ESG investing, not so good for investors

If Wasserman has her way, economic growth will be lower, unemployment higher, and investors will have lower returns.

Debbie Wasserman Shultz (D/FLA) was interviewed on Bloomberg today – and it was revealing! The topic was Florida’s plan to ban public money being invested in environmental, social, and governance (ESG) funds. She argued that DeSantis’s plans would (A) result in lower returns on funds, (B) reduce the quality of education, and (C) result in fewer businesses moving to the state.

I learned something from this interview: that Shultz and other Democratic leaders are detached from the reality of what’s happening with ESG investing. She clearly doesn’t understand or recognize that investing in ESG funds is bad policy for Florida and for investors who are primarily interested in reasonable returns. The evidence against her argument is empirical and verifiable. Bottom line: she doesn’t understand why ESG is bad policy. Her opinion amounts to virtual signaling, and Democrats will lose on this issue, even as the Biden administration now allows money managers to invest in funds based on ESG guidelines. If Wasserman has her way, economic growth will be lower, unemployment higher, and investors will have lower returns. Bad policies, bad outcomes. Amazingly, she believes the opposite and so does her party. 

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 exorbitant fees and you understand why asset managers want to push the ESG investment concept.

Virtue signaling at the expense of investor returns is dishonest and unethical. almost 80% 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. Higher fees and lower returns for ESG assets are the reason investing in ESG funds is bad for investors.

Biden's new rule re-interprets the 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.