“There is an increasing trend among some investment management firms to use money in public and state employee pension plans — that is, other people’s money — to push their own political agendas and force social change,” Kentucky Attorney General Daniel Cameron, a Republican, wrote in a letter to two of his state’s pension funds. Specifically, Cameron condemned and warned against adopting or accepting any sort of investment strategies that “put ancillary interests before investment returns for the benefit of public pensioners and state employees.”
He was referring, of course, to ESG, or “environmental, social, governance,” investing. The acronym ESG in fact encompasses several bad ideas related to the world of finance. For one thing, it includes a set of proposed disclosure rules that the Biden administration wants to force on publicly traded companies, which would be required to describe how they are planning for catastrophic climate change that may never even occur.
CRACKS FORM IN WALL STREET’S COMMITMENT TO GREEN FINANCE
It also describes the choice of investments based on political considerations instead of maximizing profit for clients. One principle of ESG, for example, is to deny or limit sharply investment in projects involving vital resources such as oil and natural gas that are required to keep billions of human beings alive. So no, this is not some frivolous concern for red-meat speeches, as Mark Cuban recently suggested. This has real-world consequences — for starters, it drives up the cost of gasoline.
This is the Left’s method of accomplishing through the world of finance what it has been unable to do in the legislative and political arenas.
Certainly, people are free to invest their own money in any way they want. If you want to invest your money with a fund that follows ESG principles, go right ahead. But when it comes to public funds and public employees’ retirement money, there is no place for such silliness. That’s why Cameron was writing to pension officials, warning them that ESG investing with public pension funds would “violate statutory and contractual fiduciary duties.”
He is exactly right. Public employees work for their retirements and deserve to have the money waiting for them when their careers are over. Moreover, the taxpayers deserve healthy pensions for those employees so that they are not later dragooned into bailing them out.
Cameron is not the first state official to attack this pernicious seepage of wokeness into the world of finance. Earlier this year, officials in Utah came just short of threatening legal action against the S&P for using irrelevant ESG criteria to lowball its analysis of the state’s creditworthiness.
“Considering recent global events, the current economic situation in the U.S., and the unreliability and inherently political nature of ESG factors in investment decisions, we view this newfound focus on ESG as politicizing the ratings process,” they wrote. The reference there to “world events” obviously pertains to the war in Ukraine and the consequent spike in oil prices. This is an important point about ESG — its entire point is to starve fossil fuel investment and make gasoline more expensive so that fewer people use it. So when President Joe Biden says that high gas prices aren’t his fault, he isn’t being accurate. Anyone who supports ESG and Biden’s efforts to impose it on the private sector is already making gas prices at least a little bit higher than they would be otherwise.
As for the public sector, Cameron is spot on. Officials in other states must act quickly to purge ESG from finance with fire and the sword — to prevent wokeness from becoming a criterion for creditworthiness or a justification for making subpar investments with public money.
