VIDEO: What is ESG and how is it hurting your retirement savings?

ESG has gotten so weaponized by the political left today that you don't know what it means.

The S & P 500 recently removed Tesla from it’s ESG Index, causing many to ask, “Just what is ESG? Why does it matter? And how could it impact me?” ALEC Vice President of Policy Lee Schalk has answers.

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.

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.