Gov.-Elect Katie Hobbs (D-AZ)
    “With reports of price gouging from across the country, Arizona has been unprepared to combat exorbitant prices by unscrupulous retailers. Adding to the pinch that Arizona families are already feeling, gas prices recently hit record highs in June… even as the top 5 oil companies reported raking in $35 billion in record profits.”

  • Gov. Gavin Newsom (D-CA)
    “Big oil is ripping people off at the pump, and they’re making more in profits off of Californians than in any other state – that’s why we need a price gouging penalty to hold them accountable and get these profits into your pockets.”

  • Gov.-Elect Maura Healey (D-MA)
    “For far too long these, these corporations have tried to use the First Amendment to shield unlawful activity, serious fraud and misrepresentation both to the investor and shareholder, public as well as to consumers, which is what we allege that ExxonMobil did. So we’re gonna continue to fight on.”

  • Gov. Kathy Hochul (D-NY)
    “I’m the only candidate for Governor of New York who is committed to cracking down on polluters, cutting carbon emissions, and treating climate change like the crisis that it is. Our environmental progress is at stake in November.”

  • Gov.-Elect Josh Shapiro (D-PA)
    “Shady corporations are taking advantage of Pennsylvanians. As our economy opens back up, they’re raising costs — and all for their own profits. I’ve taken on the powerful and well-connected my entire career. I’m not stopping now, and I’ll continue that fight as Governor.”

24 of 30 Attorney General races featured populists or progressives, who won or are leading in 20 of those races, a worrying trend for an office we’ve noted has “blended legal action with political headlines on a wide range of policy issues.” On the Republican side, Arizona Attorney General candidate Abraham Hamadeh pledged, “As your Attorney General, we will fight back against the insanity of Big Tech, against the ‘woke’ left corporations who boycott states and condemn America but refuse to utter a word against China, and against Washington’s overreach into the daily lives of Arizonans.” On the Democratic side, Minnesota Attorney General Keith Ellison contended, “It’s my job as Attorney General job to help Minnesotans afford their lives in the face of the rising costs of prescription drugs, healthcare, and higher education; declining wages and purchasing power; scams, unscrupulous landlords, and pandemic profiteering; and fraud, deception, and antitrust practices by corporations.”


  • Attorney General Steve Marshall (R-AL)
    “Big Tech is not the Ministry of Truth. It should concern us all when platforms that hold such tremendous power and influence over information wield that power in contradiction of — and with undisguised disdain for — the foundational American principles of free speech and freedom of the press.”

  • Attorney General candidate Abraham Hamadeh* (R-AZ)
    “As your Attorney General, we will fight back against the insanity of Big Tech, against the ‘woke’ left corporations who boycott states and condemn America but refuse to utter a word against China, and against Washington’s overreach into the daily lives of Arizonans.”

  • Florida Attorney General Ashley Moody (R-FL)
    “I’m sick and tired of corporations imposing their political will on unsuspecting consumers. As always, I will work with @GovRonDeSantis to ensure Floridians are protected.”

  • Attorney General Ken Paxton (R-TX)
    “The ESG movement is the latest tool that woke corporations are using to push a radical and left-leaning social agenda into every corner of American life. It’s harmful to our state and nation, and it may be illegal as well.”

  • Attorney General-Elect Andrea Campbell (D-MA)
    “As Attorney General … I’ll expose price gougers, protect your tax dollars & fight back against corporations that pollute our communities.”

  • Attorney General Dana Nessel (D-MI)
    “While drug companies profit off of people’s health, they also benefit from a current market in which they control the pricing. Enough is enough.”

  • Attorney General Keith Ellison (D-MN)
    “It’s my job as Attorney General job to help Minnesotans afford their lives in the face of the rising costs of prescription drugs, healthcare, and higher education; declining wages and purchasing power; scams, unscrupulous landlords, and pandemic profiteering; and fraud, deception, and antitrust practices by corporations.”

  • Attorney General Letitia James (D-NY)
    “Throughout the pandemic, hardworking New Yorkers have been struggling to make ends meet, but big corporations have been celebrating record breaking profits. It doesn’t add up. My office is prepared to use every tool in our toolbox to crack down on price gouging and pandemic profiteering.”

  • Attorney General Rob Bonta (D-CA)
    “CA is already experiencing the catastrophic effects of climate change. Corporations must pay for their role in the climate crisis.”

