“ESG or no-ESG, is it a Fair Fight?”

October 2022 | ESG investing

This month’s blog is written by David Sand, CCM’s chief impact strategist, in response to all the recent anti-ESG noise including the many stories from Vivek Ramaswamy and his anti-woke and pro-fossil fuel investors. Which is quite the contrast from CCM, who for over twenty-three years has worked with clients who want to invest in ways that are generally fossil fuel free, supportive of gender and racial equality, and that help with affordability for homeownership and rental housing.

Here then is a paradigm of the workings of democratic capitalism: firms with different philosophies and approaches vie for business in the free marketplace. Prospective clients will be presented with alternative visions and will choose to do business with whomever they want. That has always been the American way but there are many who now seek to change the freedoms of choice that must be an integral part of well-functioning markets.

Seventeen Republican State Treasurers have announced support for legislation that would ban consideration of ESG issues in the handling of state pension investments. These spontaneous actions come despite the reality that these same public servants have sat ex officio for years on their state pension boards where assessing ESG risk has been a routine part of the regular meetings they attend. Consider for a moment the woman who oversaw ESG for the $200 billion Texas Teachers Retirement Pension Fund where, like at many institutional investors, a program was in place to evaluate ESG implications of investments. Suddenly, the political winds have shifted in Texas and a few other states and ESG is a dirty word. Spoiler alert: she is taking her talents elsewhere.

Coordinated multi-prong attacks on ESG investing seem designed to wrest control over investment directions away from individuals, unions, trustees, and board members and place them squarely in the hands of interest groups with a narrow agenda in support of oil and gas drilling and an immediate reversal of decades of social progress. Historically pro-capitalist think tanks are now producing videos saying that investors should not be allowed to insert their values into their portfolio allocation decisions. Above all, they wish for an end to transparency on matters like pay and racial equity, environmental outputs, and movement to a lower carbon future.

An alternate vision exists in the arena of fixed income impact and ESG investing. Imagine you are the only one in the room with money to lend and that everyone wants to borrow from you. Some people have wild ideas that seem risky but might turn out to be amazing while some barely need the money and seem certain to pay you back. Some people need money to pay their rent, and some want to buy a second or third home. Maybe someone wants to build a windmill or a solar farm. Your Uncle Sam is there and willing to borrow but not pay much interest. It’s your money, should anyone tell you who or what you can and cannot lend to? Should wedge issue pounding politicians say you must lend to dying industries in which you don’t believe? Last I checked, it’s still a free country.

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