In America, we have always valued the freedom to use our own money to support political causes that we choose. But, today, many boards and fund managers invest other people’s money (including mine and probably yours) for their own partisan environmental, social and governance priorities. (“ESG”).
They claim these strategies are smart bets, but the poor performance of many ESG investments tells a different story. ESG is putting a growing number of US investment assets at risk. This includes the $20 trillion (more than the entire US GDP) managed by BlackRock and other Big 3 funds and the nearly $6 trillion managed in state pension funds owned by working-class Americans.
These investments are not only risky, but often made without the full understanding or approval of their own beneficiaries or shareholders – many of whom would oppose the progressive orthodoxy of net zero environmentalism.
ESG as a movement is an ill-defined and elusive construct; a subjective standard disguised as objective criteria. Not primarily based on merit, it thrives on coercion and nullification. Even the brilliant titan of technology, Elon Muskwho has built an empire on green innovation is not exempt from ESG shaming tactics and attempts at grandstanding.
Most of us share the desire for a cleaner and healthier environment. Vigorous debate balancing ecological concerns with economic priorities and lifestyle choices is positive and produces policies that reflect this tension. But these policies must be pursued transparently through legislative bodies, not through behind-the-scenes corporate pressure campaigns.
ESG undermines the prerogatives of Congress and the state by imposing policies on corporations that cannot be won at the ballot box. At the same time, it hyper-politicizes and militarizes the historical and legal role of the asset manager to maximize returns for investors.
This creates major incentives for trustees and other actors in the investment ecosystem to abandon their largely innocuous responsibilities as financial stewards to become mercenaries for partisan political causes.
There is no doubt that these actions align with the political views of some asset managers; Unfortunately, overly heavy green mandates have dangerous and often counterproductive consequences.
For example, ESG’s mission to neutralize use of fossil fuels actually strengthens our rivals and weakens American security by making us more dependent on foreign oil reserves and rare earths from China.
ESG is also relinquishing priorities and diverting much-needed resources from laudable corporate social responsibility (“CSR”) efforts such as eliminating human trafficking in the supply chain and supporting employee mental health.
Rather than promoting proven, working technologies like those from US-based Omnis Energy that reduce costs, eliminate emissions while increasing carbon energy production, ESG-backed carbon “solutions” too often increase costs and efficiency. negative impact on the environment. The return on investment from ESG investments is often as disappointing ecologically as it is economically.
Massive fund managers are not alone in adhering to ESG priorities. The federal government makes its own offerings to the net zero gods. After being sworn in, President Biden issued an executive order to suspend new oil and gas leases on federal lands. We sued as state attorneys general and we won.
My office led a multi-state letter challenging the US Department of Labor’s suggested policy that investment advisers elevate climate-related financial risk above all others, including foreign conflict or economic downturns. We also recently led opposition to the Comptroller of the Currency’s appointment of a climate risk officer. Why? Pressuring banks to cut off access to capital to promote an environmental agenda is a gross abuse of OCC oversight.
Such misguided rules will be challenged by me and other GA Republicans until United States Supreme Court because it’s illegal racing around Congress.
And for entities and individuals who push ESG irresponsibly, we will continue to review any potential violations of antitrust, consumer protection, securities, or other laws within our jurisdiction.
Americans are undoubtedly open to balanced solutions that strengthen domestic energy independence, reduce costs, reduce emissions and empower the consumer. But coercion by ESG dogma is unbalanced, unsustainable and, in many cases, not legal.
ESG activist asset managers and net zero government mandates have something in common. They rest on the undemocratic assumption that Wall Street and Washington can impose its will on the American people.
In this country, the laws require the opposite. Fiduciary rules require asset managers to work for their clients. The Constitution and our statutes require the government to work for us. My colleagues and I will hold them to these duties.
Sean Reyes is the Attorney General of Utah.