  • Attorney General Rob Bonta (D-CA)
    “Plastic bag manufacturers must back up their claims or face enforcement action. As Attorney General, I’m committed to tackling the global #plasticpollution crisis and the corporations behind it.”

  • Attorney General William Tong (D-CT)
    “Big Oil ignored science and peddled the use of fossil fuels, dangerously accelerating climate change. CT stands with Rhode Island @AGNeronha in his fight to hold these corporations accountable for their role in our climate crisis.”

  • Attorney General-Elect Anthony Brown (D-MD)
    “Gas prices are rising, but the price of oil is falling. It’s price gouging, plain and simple, and it’s unacceptable. We need to get tougher on bad actors in the oil and gas industry taking advantage of hardworking Americans.”

  • Attorney General-Elect Andrea Campbell (D-MA)
    “As Attorney General … I’ll expose price gougers, protect your tax dollars & fight back against corporations that pollute our communities.”

  • Attorney General Dana Nessel (D-MI)
    “While drug companies profit off of people’s health, they also benefit from a current market in which they control the pricing. Enough is enough.”

  • Attorney General Keith Ellison (D-MN)
    “It’s my job as Attorney General job to help Minnesotans afford their lives in the face of the rising costs of prescription drugs, healthcare, and higher education; declining wages and purchasing power; scams, unscrupulous landlords, and pandemic profiteering; and fraud, deception, and antitrust practices by corporations.”

  • Attorney General Letitia James (D-NY)
    “Throughout the pandemic, hardworking New Yorkers have been struggling to make ends meet, but big corporations have been celebrating record breaking profits. It doesn’t add up. My office is prepared to use every tool in our toolbox to crack down on price gouging and pandemic profiteering.”

*Race remains to be called.

22 of 28 Treasurer races featured populists or progressives, and a populist or progressive won or is leading in all 22 of those races, highlighting how this once staid office has become the frontlines in the battle for and against ESG and other divestment measures. Utah Treasurer Marlo Oaks warned, “ESG is about controlling and forcing behaviors. It attempts to do through capital markets what activists and their government allies have been unable to do through democratic processes.” Conversely, Connecticut’s newly elected Treasurer Erick Russell pledged, “I am ready to make our progressive case … using our powerful voice as a key shareholder and investor to advocate for … combating climate change, advancing human and civil rights, promoting corporate diversity, and improving public health and safety through strategic divestment.”


  • Treasurer Kimberly Yee (R-AZ)
    “We have the ability to go to companies that stand for the values that we believe in… ESG policies and woke corporations are moving in a direction that I believe is dangerous.”

  • Treasurer-Elect Mark Lowery (R-AR)
    “First thing I would like to accomplish once in office is to continue … advocacy of investment strategies at all levels of government that disinvest from ‘woke’ investments including through BlackRock Investments.”

  • Chief Financial Officer Jimmy Patronis (R-FL)
    “I was proud to join @GovRonDeSantis to deliver a simple message to the woke fund managers who keep investing in China: we intend to assert our seat at the table. Limiting our exposure to China is not only good for our country, but it’s the prudent thing to do.”

  • Chief Financial Officer Jimmy Patronis (R-FL)
    “I believe ESG is un-American because global asset managers are using the woke-standards, to reengineer society, through billion-dollar industries. It’s undemocratic. Moreover, it appears it’s not confined to equities alone. It looks like insurance markets are beginning to write coverage based on ESG criteria. … We need to fight ESG within the insurance markets because it’s another theater of battle.”

  • Treasurer Julie Ellsworth (R-ID)
    “[I am] working to stop undemocratic, woke efforts to implement non-financial or subjective criteria for measuring investment options & credit worthiness of legal businesses and individuals.”

  • Treasurer John Murante (R-NE)
    “I took a stand against an attack on conservative free speech and was joined by several other State Treasurers. Conservative voices have a right to be heard and we will fight back against discrimination led by radical left-wing politicians and supported by woke corporations.”

  • Treasurer Robert Sprague (R-OH)
    “As radical ESG-focused investment strategies continue to grab headlines, I want to make one thing clear – Ohio’s Treasury will not fall victim to it… In recent years, we’ve seen the Biden Administration weaponize its regulatory agencies and the finance sector as pawns to push their progressive agendas. Today’s ESG activism prioritizes political ideology over sound financial management.”

