Charles Gasparino
Business
March 4, 2023 | 9:51 p.m
The Senate vetoed a Labor Department rule that allows fiduciaries to consider ESG in their investment decisions. Portal
Whoever thought something as obscure as “ESG investing” would become a rallying cry for left and right in our increasingly fragmented political debate, but here we are.
The investment technique – which was originally a backwards asset allocation model to educate wealth managers and companies about the environment (i.e. reducing their carbon footprint), social issues (helping the communities they are in) and governance (more women and minorities). on company boards) – started harmlessly enough. After all, who would object to making the world a better place?
That is, until it was hijacked by the radical left and some corporate cuiters trying to rack up woke brownie points. Add to this the race riots that followed the 2020 killing of George Floyd and the constant, often hysterical, media coverage of climate change, and the result has been parts of American business embracing some of the most radical interpretations ESG has to offer.
The examples are endless – and scary. American Express, a credit card company that presumably wants to serve all Americans, once foisted employees with racially divisive “diversity and inclusion” sessions that included capitalism’s supposedly racist roots. Gary Gensler, chairman of the Securities and Exchange Commission, whose primary job is to protect investors from fraud, wants every public company to make costly disclosures about how its operations impact climate change when there’s really no solid scientific evidence on the subject gives.
New York comptroller Brad Lander wants BlackRock to detail how the city could invest in high-performing stocks without giving money to the fossil fuel industry. Getty Images
Money managers give in to the absurd demands of left-wing Poles who run large pension funds, or face losing deals. New York comptroller Brad Lander, who oversees Gotham’s $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… to phase out at high levels -issuing assets.” Not just in NYC but everywhere else it manages money. Take a look at any Disney annual report and you’ll see a company so obsessed with all kinds of diversity quotas in its leadership ranks and programs that it doesn’t seem to have much time to make money for its shareholders .
For a time, that kind of idiocy could be ignored. The low-inflation bull market made the ESG craze somewhat palatable as stocks continued to rise while the prices of staples like groceries and gas remained stable. Then reality set in: the pandemic, massive stimulus spending, and too much money chasing too few goods. The public began to see that ESG’s zeal offered no excuse for opposing political views or the economic fallout of a war like that between Ukraine and Russia that cut off oil supplies.
These necessities of life became increasingly unaffordable, even if you had a job, because of pressure from asset managers to divest themselves of energy production. Making the world a better place soon came at the cost of bankrupting America’s middle and working classes through a pernicious tax known as inflation.
What we have now is the inevitable backlash that always follows such zeal. This fight is being led by Florida Gov. Ron DeSantis, who found political gold fighting back against corporate awakening at Disney after the company challenged its law banning sex education classes for young children. Disney listened to a vocal, insanely woke minority of its workforce, while DeSantis listened to voters who overwhelmingly reelected him as governor.
Ron DeSantis is pulling government money out of BlackRock because it offers ESG investing opportunities to clients who want it. SOPA Images/LightRocket via Getty Images
tax penalty
Last week, he officially stripped one of Florida’s largest employers of its special self-government status in retaliation. And he goes on; he’s now draining government money from BlackRock for offering ESG investing – even to clients who want it – and has branded the firm the disgrace of a “woke” company.
Other state leaders are jumping on the anti-BlackRock bandwagon, which is a shame as the company didn’t invent ESG and isn’t driving it in Central America; it merely responds to the needs of some customers.
The more important point here is that you can’t help but think that many elements of the backlash are just as dangerous as those thoughtlessly pushing the most radical interpretations of ESG. My sources at BlackRock tell me if the Florida governor wants a portfolio of sin stocks for state pension money, all he has to do is ask. Likewise, in New York City, they told Lander that if he doesn’t like oil and gas companies, that’s his business; Just don’t force BlackRock to enforce these standards when the company is managing other people’s money.
Seems reasonable in an increasingly unreasonable debate. Last week, the US Senate followed the House of Representatives in voting to ban a Labor Department rule that allows fiduciaries to consider ESG – if they choose – in their investment decisions. President Biden is likely to veto the measure, which passed with a few Dems joining Republicans in the tightly divided chamber.
The fact that any Democrats have joined the opposition shows you how much the pendulum is swinging in the opposite direction, and potentially dangerously. Unless I misunderstand, the rule does not require financial advisors to use ESG in their portfolio recommendations to clients, only that they may consider it.
Pretty reasonable again. Do ESG radicals really want a world where it’s illegal to divert money away from a company that dumps carcinogens into the Hudson River (GE did until about 1977) when it’s very profitable?
Apparently yes.
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