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Both sides of the ESG debate are putting pressure on companies. Eric McGregor – Light Rocket – Getty Images
The rise of the environmental, social, and governance (ESG) movement in investing has been in the headlines for years, but ESG has been met with understandable skepticism from taxpayers who underwrite state and local pension plans and government borrowing. voices are rising. Ultimately, if the managers of these businesses do not focus on striking the right balance between risk and return, and instead pursue ideological investment objectives, taxpayers will lose hundreds of billions of dollars. We may incur additional debt. However, the focus needs to be in both directions.Force managers to reflexively embrace her ESG or Reflexively avoiding it could deprive taxpayers of the market-based innovation, resilience, and long-term value we rely on to avoid financial collapse.
At the state level alone, taxpayers face $1.3 trillion in unfunded liability from public employee pension systems, according to a report by the Council of State Governments. Administrators of these pension plans need every tool available to protect taxpayers from large-scale bailouts. Passing restrictive laws at the federal or state level and directing these managers to avoid certain industries and banks deemed “too woke” or “not woke” can help maintain financial You may find yourself in a position where you cannot.
The financial contagion caused by ESG advocates and opponents is already spreading to other areas of finance. In some instances, the pursuit of non-financial, politically motivated outcomes has resulted in reduced investment returns, market distortions, and other forms of economic harm.
When Texas passed a law in 2021 that prohibits banks from working with local governments that adopt risk mitigation policies related to fossil fuels and firearms, it prompted five of the state’s largest underwriters to exit the market. Researchers at Wharton Business School have discovered that. This reduced local borrowing competition and raised interest rates, costing taxpayers an additional $532 million in interest over eight months.
Last year, in Stillwater, Oklahoma, when the city council tried to borrow money from Bank of America for a major infrastructure project, the state treasurer put the bank on a blacklist of companies boycotting fossil fuels.・Added of America. The move forced the city to find a new investor. Oklahoman It is reported that they ended up offering higher interest rates. The result was an additional cost to local taxpayers of his $1.2 million.
Free markets inherently thrive on competition, efficiency, and adaptability. ESG investing can coexist harmoniously with these principles. By working with investors, companies can choose to voluntarily adopt sustainable practices and prioritize ethical governance, while giving companies the freedom to make investment decisions that improve their overall performance. can be secured.
At the same time, companies that invest in resource-efficient initiatives such as renewable energy can drive innovation that delivers economic benefits by reducing costs, increasing operational efficiency, and staying ahead of regulatory changes.
Additionally, companies that engage in robust ESG analysis will be more resilient and better prepared to manage environmental and social risks outside of their control and the potential for negative events that could impact their financial performance. nature is reduced. The bottom line is that companies should be free to pursue or not pursue his ESG investments.
The recent bipartisan onslaught to steer government business away from companies with whom we have political disagreements poses significant risks to taxpayers and their investments. That’s why we recently teamed up with a centre-right taxpayer advocacy group to outline a set of common sense investment principles for policymakers. These include:
- We reject big government intervention. Promote limited government and pro-growth policies that eliminate red tape and reduce tax burdens.
- Protect pensions and investments from politicization. Do not prohibit or force certain types of decisions that fall outside the bounds of maximizing return on investment in a free market.
- Ensure that fiduciaries always comply with their duties of care and loyalty and act in the best interests of their clients.
- It removes the shackles of government and empowers businesses, pension funds, and individuals to responsibly plan for future uncertainty in an era of rising prices and rising debt.
- Informed capital flows freely and fosters a business-friendly environment.
- Allowing businesses to voluntarily adopt sustainable workforce and operating practices without government intervention.
- We reject politically motivated efforts to keep government out of the boardroom and direct government business away from or toward certain companies based on narrow political agendas.
ESG investing should not be mandated or prohibited by governments. By embracing common-sense investment principles within a free market framework, state and federal legislatures can help advance policies that meet the changing needs and expectations of the American people and promote sustainable economic growth. Masu.
Carlos Curbelo served as the U.S. Representative for Florida’s 26th Congressional District from 2015 to 2019. Pete Sepp is the president of the National Taxpayers Union.
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