DeSantis Organizing States to Push Back on ESG
DeSantis Organizing States to Push Back on ESG
Florida Gov. Ron DeSantis will be announcing an alliance of 18 states with the intention of pushing back against President Biden’s environmental, social, corporate governance (ESG) agenda.
According to a press release, each of these states has promised to initiate “state-level efforts to protect individuals from the ESG movement” by purging ESGs from state pension funds and investments. The 18 states include Alabama, Alaska, Arkansas, Georgia, Idaho, Iowa, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Oklahoma, South Dakota, Tennessee, Vermont, West Virginia, and Wyoming, according to DeSantis’s office. (The newly-elected treasurer of my home state of Kansas has been on the case since he took office in January, 2023.)
I said we would spearhead an initiative to join with other like-minded states to send an even louder message to the financial industry that the American people have rejected ESG at the ballot box. We will not stand idly by as the stability of our country’s economy is threatened by woke executives who put their political agenda ahead of their clients’ finances.
A draft letter from the states reads:
Proliferation of ESG throughout America is a direct threat to the American economy, individual economic freedom, and our way of life, putting investment decisions in the hands of the woke mob to bypass the ballot box and inject political ideology into investment decisions, corporate governance, and the everyday economy.
So what about Florida?
As usual, the Florida governor has already led the way. In February he announced a proposal to restrict ESG in the state’s pensions and retirement funds.
DeSantis said in a press release:
At my direction, Florida has led the way in combating the pernicious effects of the ESG regime by directing our state pension fund managers to reject ESG and instead focus on obtaining the highest return on investment for Florida’s taxpayers and retirees.
Sky News Australia took note, and encouraged the Land Down Under to follow suit. (Oh, and they also hope DeSantis becomes the next US president.)
Plus, in Congress, a bill to block pension fund managers from basing investments on ESG passed both houses two weeks ago, with Sens. Joe Manchin (D-WV) and Jon Tester (D-MT) signing on.
President Biden is expected to veto the bill. Meanwhile, Press Secretary Karine Jean-Pierre took to blasting “MAGA” in remarks to reporters:
It forces MAGA Republicans’ ideology down the throats of the private sector and handcuffing investors as well. The bill would bar fiduciaries from considering significant risks like extreme climate threats and poor corporate governance when they make investment decisions.
It’s always MAGA-this, MAGA-that with these people, isn’t it.
After the collapse of the Silicon Valley Bank last week, investors are understandably nervous. And many may be wondering if ESG investments had anything to do with it.
Indeed, the bank put money into environmental, social and governance causes. Moreover, they were proud to do so, according to their August, 2022 report:
The report details the company’s commitments and strategies to help create a more just, equitable and sustainable world and reports on its programs and progress made throughout 2021.
But did these investments contribute to its collapse? Nonsense, writes the fact-checker at the New York Times. Those are Republican talking points:
Blaming workplace diversity or environmentally and socially conscious investments for the firm’s downfall signals a “complete lack of understanding of how banks work,” one expert said.
Well, you trot out your expert, and I’ll raise you mine. Economist Diana Furchtgott-Roth of the Heritage Foundation pointed out that SVB failed to prioritize risk management. But while they neglected risk management, SVB instead focused on ESG investments:
While neglecting critical risk management, the bank’s 2023 proxy statement records 40 mentions of the environmental, social, and governance—or ESG—movement currently in vogue at many corporations and financial institutions. In a “key change,” the board expanded the Governance and Corporate Responsibility Committee’s oversight role in ESG ….
This shows a misplaced sense of priorities.
Writing in The Free Press, journalist Rupa Subramanya called ESG “The Giant Grift That Swallowed Wall Street — and Maybe Your Savings.” She wrote:
In 2022, eight of the top ten actively managed ESG funds in the United States fared worse than the S&P 500’s 14.8% decline—compounding long-percolating fears that ESG is a ruse.
And an increasing number of executives and lawyers are voicing concerns, too. Like venture capitalist Chamath Palihapitiya, who told CNBC in February, 2020, that ESG is a “complete fraud.”
There’s also Aswath Damodaran, a finance professor at NYU’s Stern School of Business, who wrote in an email that:
ESG is a scam, an idea that was born in sanctimony, nurtured in hypocrisy and sold with sophistry. The inhabitants of this space are either useful idiots, who think that they are making a difference to society when they are, in fact, just pushing problems behind curtains, or feckless knaves, who use it to make money.
Carson Block, whose Muddy Waters Research looks into publicly-held companies, called ESG a grift and added: “ESG is just bullshit tweaks at the margins.”
And then there’s Tariq Fancy.
Fancy used to be a believer in ESG. In fact, he had once been Chief Investment Officer for Sustainable Investing at BlackRock, one of the big three Wall Street asset managers. And BlackRock’s CEO Larry Fink is a fervent disciple of ESG.
But by 2019, Tariq Fancy was having his doubts. He found that the sales people didn’t care about how the ESG funds worked; they only cared about how many they sold. Fancy called ESGs “green paint on the existing system.”
Eventually he concluded:
This is definitely not going to work.
Professor Damodaran would agree (as would Gov. DeSantis, one presumes). He wrote:
The only healthy endgame for ESG is another acronym: RIP. And it will not be a moment too soon.
Featured image: Gage Skidmore/flickr/cropped/CC BY-SA 2.0.
The funny thing in all of this is that the ESG folks thought they were an invulnerable legion. All it took was a few normal people pushing back and things are collapsing on them.