AMAC EXCLUSIVE
Corporate America must decide: Will it allow progressive activists to drive Environmental, Social, Governance (ESG) agendas that diminish profits and further divide Americans, or will it return its focus to producing high quality goods and services that help and serve all people?
Corporations that yield to political agendas harm shareholders, customers, vendors, employees, and small businesses. Proceeding down this path will ruin our business community and free-market spirit. There are, however, signs that the tide is turning.
As the Attorney General of Kentucky, I saw the potential dangers ESG posed to our citizens. Asset managers virtue signal on climate and social policies using their customers’ money. That has meant refusing to invest in industries they find personally objectionable—coal, oil, natural gas—at the expense of the return on investment to teachers, firefighters, police officers, and other public servants.
So, I launched an investigation into the ESG-related investment practices of Vanguard and State Street Bank. Within a month, Vanguard pulled out of the Net-Zero Asset Managers Initiative. I also published a Kentucky-specific opinion on fiduciary duty and ESG in pension funds, clarifying that these public funds cannot be used to pursue ESG goals in Kentucky.
Common sense tells most people that taxpayers and shareholders deserve better than to have their hard-earned savings leveraged for political purposes.
Thankfully, conservative leaders have taken other meaningful steps to address this concern. For example, when BlackRock supported an effort to have companies divest from oil and gas, 15 states responded by passing legislation in 2023 that either prevents firms from doing business with the state if that firm boycotts the state’s key industries or prevents the use of state funds for ESG investing purposes.
In April, West Virginia added Citigroup Inc.; TD Bank, N.A.; The Northern Trust Company; and HSBC Holdings, PLC to the state’s Restricted Financial Institution List after determining that the institutions are engaged in boycotts of fossil fuel companies as defined under state law. Just two weeks before, Texas divested $8.5 billion from BlackRock after the Texas State Board of Education Chairman concluded the firm was hurting key oil and gas interests.
Florida also took measures to completely block the ideological ESG agenda from being used when it comes to their state pension funds. Lawmakers there reclaimed the State Board of Administration’s proxy voting rights from large asset managers, arguing investment decisions should be based on giving Florida retirees the “highest return” possible.
Continued awareness efforts are underway to stop asset managers from secretly voting against a state’s economic interests with shareholder dollars through proxy votes at annual shareholder meetings. At the 1792 Exchange, we publish an annual report that lists the proxy votes of all 50 states and their asset managers. This database, along with scrutiny from state officials, saw support for ESG proposals decline nearly 20 percent year-over-year. Additionally, one of the two largest proxy advisory firms, ISS, approved a new “ESG-Skeptical” voting alternative created by Bowyer Research.
Not only do big asset managers push political agendas under the banner of ESG, many banks, insurance companies, and other businesses refuse to do business with certain customers based on strident adherence to ESG criteria. Cancelling supply chains, customers, and small businesses for not adhering to a radical left-wing agenda is a major problem that we’ve highlighted in our Corporate Bias Ratings. Concerned shareholders continue to present our ratings to management at annual shareholder meetings as they push for companies to treat all people fairly.
Great strides have been made to roll back the ESG political agenda harming Americans’ wallets, but the work is far from over. ESG advocates have changed their strategy, with some rebranding their messaging to “conscious capitalism” or “transition investing” to mask their agenda-driven tactics.
As ESG moves into the shadows, we are also carefully monitoring climate legislation coming out of Europe that could affect 3,500 American companies as well as efforts at the state and federal level that would force companies to pour time and money into achieving ideological goals rather than providing products and services to customers and maximizing returns for shareholders.
ESG and stakeholder capitalism, no matter what name it goes by, is a threat to the American Dream. At the 1792 Exchange, we combat that threat, no matter its form, every single day for the hard-working American people.
Daniel Cameron served as the 51st Attorney General of the Commonwealth of Kentucky. He currently serves as the CEO of the 1792 Exchange.
