Red-state lawmakers are increasingly trying to interfere in private firms’ decision-making. They’re making a terrible mistake.
Republican elected officials seem to think they’ve found three new evil letters to pair with their favorite bugaboo, CRT, or critical race theory. This one is called ESG, which refers to investment strategies that consider environmental, social and governance issues. Critics call it “woke capitalism.” There’s just one problem: They don’t seem to understand capitalism. And flogging ESG is not only a terrible economic mistake. It will be a political loser, too.
Republican critics of ESG have focused primarily on the “E,” arguing that climate change should not factor into investment decisions. Texas has adopted a law restricting the state, localities, and pension boards from doing business with financial firms that seek to limit their exposure to fossil fuel companies. Even firms that have large investments in fossil fuels are being banned, if they dare attempt to price climate risk into their portfolio allocations. Oklahoma has enacted a similar law, and other Republican leaders are moving in the same direction. Last month, Florida’s Republican governor, Ron DeSantis, supported a resolution barring pension fund managers from considering ESG factors.
All these anti-ESG crusaders position themselves as defenders of the free market. But they are attempting to use government to block private firms from acting in the best interests of their clients, including retired police officers, teachers and many others who depend upon public pensions. And in doing so, they are turning the most basic investment rules on their head.
Any responsible money manager, especially one with a fiduciary duty to taxpayers, seeks to build a diversified portfolio (including on energy); identifies and mitigates risk (including the risks associated with climate change); and considers macro trends that are shaping industries and markets (such as the steadily declining price of clean power).
That’s investing 101, and either Republican critics of ESG don’t understand it, or they are catering to the interests of fossil fuel companies. It may well be both. Either way, they are standing in the way of the most powerful force we can muster in the fight against climate change: the private sector. And the stakes could not be higher.
Full Commentary by Michael R Bloomberg @ https://www.bloomberg.com/opinion/articles/2022-09-06/on-climate-change-republicans-need-a-crash-course-in-capitalism