OPINION:
It’s time for a reckoning.
In what is being called “ESG month,” the House Financial Services Committee is holding a series of hearings investigating the practices and consequences of environmental, social and governance investing.
Rather than prioritizing the financial well-being and stability of retirees, the emphasis of ESG has been on forcing ideological policy objectives associated with far-left extremism. Congress must not fail to hold accountable those “woke” asset managers who have been derelict in their fiduciary responsibility.
Through ESG, unelected institutional asset managers controlling trillions of dollars have found a means of pushing corporations to embrace sweeping policy changes and social activism.
In 2021, Financial Industry Regulatory Authority then-Chair Eileen Murray told FINRA CEO Robert Cook: “I think the other big thing that is a terrific opportunity for financial services, which act as advisers, investors and lenders to really work on ESG … I think there’s a tremendous opportunity in our industry given newer technologies, reimagining work, focusing on ESG. Who could argue with ESG, and happier employees, a better environment?
“All sounds great, but there’s a lot of work to realize the benefits of that. And I think financial services firms, like I said, as advisers, investors, and lenders, are in great position to really help society on that front” at their national conference.
Through this public endorsement, ESG investing began to accelerate in the United States, handing the left victories it could never have hoped to achieve through the ballot box.
Through their arbitrary ESG scoring system, these activist high-rollers are “forcing behaviors,” as BlackRock CEO Larry Fink acknowledged. For example, extending credit to build electric cars that nobody wants would lead to a higher ESG score while helping to finance a natural gas project would virtually torpedo an institution’s ESG rating.
In essence, a cabal of financial chieftains are determining which politically preferred industries should thrive and which companies — and even economic sectors — will be targeted for destruction.
A classic tactic that big asset managers use to intimidate corporate executives into submission is to threaten to back ESG activist-led shareholder resolutions. C-suite executives can devote considerable energy to a protracted fight and hope that they win enough shareholder votes to defeat the resolution at their annual meeting.
But with a large asset manager such as BlackRock backing ESG activist shareholders, as it has done in the past, the corporation’s odds of winning become bleak. As this scenario more often plays out, the company folds its cards, negotiating with the activists ahead of time for more favorable terms.
ESG investment practices are even more reprehensible in that hardworking Americans’ private investment portfolios and state pension funds are being manipulated without their consent or knowledge, based on political factors that have nothing to do with maximizing returns, and with which they may not approve.
Fund managers have a clear-cut obligation to retirees and investors to maximize investment profits. And yet mutual funds scoring highly on ESG factors are constantly outperformed by funds rated lowest for ESG, according to research from the University of Chicago.
Bluntly stated, the ESG embezzlement scheme functions much like a political parasite feeding on retirees’ futures.
The reckless pursuit of ESG objectives at the expense of generating shareholder value constitutes nothing short of financial malfeasance. Not long ago, few Americans were aware that the ESG flim-flam even existed. But as activists overplayed their hand, public awareness and controversy grew.
Due to conflicts with state laws related to fiduciary responsibility, four state treasurers have so far divested more than $3 billion in pension fund assets managed by BlackRock.
In December, the financial asset manager Vanguard Group withdrew from the Net Zero Asset Managers initiative as lawmaker scrutiny of ESG-related activities increased.
By June, the ESG brand had become so toxic that even Mr. Fink, the BlackRock CEO who was an enthusiastic actor in “forcing” ESG upon corporate America, stated that he was no longer “going to use the word ESG.”
Just to be clear, Mr. Fink is not likely to stop pushing ESG. It’s just that going forward, he’s going to refer to that wilted rose by any other name.
In July, Congress finally started giving ESG the attention it merits. Members of the House Financial Services Committee must continue to call out the big asset managers that perpetrated this scam on the American people and hold them accountable.
Moreover, corrective legislation must follow on the heels of these hearings.
As a promising start, Rep. Chip Roy, Texas Republican, has introduced the No ESG at TSP Act, which would prohibit investments under the federal Thrift Savings Plan in certain mutual funds that make investment decisions primarily based on environmental, social and governance criteria.
This effort would ensure that investments made through the TSP maximize returns to its investors, not promote “woke” activism.
Even if these and other anticipated proposals to curb ESG abuses get the inevitable veto from President Biden, it’s vitally important that Americans know which legislators are willing to stand up to defend retirement nest eggs from “woke” corporate impropriety.
• David McIntosh is president of the Club for Growth and a former member of Congress. Follow him on X, formerly known as Twitter, @DavidMMcintosh.
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