One zeal sparked a backlash for ESG investment

Whoever thought that something as cryptic as “ESG Investing” would become a rallying cry for left and right in our increasingly fragmented political debate, here we are.

The investment technique, which was originally a backwater asset allocation model to educate financial managers and corporations about the environment (that is, minorities on boards of directors) began innocently enough. After all, who would be against trying to make the world a better place?

That is, until it was taken over by the radical left and some corporate top managers looking to score points. Add to that the race riots following the 2020 killing of George Floyd and the constant, often hysterical media coverage of climate change, and the result is that many corporate Americans have embraced some of the most radical interpretations ESG has to offer.

The examples are endless – and frightening. American Express, a credit card company that apparently wants to cater to all Americans, once forced racist “diversity and inclusion” sessions on employees that included the alleged racist roots of capitalism. Gary Gensler, chairman of the Securities and Exchange Commission, whose main mission is to protect investors from fraud, wants every public company to make costly disclosures about how their activities affect climate change, even though in fact there is no authoritative scientific evidence on this subject.

Money managers go along with the absurd demands of left-wing politicians who manage large pension funds or face loss of business. New York Comptroller Brad Lander, who oversees Gotham’s more than $200 billion pension system, wants asset manager BlackRock, which uses ESG in some of its investment models, to “provide a detailed approach to keeping fossil fuels in the ground and phasing out high prices”. issuance assets. Not only in New York, but everywhere he manages money. Take a look at Disney’s annual report and you can see that the company is so obsessed with all sorts of diversity quotas in its executive positions and programs that it doesn’t seem like it has much time to make money for its shareholders.

For a while, this type of idiocy could be ignored. The low inflationary bull market made the ESG frenzy somewhat bearable because stocks continued to rise while prices of essentials such as food and gas remained stable. Then reality hit: a pandemic, massive stimulus spending, and too much money chasing too few goods. The public has begun to realize that ESG fanaticism does not justify opposing political views or the economic consequences of a war, such as the one between Ukraine and Russia that led to oil supply disruptions.

These necessities became more and more unavailable even if you had a job, because asset managers were faced with the need to abandon energy production. The world soon became a better place by ruining America’s middle and working class through a disastrous tax known as inflation.

What we have now is the inevitable reaction that always follows such fanaticism. Leading the fight is Florida Gov. Ron DeSantis, who has found political gold by taking on a corporate awakening at Disney following the company’s bizarre opposition to its law against teaching babies about sex. Disney listened to a voice that woke up a minority of its workforce insanely, while DeSantis listened to voters who overwhelmingly re-elected him as governor.

tax penalty

Last week, he officially stripped one of Florida’s largest employers of his special self-government status in retaliation. And he goes on; now he’s siphoning public money from BlackRock because it’s offering investments in ESG – even to clients who want it – and has branded the firm as an “awakened” corporation.

Politicians from other states join the anti-BlackRock bandwagon, which is a shame because the company didn’t invent ESG and isn’t promoting it in mid-America; it’s just a response to some customer’s requirement.

The most important thing here is that you can’t help but think that many elements of the backlash are just as dangerous as those who mindlessly promote the most radical interpretations of ESG. My sources at BlackRock tell me that if the Florida governor wants a portfolio of Sin stock for state pension money, all he has to do is ask. Likewise, they told Lander in New York that if he didn’t like the oil and gas companies, then it was his fault; just don’t force BlackRock to enforce these standards when the firm manages other people’s money.

Seems reasonable in an increasingly unreasonable debate. Last week, the US Senate followed the House of Representatives and voted to repeal a Labor Department rule that allows fiduciaries to consider ESG – if they want – in their investment decisions. President Biden is likely to veto the measure, passed by a small number of Democrats who have joined Republicans in a closely divided house.

The fact that a Democrat has joined the opposition shows how much the pendulum is swinging in the opposite direction, and perhaps dangerously. If I’m not mistaken, the rule does not require financial advisers to use ESG in their portfolio advice to clients, it’s just that they can take it into account.

Again, quite reasonable. Do ESG radicals really want the world to make it illegal to divert money from a company that dumps carcinogens into the Hudson River (GE did this until about 1977) if it’s very profitable?

Apparently, yes.