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The Backlash Against ESG With Jerry Bowyer

MoneyWise | Sep 14, 2022

Show Notes

You may not know it, but there’s a political and ideological war raging inside your investment portfolio. In recent years, a tiny but very vocal minority has sought to bully financial institutions into adopting their views of culture and politics. But it seems they’ve gone too far. Rob talks about that with economist Jerry Bowyer.

  • ESG is an acronym for Environmental, Social, and Governance investing, ESG, and it’s being exploited by the minority you mentioned.
  • The Wall Street Journal recently ran a story about a letter addressed to the money management giant Blackrock by the Attorney General of Arizona and 18 of his counterparts in other states. This comes after a series of actions taken by state-level financial officers questioning Blackrock and other asset managers as well as rating agencies for their heavy-handed imposition of ESG.
  • They were imposing their views of ESG on state investment assets and even on the states themselves. Add to that the world’s richest man, and former ESG darling, Elon Musk, calling the whole thing a scam, and pushback from Republican senators, governors, and other hopefuls against the politicization of the world of finance, and it adds up to a powerful reaction to a movement which had been seen as the inevitable future of the industry.
  • Bowyer says the backlash against the ESG movement is important because that sense of inevitability was a key source of ESG’s power. The message was “fall in line with the inevitable march of history or get left behind.”
  • When investors questioned the prudence of imposing political criteria on financial decisions, they were assured that it was, indeed, prudent because this was where the world was going. Eventually, the governments of the world would wake up to the reality of climate change and outlaw fossil fuels, leaving them as “stranded assets” sitting on company balance sheets. As social consciousness inevitably rose, anti-social behavior would be punished in the form of “reputational risk” and eventually the loss of the company’s “social license” to do business. So don’t take a risk, do the safe thing, and fall into line now.
  • But a populist revolt stubbornly held on, not just to God and guns, but also to fossil fuels, color-blindness, viewpoint diversity, parental rights in education, and the sanctity of life. Facts are stubborn things, but our ruling class now has to learn that stubborn people are also a fact.
  • Those who stubbornly hold fast to things which the anointed can’t believe still exist are aware, angry, and registered to vote (and have the IDs to prove it) know it. And dozens of attorneys general, treasurers, senators, and governors know it. This means that the chief selling point, risk management, has suddenly become the chief objection. ESG is now a controversial political risk.
  • How is the ESG crowd reacting to this backlash?
  • The controversy is now so undeniable, Bowyer says, that the ESG industry is lashing back at the backlash, the denial of which is essential to the premise of that industry. As You Sow, one of the non-profit clearinghouses for the industry, posted a quote on social media acknowledging that “the acronym ESG as a construct may have lost some of its luster…” and has been explaining to the shrinking faithful that the reason “why there’s been such a backlash against ESG” is that it “It’s extremely effective!” So, the new party line is basically, “We’re losing so much because we win so much.” The unspun version is that ideology pushed the movement beyond the investing public’s tolerance point and the shareholders and the voters are correcting the imbalance.
  • Things have gotten so bad that they haven’t just alienated the populist right, they’ve alienated some pretty close former allies, for example Tesla Inc. The green giant of industry had been an ESG colossus until Elon Musk failed to keep pace with the inevitable march of history and came out of the closet as a “free speech absolutist” and Twitter-prisoner public defender.
  • At the recent Tesla Annual meeting, the shareholder base of an electric car and solar panel company jeered as activists presented ideologically charged public statements, cheered when the moderator stepped in to cut the speeches short and then went on to vote down the slate of ideological ballot proposals. Did I mention that this was Tesla? If they’ve lost Tesla, they’ve lost.
  • But the war isn’t over. Even if the whole ESG movement goes down in flames, the people behind it are always looking for something and they never give up.
  • Let me explain it like this: Humanistic philosophy can deny, but not ignore, the reality of human sin. This means the people who espouse it need it to find other ways to purge their own feelings of guilt.
  • Social justice investing stepped in as their form of atonement for the sin of being a capitalist. But the thing is, and it’s critical to understand this: Whatever form of atonement they come up with in the future will never be complete because the demands for purity keep escalating. Americans should revolt against this new form of authoritarianism, but only a Christian worldview can truly replace it.
  • (RW) Economist Jerry Bowyer is the author of The Maker Versus the Takers: What Jesus Really Said About Social Justice and Economics … and you can read Jerry’s weekly insights on the economy at Vident.com.

On this program, Rob also answers listener questions:

  • What is the best way to manage an IRA at age 64?

Remember, you can call in to ask your questions most days at (800) 525-7000 or email them to [email protected]. Also, visit our website at MoneyWise.org where you can connect with a MoneyWise Coach, join the MoneyWise Community, and even download the free MoneyWise app.

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