  • Treasurer Curtis Loftis (R-SC)
    “I will not allow our financial partners to undermine my fiduciary responsibility to maximize investment returns while accepting a prudent level of risk for the benefit of our citizens. It is imperative that we stand up to BlackRock and resist the pressure to simply fall into line with their leftist worldview.”

  • Comptroller Glenn Hegar (R-TX)
    “The environmental, social and corporate governance (ESG) movement has produced an opaque and perverse system in which some financial companies no longer make decisions in the best interest of their shareholders or their clients, but instead use their financial clout to push a social and political agenda shrouded in secrecy.”

  • Treasurer Marlo Oaks (R-UT)
    “ESG is about controlling and forcing behaviors. It attempts to do through capital markets what activists and their government allies have been unable to do through democratic processes.”

  • Treasurer Fiona Ma (D-CA)
    “I recognize that, for too long, capitalistic systems have unfairly and disproportionately rewarded the powerful and wealthy.”

  • Treasurer-Elect Erick Russell (D-CT)
    “I am ready to make our progressive case … using our powerful voice as a key shareholder and investor to advocate for … combating climate change, advancing human and civil rights, promoting corporate diversity, and improving public health and safety through strategic divestment.”

  • Treasurer Deb Goldberg (D-MA)
    “The pension fund invests billions of dollars in publicly-traded companies, and we want to do all we can to ensure these organizations are following best practices by affirming the science and causes of climate change… It is critical that we be forward thinking in building and implementing a comprehensive ESG framework that will have a positive long-term impact on our changing climate.”

  • Treasurer Zach Conine (D-NV)
    “Today, I directed our team to divest the State of Nevada from any investment in a business that profits from the sale or manufacture of assault-style weapons. No one policy or law will fix this crisis, but we all must do something.”

  • Comptroller Thomas DiNapoli (D-NY)
    “Achieving net-zero carbon emissions by 2040 will put the [state pension] Fund in a strong position for the future mapped out in the Paris Agreement. We continue to assess energy sector companies in our portfolio … Those that fail to meet our minimum standards may be removed from our portfolio.”

  • Treasurer-Elect James Diossa (D-RI)
    “As Treasurer, I intend to leverage state funding in order to encourage cities and towns to adopt zoning and land use laws that encourage sustainable energy infrastructure. … Ensuring such projects move forward with an eye toward sustainability will pay long term climate change dividends.”

  • Treasurer-Elect Mike Pieciak (D-VT)
    “[Fossil fuel investments are] a complicated issue, right? But I think everybody should be pro-divestment when you think of the financial risks that it’s going to present. So then it just comes down to when and how.”

  • Treasurer Curtis Loftis (R-SC)
    “I will not allow our financial partners to undermine my fiduciary responsibility to maximize investment returns while accepting a prudent level of risk for the benefit of our citizens. It is imperative that we stand up to BlackRock and resist the pressure to simply fall into line with their leftist worldview.”

  • Comptroller Glenn Hegar (R-TX)
    “The environmental, social and corporate governance (ESG) movement has produced an opaque and perverse system in which some financial companies no longer make decisions in the best interest of their shareholders or their clients, but instead use their financial clout to push a social and political agenda shrouded in secrecy.”

  • Treasurer Marlo Oaks (R-UT)
    “ESG is about controlling and forcing behaviors. It attempts to do through capital markets what activists and their government allies have been unable to do through democratic processes.”

It’s Time to Act Before It’s Too Late

Companies and industries cannot wait to prepare for the onslaught of scrutiny that is lurking around the corner. With just 63 days until nearly all legislative sessions have begun, next year’s legislative sessions and executive actions will be developed and influenced sooner than you think. Understanding what shaped the 2022 campaigns is the first step. To know what you should do next, check out Delve’s newly released playbook, The Twin Tides Are Here: Your Playbook for What Comes Next, and grab one of the few remaining seats for tomorrow’s webinar on the new business landscape.

Are You Ready for The Wave?

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The Wave Is Here

As our CEO Jeff Berkowitz detailed in Campaigns & Elections today, while campaign operatives prepare to catch up on sleep after the election ends, corporate and issues advocacy professionals’ hard work is just beginning – charged with navigating their organizations through the new landscape shaped by the results. Following an election cycle driven by the twin tides of populism and progressivism, that task may prove even more difficult than in the past.

