Why I oppose ESG: Use politics, free markets to decide policy, not coercion
I'm against the use of economic force to drive politcal agendas
ESG is no longer the motive capital allocation in Florida: Andy Barr
Rep. Andy Barr discusses how Florida Governor Ron DeSantis is planning to impose a flat ban on ESG in the state on ‘Fox Business Tonight.’
I have been an outspoken critic of a scoring system known as ESG, short for Environmental, Social, and Governance. The underlying premise of the E in ESG is that we face an existential threat from climate change, so we must transition away from fossil fuels.
Given the intense feelings about the environment, it is easy to misconstrue my opposition to ESG as "fighting against climate change." However, that is simply not the case. I support developing solutions to address climate concerns. What I am against is the use of economic force to drive political agendas.
When an organization needs money, it goes to the capital markets. Investors consider relevant risks associated with investing, some of which may fall within the realm of ESG. But financially material factors have generally always been considered. The framework of ESG goes beyond normal risk measures and assigns an additional score based on subjective criteria that not even ESG advocates can agree upon.
ESG is destructive: Expert
Point Bridge Capital CEO and founder Hal Lambert and Manhattan Institute senior fellow Allison Schrager weigh in on environmental policies and their ties to inflation on 'Making Money.'
ESG is political. Who decides what the ESG factors are?
DESANTIS ANNOUNCES PLAN TO COMBAT ESG INFLUENCE IN FLORIDA
For example, S&P Global considers "adverse publicity resulting in reputational risk" as one of its social indicators. It is far too easy for an outside organization with market credibility to highlight an unpopular policy and claim it will result in reputational risk. This could enable investors, using an evaluator’s market credibility as currency, to pressure their investment managers not to lend money based on a state’s unpopular policy. This sort of coercion is happening today with the pressure asset owners are exerting on investment managers to sign net zero climate pledges.
ESG shifts the political process from our democratic institutions to those managing money. Whoever has the most money wins. And they are driving their political agendas using other people’s money, including Americans’ retirement funds. BlackRock uses the trillions of dollars it manages as leverage to compel companies to implement certain policies and argues "forcing behaviors" is necessary to achieve its goals.
GOP to investigate Wall Street 'climate cartels' over ESG policies
Strive founder Vivek Ramaswamy reacts to congress vowing to investigate Wall Street firms engaging in a 'scam' to reduce drilling for oil and gas on 'Making Money.'
Our country was founded on the concept of plurality to prevent a consolidation of power. Our constitutional form of government separates power into equal branches with checks and balances. The markets represent one of our most pluralistic institutions, comprised of many parties with diverse views about the future. Markets only operate when differing views are allowed. ESG moves the market to one view that is generally subjective and political.
The net zero climate pledges signed onto by the banking, insurance and investment industries focus on transitioning away from traditional energy, without addressing the question of what we are transitioning to or evaluating the very real human cost of boycotting fossil fuels. Because of the coercive tactics of ESG, capital is not going to where it would normally go—to profitable projects in the oil and gas industry.
In 2015, 59 oil and gas funds were raised globally representing $46.6 billion; in 2021, 11 funds were raised totaling $4.6 billion, a drop of 90%, despite improving economics. This has contributed to sky-high gas prices because of insufficient supply and inflation across the economy. Sadly, Americans who least can afford it are bearing the greatest burden.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
The markets allocate capital to environmental solutions by investing in innovation. However, when politics force an agenda and get enough participants to behave one way, markets stop functioning properly. ESG distorts the markets, pulls funding from the very organizations most likely to find a solution, and attempts to bankrupt an industry that is vital to our day-to-day lives, including the food we eat, the clothes we wear, the electricity we use, and our transportation.
Further, ESG threatens a massive regulatory burden and the transfer of wealth from our retirement portfolios to lawyers and professional services firms. This will not result in solutions to environmental and social challenges. It may help some people feel better about their investments, but its coercive nature should scare us all. If people agree with the politics, they might find no fault in this method. But what happens when the politics behind the system change? What if the agenda flips and companies are forced to make pro-life contributions in order to get capital?
CLICK HERE TO READ MORE ON FOX BUSINESS
As for the political issues at the heart of ESG, we have a system for addressing our differences. The Green New Deal failed in Congress. Rather than opting for another policy solution, ESG advocates bypassed the legislative process and forced their agenda using the capital markets. When we bypass our democratic institutions, we undermine those very institutions that have protected us and our freedoms.
All Americans, whether you believe climate change represents a threat or not, should be against the destruction of our constitutional form of government and free market competition. We need democratic institutions to resolve our differences and reach points of consensus, not economic coercion wielded by ideologues that bypasses debate altogether. That harms us all.