Environmental Social Governance (ESG) has taken a beating this past year from Republican lawmakers across the nation. And with good reason.
Billions of dollars have been lost for American shareholders, all to advance a leftist agenda they were never asked if they supported. A majority of the largest investment firms routinely vote in favor of environmental and equity activism, yet ESG funds underperform.
ESG closely aligns with UN Sustainable Development Goals of climate change mitigation and social justice causes, altering traditional frameworks for evaluating risk assessment and credit allocation. A company’s ESG score is used to determine whether it is “socially responsible,” and those companies deemed unworthy are being frozen out of financial markets. Corporate governance has been hijacked.
As laid out by economist Stephen Moore in a June House Oversight hearing, money management firms vote by proxy on shareholder resolutions brought on by social activists with a far-left climate agenda, unbeknownst to the clients. These ESG investments typically reduce shareholder returns, which is a violation of their fiduciary duty; firms have a legal obligation to maximize earnings. Trillions of dollars in assets are locked into ESG investments, including retirement funds. Asset managers have been utilizing Americans’ hard-earned money to further a climate agenda that no one else signed up for but they themselves want.
This was the second hearing by the Oversight Committee in a month’s time. And there’s been plenty more.
Several weeks ago the House Financial Services Committee launched its attack on ESG by conducting four separate hearings, each with a particular focus. This all stems from the Republican ESG Working Group, established by the very same committee in February and led by Oversight & Investigations Subcommittee Chair Bill Huizenga. Its goal? “Combat the threat to our capital markets.”
Lawmakers on Capitol Hill aren’t the only ones taking aim.
Governors from 19 states, led by Florida’s Ron DeSantis, formed a coalition in response to Biden’s threat to veto a Congressional measure to block ESG promotion in boardrooms. Fifteen states have already enacted anti-ESG laws, with maybe a dozen more on the way.
Republican attorneys general (AG) from over 20 states have also joined the campaign. They launched investigations into the Net-Zero Banking Alliance, whose members control trillions in assets, and sent a scathing letter to the world’s largest asset manager, BlackRock. They strongly opposed the SEC’s proposal to require ESG disclosures. And they sued the Department of Labor’s rule which gives fiduciaries more freedom to consider ESG when selecting investments.
Utah AG Sean Reyes stated in a June hearing, “My fellow attorneys general and I are charged with enforcing antitrust and consumer protection laws to protect fair competition in our marketplace.”
ESG is political activism at its best, working towards an agenda the left could not otherwise enact through standard democratic processes. The free market would never implement such a radical framework on its own and is thus installed by the global elite, recklessly determined to further the mission of the Paris Climate Accord. ESG metrics are designed to promote political or ideological goals by holding back capital from and/or punishing non-approved enterprises, such as fossil fuels.
Firearm and hydrocarbon industries have been targeted at high rates. The U.S. Office of the Comptroller of the Currency in 2020 found many industries (including firearms and energy) being denied funds. And one mineral company was even told by a major Wall Street bank that its loan was contingent on tweeting “climate change talking points.”
Prioritizing ideological agendas over profitability is as unethical as it is unlawful. Asset managers have a fiduciary duty to act in their client’s best interests by maximizing profit.
In response to the other side of the aisle’s apathetic and vexed reactions to multiple ESG-related hearings, Congressman Lawlersimply stated: “A lot of policies are being enacted precisely because of ESG that are having a profound negative impact on the marketplace and economy.”
Anyone running a household or business has certainly noticed. Targeting the fossil fuel industry has put limits on energy output and created a ripple effect across the economic landscape, through choked supply chains and raised prices. The global elites are putting strain on Americans’ budgets.
Government officials need to continue this trajectory of shedding light on and taking action against these net-zero alliances that use their collective market power over trillions in assets. It is time to hold the ESG zealots accountable.
Kristen Walker is a policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.theamericanconsumer.org or follow us on Twitter @ConsumerPal.