WASHINGTON – ESG or “Environmental, Social, and Corporate Governance,” is the latest political acronym to get Washington, D.C.’s full attention. Conservatives have made the investment strategy a target, creating a rallying cry against what they call “woke capitalism.”
“152 million investors through 401k plans. $11.7 trillion. That is a lot of money,” Sen. Mike Braun (R-IN) told reporters in a recent news conference. “That is the accumulation of a lot of hard work and the only criterion should be what gives you the best math, the best return on investment.”
Braun said that’s not what you get with ESG which takes into account a company’s climate change initiatives, diversity, and corporate transparency – with a heavy emphasis on the climate aspect.
Some of the largest asset managers, including Black Rock, call ESG good business.
Conservatives tend to disagree though.
Joel Griffith, a research fellow at The Heritage Foundation, told CBN News the strategy politicizes investments often at a cost to investors.
“If you look back through the last several years and track investments in ESG type of funds versus investments in the broader stock market, you see that those ESG investments are underperforming the overall stock market,” Griffith said.
Some investment advisors also question if ESG would actually help the climate or move the world to a more sustainable future.
Of course, there are other routes to take.
For Christians, one solution is faith-based investing.
“Christians don’t want to be controlled. They love freedom. They love Biblical values,” Guidestone Funds President and CIO David Spika said in an interview with CBN News. “So, to be told you must invest this way. You can’t own fossil fuel companies really doesn’t sit well with them.”
Guidestone Funds is the country’s largest Christian investment management firm.
Spika said there are a few ways Guidestone promotes Biblical values.
- Exclusionary screens – or not owning companies inconsistent with Biblical values
- Shareholder advocacy – a way to encourage companies Guidestone owns to adopt Christ-like values
- Impact investing
“Impact investing we feel like is really the future of faith-based investing,” Spika explained. “This is where we proactively invest in companies that are doing good. That are serving, that are promoting the growth of God’s kingdom.”
Several states have already pulled money out of ESG investments and at least 16 states are considering legislation to stop it.
“So there’s an effort underway in states like Florida, and actually Oklahoma is looking at legislation as well, Kansas, West Virginia. There are a number of states that are saying, ‘Look, if you are a pension play manager or public sector employees, like firefighters and teachers and police, then you have to abide by a fiduciary duty to those clients,'” Griffith noted. “And that fiduciary duty means you cannot be considering ESG factors when it comes to making investments.”
Griffith said investors are finally waking up and that may be why the issue is gaining so much steam on Capitol Hill.
In November, the Labor Department issued a rule allowing federal retirement plan managers to factor ESG into investment decisions. Both houses of Congress have voted to repeal that rule and President Biden is expected to issue his first veto when it comes to his desk.
“When you are allowed to actually start allocating these retirement funds into certain investment vehicles where it’s pushing a political agenda, that is government in overdrive,” Braun said.
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