From aggressive congressional investigations to even more frequent executive action, companies will find themselves fighting a two front war in Washington. Those two fronts will extend across the country, as it is likely red states will get redder and blue state bluer after the election, sweeping into office newer, more ideological legislators from each party. Many of these legislators will find themselves in supermajorities and trifectas, both of which are expected to expand after the election. With one-party control growing in many states, these legislators — and an increasing array of down ballot statewide elected officials — will widen the already gaping policy chasm businesses have to straddle between red and blue states.

Fortunately, here at Delve we have a well-honed playbook that sets public affairs operations up for success in the face of such challenges. Here’s what you need to do to navigate what the post-election tides sweep into 2023 with an information advantage.

Your Post-Election Playbook Is Here

Understand Where Your Risk Exists: More fights are about to occur in more jurisdictions on a wider range of issues on which companies and industries will be expected to engage. Yet even the most well-resourced organizations cannot run a 50-state offense and defense. To focus time and resources on where the most important battles are likely to occur, survey the landscape for where meaningful wins can be achieved and where serious political and reputational blows are likely to come. This survey should identify and assess key factors that indicate the likelihood of opportunity or challenges on key issues and interests for your organization, such as ballot initiatives; current and past activity of legislators and regulators; the presence and activity level of national and local activists, competitors, and other stakeholders; past and current lobbying efforts and political activities; and much more. At Delve, we weigh a customized set of risk factors across each jurisdiction to develop a heat map of risk and opportunity that helps public affairs professionals and lobbying teams target with pinpoint precision where to concentrate their resources and engage in the right fights early.

Find The Stakeholders: Friends are best found before the fighting begins, so once you understand where there is risk and opportunity, it is time to assess which stakeholders are likely to (or certainly ought to) engage in the debate, and whether you can work with them, or have to overcome their opposition. The traditional lobbying in “smoke-filled rooms” is long gone, so successful public affairs efforts must consider a range of actors beyond the actual policymakers, such as community organizations, competing businesses, labor unions, academics, and public and private interest groups. Reading the tea leaves of their previous statements and positions, funding sources, any relevant affiliations, and interests illuminates where they may come down in the fight, and together, help create a “web” of stakeholders that informs your strategy to bolster defenses and advance your interests through a winning coalition.

Secure An Information Advantage: Having assessed the landscape and mapped out the stakeholders, it is time to dig deeper into who those policymakers and stakeholders are and what is important to know about them. Whether it means developing key facts proving the value of a policy or discovering false motives of the opposition, an information advantage is an essential part of a winning public affairs playbook. These insights can include funding sources, inferred strategies and observed tactics, coordination with other groups, who influences them, what their motivations are, and how credible they should be considered by others. With more stakeholders engaging in more debates, the field of play is wider than ever before, so sharp, usable information lets you shape the debate with government decision-makers, the press, and public.

Build a System to Avoid Surprises: Even after charting a course and launching a campaign, the foundation it is built on continues to shift. The advocacy landscape moves faster and with greater intensity along with heightened political and reputational risks. By the time critical information reaches the headlines, it is often too late. Going past noisy mass media and social media to decipher what your opponents and key stakeholders are likely to do next is critical to mitigating risks and seizing on opportunities. Analyzing a wide range of primary and secondary sources can indicate changes to the state of play, so build a robust program that analyzes and synthesizes social media, press coverage, legislative action, regulatory filings, meeting schedules, event outcomes, stakeholder newsletters, and a wide range of other sources. It’s not the aggregation of these pieces of information, but rather the analysis of how they fit together that can provide a timely and actionable view of the landscape that keeps you ahead of the curve.

Don’t Wait to Turn Your Playbook into Action

Companies and industries cannot wait for the election results on November 8th to prepare for the coming onslaught of scrutiny and pressure. Next year’s legislative sessions and executive actions will be shaped and influenced sooner than you think. Smart public affairs professionals can leverage this playbook to keep their organizations ahead of the curve before it’s too late. If you need help assessing these risks and identifying which stakeholders are likely to shape next year’s policy debate, feel free to contact us.

https://twitter.com/POTUS/status/1495911308625125380/photo/1

The Phone and Pen Are Back

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Here’s What You Need to Know

When Congressional Republicans frustrated President Barack Obama’s agenda, he bluntly declared, “I’ve got a pen, and I’ve got a phone,” with which he pledged “to sign executive orders and take … administrative actions that move the ball forward.” With at least one chamber of Congress expected to shift to GOP hands, President Joe Biden will find himself with a similar predicament, and if his first year in office is any indication, he is not waiting to wield his phone and pen in ways that impact a wide range of businesses.

