Wall Street Is Using Your Money to Buy Virtue; Don’t Let Theminsidesources
There is a new class of profiteers in the investment world, and you, the typical American, are paying the price for their virtue-filled scheme. Wall Street elites have been pushing the adoption of corporate metrics, referred to as environmental, social and governance (ESG), to assess how much good or bad a company is bringing to society. Interestingly, only the far-left socialist causes qualify as “good.”
While advocates of ESG promise a better, healthier and happier future, the policies they support through manipulated investments cause more harm than good. “E,” or environmental investments, are shifting financial support away from the technologies that have led to our greatest environmental improvements. These “E” investments — like solar and wind energy projects — are also leading to a less reliable, more expensive energy grid, making it increasingly ill-equipped to deal with predictable weather patterns.
“S,” or social investments, are turning boardrooms into activists pushing companies to invest in politically divisive campaigns, like defunding the police.
The “G,” or governance investments, encourage race or gender-based hiring quotas and subject employees to anti-racism training premised on labeling co-workers as either the oppressors or the oppressed based on skin color. Way to bring the team together.
Economic and financial researchers recently found that ESG is not only used as a justification for poor business performance but also as a cover for bad compliance records. Turns out companies are sensitive about moral failings like relying on supply chains that involve slave, forced or child labor, but instead of directing capital to address them, they shift their money to ESG funds and then brag about their ESG score with high-end marketing. How virtuous.
Furthermore, investment houses like Blackrock, Vanguard and Fidelity entrusted by pensioners and retirees to maximize the value of hard-earned dollars are producing lower returns because of their focus on ESG. Even when this enlightened investment strategy fails to deliver any of the inflated promises for the planet, the people or the pensioner pocketbooks, the Vanguards of the world get paid their premium fees either way. One analysis found these fees, referred to as ratio rates, to be “5 to 15 times more” for ESG-focused investing that consistently “perform worse.”
Imagine if an attorney took the same approach as ESG-focused financial experts. Let’s say you’re on trial for alleged criminal conduct, and you invest in a high-end attorney to improve your prospects of not going to jail. While preparing for trial, the attorney decides to forgo reading through piles of discovery or witness interviews relevant to exposing gaps in the case and establishing doubt in the jurors’ minds. Instead, the high-end attorney reads the latest books on anti-racism and gender pronouns. You get to trial. The high-end attorney doesn’t perform as well as the other attorney who focuses on more substantive topics like building a case to prove guilt beyond a reasonable doubt. When the jury finds you guilty, imagine your attorney saying, “Well you lost your freedom, but I feel better about understanding oppression. Your bill is in the mail.”
While absurd to play out, this is what’s happening in the financial sector. Financial professionals, which non-experts entrust to maximize their future value, are setting aside their fiduciary duties in pursuit of woke politics.
In the legal world, clients could sue lawyers for incompetence. In the financial world, retirement and pension-fund managers can sue for betraying their duty to pursue the financial interests of beneficiaries. The Department of Labor, however, is working to change this and excuse poor financial behavior if it was done to pursue virtuous goals like climate change, diversity or other ESG-approved factors. There is very little recourse for the individually felt consequences of ESG investment decisions. Because, well, they were “doing the right things” or purportedly trying to.
Whether investing in your future retirement or children’s college fund, how much are you willing to sacrifice for the emotional benefit of the financially elite? If the answer is zero, steer clear of ESG investing schemes. And if you care about the environment, drink water from a reusable plastic bottle. It does more to tangibly help the environment than ESG investing, and it comes at a significantly lower cost.