Why are so many companies "woke"? Because of the ESG – or environmental, social and governance – agenda that many money managers are pursuing, which is forcing many big businesses to focus on combating climate change and promoting "diversity" ahead of delivering for their customers.
ESG means that money managers on Wall Street are able to impose their political preferences on businesses in which they invest. As Florida Governor Ron DeSantis recently put it, "ESG is an attempt to impose, through the economy, an ideological agenda that could not win at the ballot box."
The trouble is that the ESG agenda is winning. Billions of dollars of professionally managed assets are now used to impose ESG targets on corporate America – and on those that work for them.
Whatever your own personal political preferences, surely we can all agree that investment managers should not be using other people’s assets to promote ideology?
Quite apart from the politics, the problem with ESG is that it is not objective. There are different methodologies that various companies use to evaluate their use of ESG. Many of these businesses, it seems, rate their ESG scores on feelings rather than facts, making the process arbitrary
For example, one might assume that Tesla, a maker of eco-friendly electric vehicles, would have a high ESG rating. False. Tesla has been marked down by many of those that devise various ESG metrics, while various oil-producing businesses are rated highly.
We believe that it is up to those that own private capital to decide how best to invest it. Whether or not fund managers, who are merely the custodians of other people’s money, should be free to prioritize investment choices based on their own personal political preferences is perhaps a little less clear-cut. One thing we should absolutely insist on is that when it comes to allocating public money, investment should be made on the basis of maximizing returns, not promoting political beliefs.
To that end, several states across the country have implemented policies that prohibit investing on the basis only of ESG. Pension fund managers in states such as Texas, Louisiana and Florida are now required to invest in companies that would generate the best financial outcomes for growing pension funds, instead of ESG-driven objectives and exposing taxpayer dollars to potentially harming risks. This is what we would like to see in Mississippi.
Currently, Mississippi has no such legislation in place. In our state, it is up to the state’s ten-strong Public Employees’ Retirement System (PERS) board to oversee the investment strategy on behalf of around 325,000 PERS beneficiaries.
We would like to see legislation put in place to ensure that PERS funds are invested in order to maximize returns for those that have paid into the system, rather than promote fashionable causes.
ESG is, according to Elon Musk "a scam". Masquerading as a noble cause, "it has been weaponized by phony social justice warriors." ESG investing will not only cause long-term distortions in the marketplace. We fear it will ensure lower returns for pensioners whose savings have been managed by the scammers. Given the already precarious position of Mississippi’s public employee pension system, we believe ESG is something we simply cannot afford.
A potential bill we would like to see passed during the session calls on the state’s asset managers to comply with the highest standard of integrity to funds and their investments. Due to the ever-changing definition and standards of ESG, Mississippi should take its trust funds, specifically retirement fund money, fiduciarily seriously, and therefore, should act solely in the interests of participants and beneficiaries and invest in funds in a manner that prioritizes the highest return.