Biden has issued more than 100 executive orders since taking office – including more in his first year than any president since Gerald Ford – and that does not count numerous administrative actions taken by various federal agencies. Come January, with Republicans likely to gain control of the U.S. House and possibly the Senate, that number is all-but-assured to grow exponentially. Here’s what public affairs professionals need to know to anticipate how these actions could impact their interests.

How Biden May Put His Phone and Pen to Work

Declare A Climate Emergency. Even after passage of the Inflation Reduction Act, climate activists and members of Congress are pressuring Biden to issue an emergency declaration on climate change, which would allow the president to (1) halt crude oil exports, (2) limit oil and gas drilling in federal waters, and (3) direct agencies including the Federal Emergency Management Agency to boost renewable-energy sources.

Seize The Means of Energy Production. With gas prices rising, Biden has indicated he may invoke the Defense Production Act (DPA) in an effort to boost the U.S.’s oil-refining capacity, a hammer he has already wielded against the energy sector in other ways.

Extend The COVID Emergency. The COVID-19 Public Health Emergency (PHE) is set to expire on January 11, 2023, after the Administration extended it for the seventh time last week. With Congressional Republicans likely to scrutinize his pandemic response, particularly after Biden declared the pandemic “over,” and without another extension the PHE’s relaxation of many regulations could come to an end even as senior health officials seek additional funding to fight the virus.

Pressure States and Companies on The Culture Wars. Covid is not the only culture clash likely to see executive action. Under pressure from abortion rights activists, Biden could double down on commitments by his Task Force on Reproductive Healthcare Access, including the possibility he could declare a public health emergency on abortion access. Biden could also pressure states through Medicaid and other funding mechanisms to cover abortion access, leaving care providers, insurers, and employers caught between federal and state health officials. Biden may take similar action to ensure access to “gender-affirming care.

Forcing Social Impact on Financial Services Sector. More executives could see their compensation tied to how well their company is doing on environmental, social and governance (ESG) goals – with an emphasis on the environmental – if the Securities & Exchange Commission finalizes its Climate Disclosure Rule. Furthermore, the Department of Labor proposed a rule in October 2021 that could compel ERISA plan fiduciaries to incorporate more ESG investing, and in February issued a request for information seeking input from stakeholders about whether the agency should add climate-risk questions to Form 5500, the form plans are required to submit annually. Plan fiduciaries and other stakeholders may be impacted by the final rules and policy pronouncements that come from these actions.

“Ungigging” The Economy. Biden faces growing pressure from gig economy workers and labor unions to follow through on his 2020 campaign pledge to “Ensure workers in the ‘gig economy’ and beyond receive the legal benefits and protections they deserve.” That pledge could lead to executive action forcing companies like Uber, Lyft, and DoorDash to classify drivers as employees rather than independent contractors.

Return Of the Joint Employer Rule. Biden is also facing demands from unions and labor activists to broaden the legal test for determining when a company jointly employs franchise workers – something the Obama Administration attempted to do before courts stepped in. Biden’s National Labor Relations Board recently proposed a rule to broaden the joint employment relationship to include indirect and unexercised control over the terms and conditions of a job.

Increased Executive Actions Will Leave Businesses Fighting a Two-Front War in Washington

As we noted last month, a Republican takeover of at least one and possibly both chambers of Congress will bring new pressures and scrutiny to companies and industries that populists in the GOP view with increased skepticism. As Republicans launch investigations likely to hit a wide range of industries, President Biden will be counteracting Congressional intransigence with executive action, often leaving it to courts to sort out conflicting policy directions. Public affairs professionals cannot wait to prepare for this new landscape in which they will have to satisfy competing demands from each end of Pennsylvania Avenue. If you need help assessing these risks and which stakeholders are likely to influence them, feel free to contact us.

The Power of The Purse – And Pensions

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Here’s What You Need to Know

State financial officers – 36 of whom are independently elected – control more than $4.56 trillion in state-administered pension funds and $1.27 trillion in revenue collected by state treasuries. Now, they are increasingly recognizing those portfolios can be a political force that can greatly impact banks, asset managers, and firms that rely on financial markets.

That’s why, as Delve CEO Jeff Berkowitz last week wrote in American Banker, “In the November midterm elections, the twin tides of progressivism and populism will crash ashore, and financial institutions will need to look further down-ballot than ever before to assess the risks they face from incoming elected officials.”

