ESG investing advances the woke political agenda of Democrats and enriches the elites
Wall Street and the Biden administration are putting your retirement money at risk in pursuit of Democrats' woke leftist agenda.
The letters ESG stand for environmental, social, and governance. Together they are a way for investors to monitor how “socially conscious” a company is. But it's a weak scorecard for investors. Elon Musk called ESG investing “a scam weaponized by phony social justice warriors.”
ESG investing has been underperforming this year
A study by Investment Metrics in September found that 78% of funds focusing on ESG principles fell more than 15 percent below their benchmarks in the first six months of 2022. At the same time, just 3% of the 166 US-listed ESG stock funds reported having positive returns as of September These funds were once booming, nearly doubling their assets from 2019 to 2021. This year, tech firms in which ESG funds tend to invest have been hampered by soaring inflation and rising interest rates. In contrast, oil and gas companies have been booming and so have their stock prices.
ESG is an effective way for social justice warriors and climate change activists to enact major policies that bypass Congress and the ballot box—in short, we, the American people.
Biden’s new rule puts retirement money at risk in pursuit of a leftist agenda
The Biden administration is now allowing fiduciaries to invest retirement money in these failing funds, many of which focus on social and environmental policies rather than investment returns. In other words, the Biden administration is putting your retirement money at risk in pursuit of a woke leftist agenda.
Biden's Department of Labor released a new rule misnamed “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights” the day before Thanksgiving – to avoid unwanted attention. Secretary of Labor Marty Walsh said the new rule “allows plan fiduciaries to consider climate change and other environmental, social and governance factors when they select retirement investments and exercise shareholder rights.”
Don't let the Orwellian doublespeak mislead you. The rule re-interprets the 1971 Employee Retirement Income Security Act (ERISA), which requires fund managers to make investment decisions for the sole benefit of the investors who depend on those assets. The law clearly states that those managing such assets must do so “solely” in the interest of and for the “exclusive purpose” of providing benefits to participants and their beneficiaries.
ERISA provides no basis for investing assets to prioritize social issues such as achieving environmental social “equity” justice or in any other wealth redistribution scheme that aligns with the Democrats woke political agenda.
The new rule will allow asset managers to use retirees’ assets to advance the Democrat's political and social agenda in contravention of ERISA’s specific statutory language. This is not only bad policy and government malfeasance; it is also anti-democratic – socialism by another name.
ESG funds enrich the elites on Wall Street
Elites like BlackRock’s CEO Larry Fink are getting even richer because of the woke ESG hype. BlackRock’s ESG Aware fund, for example, charges fees five times higher than those of its Core S&P 500 fund. Fees to hold ESG investment funds are, on average, 43 percent higher than conventional investment funds. Worldwide ESG assets total about $3 trillion; multiply that by BlackRock’s exorbitant fees and you understand why their asset managers want to push the ESG investment concept.
Virtue signaling at the expense of investor returns is dishonest and unethical. In principle and in practice, fund managers must behave ethically as fiduciary agents, respecting and observing an industry-wide commitment to values like transparency, integrity, candor, and putting investors first. Woke ESG investing does not meet this high bar.
Investment funds must be dedicated to assuring the best risk-adjusted returns for shareholders, not for the benefit of any other “social” pursuit. Of course, other stakeholders must be considered, but it's the investors’ interest that must come first. Asset managers are trained, incentivized, and bound by laws and ethics to maximize their clients’ returns.
It is unethical and unreasonable to expect money managers to put public social interests ahead of their clients’ interests. Larry Fink and others like him have, in effect, set up ESG funds for marketing and ideological purposes. It doesn't matter if the funds underperform the market; BlackRock gets paid based on the size of the assets under management, and it charges higher-than-average fees for these virtue-signaling funds.
Woke financial firms pressure big oil
American companies like Exxon should be drilling and increasing capital expenditures in their businesses. Instead, they're being crippled by the Biden Administration and woke Wall Street firms. Even today, with all the talk about sustainable energy, about 80 percent of our energy comes from fossil fuels and this number will remain high for decades. While Exxon is now transitioning away from fossil fuels and toward renewables, it’s doing so because 21 percent of the company is owned by BlackRock, State Street, and Vanguard. These companies colluded to replace three Exxon board members with progressive activists pushing an ESG agenda.
Just three years ago, America was a net energy producer – meaning, we produced more energy than we used and sold the excess to customers around the globe. Today, the Biden administration is begging for dirty energy, much of it from countries with little or no social or ethical governance of their own. Let us pause for a moment and consider that point. Our government wants to import energy from countries that deny their citizens' basic human rights and pollute the planet with abandon while insisting that American companies comply with ESG. You couldn’t make this stuff up!
Several states are pulling money out of assets managed by BlackRock.
Florida Chief Financial Officer Jimmy Patronis announced on Thursday that the state’s treasury would begin pulling out $2 billion of assets currently under management by BlackRock. The Sunshine State cited the firm’s support for environmental, social, and governance investing.
“BlackRock CEO Larry Fink is on a campaign to change the world,” Mr. Patronis said in a press release. “Using our cash, however, to fund BlackRock’s social-engineering project isn’t something Florida ever signed up for.” Mr. Patronis said Florida’s state treasury will have transferred all its short and long-term investments to another asset manager by early 2023.
Florida follows Louisiana, which pledged to pull $794 million from BlackRock funds in October because of BlackRock's support for ESG.
A warning for investors and voters
Many liberal politicians are pressuring banks to use both their balance sheets and their influence to address issues wholly unrelated to banking, such as global warming, gun control, voter rights, and abortion.
Republican lawmakers, who will be in the House majority come January, are pressing party leaders to send a message to big financial firms: Stop appeasing the left with “woke” business practices, keep financing fossil fuels and cut ties with China. Republicans will have committee gavels and subpoena powers to back that up.
ESG fundamentally changes the critical fiduciary relationship between the investor and asset manager. Ideologues like Larry Fink want to impose their woke values on our country without asking Americans for their permission. Investors cannot afford to have fund managers put their preferred social causes ahead of investment returns. We need to keep woke politics out of investment decisions and let Congress do its job of policymaking.
The problem with wokeism – and its cousin gaslighting – is not its presumed rightness or superiority over all other opinions; it is because it has become as toxic to reasonable debate as the pollution it wants to clean up.
A company claiming to be ESG (and 'certified' by BlackRock and others) may still work with dictators, human rights abusers, and polluters. There is no clear measurable standard of what each letter, E-S-G, means and how each is defined or measured.
As a result, ESG is woke by another name. Orwellian? Indeed. It means whatever the advocate claims it means.