ALEC on Conservative Talk Radio: The progressive left has weaponized ESG investing
No one really knows what ESG means. Ask 100 people and you get 100 different answers. It's really very difficult to define. Unfortunately, the progressive left has used ESG principles as a political weapon against anyone who doesn't stand up for their “Green New Deal” agenda broadly and a big government takeover of people's livelihoods.
This week Jonathan Williams, ALEC Executive Vice President of Policy and Chief Economist was a featured guest on a conservative radio show in Tucson, AZ hosted by Charles Heller. Williams talked about ALEC’s new model policy aimed at protecting state retirement pensions from politically motivated investment schemes, sometimes referred to as ESG investing.
Charles Heller: What I want to talk about today mostly is ESG. What is it? And what does it mean that the S & P 500 ESG Index dropped Tesla from that fund?
Jonathan Williams: ESG stands for Environmental, Social, and Governance. It’s a system of rating companies based on many non-financial factors, or sometimes, what I call politically motivated investment schemes. It goes back a few decades, starting with different terminology like “socially responsible investing,” which over time is merged into ESG. There’s a lot to unpack there. On the Elon Musk question, the largest electric car manufacturer in the world, and suddenly, they’re getting delisted from an ESG index fund. You do wonder if it is a coincidence or not that Elon Musk is gone out there on a limb to try to purchase Twitter and get involved in some of these battles right now around cultural issues. The timing is a little bit suspect, to say the least.
To take a step back, ESG is a challenging issue because groups with little transparency or accountability are coming in and giving companies scores or judging how “responsible” they are with respect to ESG.
But no one really knows what ESG means. Ask 100 people and you get 100 different answers. It’s really very difficult to define. Unfortunately, the progressive left has used ESG principles as a political weapon against anyone who doesn’t stand up for their “Green New Deal” agenda broadly and a big government takeover of people’s livelihoods. If there were a more neutral definition of ESG, then there might be some interesting things that you could pull out of it, such as some good best practices around governance that companies could use, which could be beneficial in the long run. However, ESG has gotten so weaponized by the political left today that you don’t know what it means.
The new ALEC model policy to address politically driven investments within public pensions is only a few weeks old. It is something that our legislators have brought to us in response to the proliferation of politics entering the world of fiduciary duty and public pensions. It basically puts into state law real protections to say that people cannot put their political views ahead of long-term investment returns within pension plans. Pension systems across the country – especially in progressive states, like New York, Illinois, and California – are hundreds of billions of dollars, if not trillions underfunded. Ultimately, what this means is higher taxes for all of us and in some cases, lower benefits for workers.
To keep these pensions above water, states need to have financial practices similar to real fiduciary rules in the private sector. And that is what our model policy accomplishes. This is not rocket science. It is basic Economics 101. If people put their own political views ahead of long-term investment returns, for pensioners or for workers, there needs to be penalties and there needs to be real protections in state law. That’s exactly what this new piece of model legislation does.
Charles Heller: Your model policy gives states a tool to protect state retirement funds from ESG investing, right?
Jonathan Williams: Yes. For more information on our ALEC model policy to protect state retirement pensions, go to ALEC.ORG.