While political risk analysis often looks at Congress or state legislatures, businesses need to be aware such risks extend beyond oversight and legislation. Traditionally, governors are the main state executives shaping policy debates, but other statewide officeholders responsible for specific government functions advocate for policy changes too. As they do, firms in and out of the financial sector will need to prepare for very real legal and financial consequences.

How Commerce Got Politicized

The multistate tobacco settlement in the late 1990s helped state attorneys general (AG) recognize the power they had to pressure disfavored industries or signal opposition to a president. Not surprisingly, over the past 10 years campaign spending on AG races has more than tripled, fueled by corporate funds flowing into national groups like the Republican Attorneys General Association and Democratic Attorneys General Association.

In recent years, state AGs have blended legal action with political headlines on a wide range of policy issues, from suing energy firms over climate change to seeking to overturn the Affordable Care Act to making it easier for local prosecutors to sue financial services firms to seeking lower drug prices and even curtailing EPA regulatory authority.

AGs are not alone though. The most recent statewide officials to enter the political arena are state treasurers.

Treasurers Join the Fray

Between state government expenditures and investments by more than 300 state-administered pension funds, state treasurers have considerable market power, not to mention their offices’ sway over market regulation. Now they are wielding this power in a wide range of industries and companies – often from competing partisan perspectives.

To Drill or Divest. Last year, 15 state treasurers launched a coalition opposing financial institution’s ESG commitments that could lead to defunding or divesting from fossil fuel-related project. This summer, two of those officials – Texas Comptroller Glenn Hegar and West Virginia Treasurer Riley Moore – announced the disqualification of a number of banks and asset managers under recently passed laws prohibiting their states from doing business with “financial institutions that are engaged in a boycott of energy companies.” Last month, a coalition of 14 Democratic treasurers responded, signing a letter objecting to “blacklisting financial firms that don’t agree with their political views.” However, that has not stopped California’s state treasurer is pushing her state’s teachers’ pension fund to divest from fossil fuels, which Maine’s treasurer began last year.

Stand With American Allies. 35 states have passed legislation restricting state public pension fund investments in or other state commerce with companies that endorse or comply with the anti-Israel Boycott, Divestment, and Sanctions (BDS) movement. This summer, Arizona Treasurer Kimberly Yee warned investment firm Morningstar its environmental, social and governance ratings subsidiary was violating her state’s anti-BDS law. Last September, Yee was the first of seven state financial officers from both political parties to divest pension funds from Unilever after its subsidiary Ben & Jerry’s announced it would no longer allow sales in Israeli settlements. As the Biden Administration’s pursuit of a renewed Iran nuclear deal roils Middle East security politics, expect growing awareness of how firms engage in the region.

Step Away from American Enemies. When Russia invaded Ukraine, the push for companies to divest did not just come from the private sector and the public. State treasurers moved to divest their pension funds from companies and funds that included Russian interests. If the U.S. and China continue at least selected decoupling, this trend could become very complicated for banks and asset managers.

Social Issues Carry Financial Consequences. In 2019, Maryland Comptroller Peter Franchot declared his state’s pensions would divest from any and all Alabama-based companies in reaction to that state’s strict abortion law. Now, as companies respond to the Dobbs decision by covering employee abortion travel costs, opposite pressure could come from red states. Similarly, at least four state treasurers — Connecticut, Rhode Island, Nevada, and Massachusetts — have divested or are seeking to divest from investment funds with firearms-related holdings. Expect such actions to expand as the culture wars increasingly play out in state capitals.

Look Before You Leap

The politicization of commerce puts business in a precarious position. States are becoming increasingly polarized in their political and social issue demands on companies, and that makes it more difficult for companies to take either side without facing consequences. Adding to the confusion, while the principles in question can seem straightforward — every vote should count, climate change is real, gun violence should be thwarted — behind these shared principles are often expectations from well-coordinated activists that firms will endorse divisive, partisan solutions.

With state treasurers becoming a growing political force, companies can now face real financial consequences if their business practices and public statements do not comport with the views and objectives of elected officials who hold sway over state finances and investment. To avoid the pitfalls, companies must understand the full range of policymakers and stakeholders before starting their corporate advocacy. They should also be mindful of how they engage in policy and cultural debates, because just as in physics, every political action has an (un)equal and opposite reaction.