Republicans Can Stop ESG Political Bias

Tesla CEO Elon Musk leaves federal court in New York on April 4, 2019.



I’m old enough to remember when liberals accused big business of consistently siding with the Republicans. But in 2022, the awakened left is poised to conquer corporate America and has embarked on a strategy to impose its radical environmental and social agenda on publicly traded companies.

A sudden abundance of liberal shareholders isn’t what’s fueling this new trend of woke capitalism, and it’s certainly not a reflection of consumer demand. Rather, the shift is being engineered entirely by a handful of very large and powerful Wall Street financiers who promote left-wing environmental, social and governance (ESG) goals and ignore the interests of companies and their employees.

ESG is a pernicious strategy because it enables the left to achieve what it could never achieve at the ballot box or through free market competition. ESG empowers an unelected cabal of bureaucrats, regulators and activist investors to rate companies based on their adherence to leftist values. Like the social credit scores issued by the Chinese Communist Party, a low ESG score can be devastating, making it virtually impossible for a company to raise capital — and that’s the point.

Last week, the S&P 500 ESG index took Tesla public after claiming the electric carmaker lacked a “low-carbon strategy.” In reality, the left is likely targeting Tesla CEO Elon Musk for his commitment to free speech and his criticism of the Biden administration.

ESG scores are not political per se, as the attack on Tesla and Mr. Musk showed. But they are entirely subjective and often hypocritical. In one particularly egregious example, Exxon Mobil and Chevron received less favorable ESG ratings than Russian energy companies Gazprom and Rosneft,

in which Vladimir Putin’s government is a major shareholder. What exactly are the left’s criteria for ranking companies largely controlled by Mr. Putin’s murderous regime higher than American companies? It is instructive to note that, despite their altruistic pretense, ESG advocates almost never refuse to do business with China or Russia – two of the world’s biggest polluters with well-documented histories of human rights abuses.

Finance should always facilitate investment and stimulate economic growth that benefits the whole country. But President Biden’s regulators are arming the financial system to halt economic growth in the energy sector in the name of environmental extremism. Presidential Climate Ambassador John Kerry is pressuring banks to refuse to lend to US oil and gas companies, preventing them from increasing production.

Activist investors in the private sector are only too happy to play along. In a recent case, an insurgent shareholder backed by BlackRock,

the world’s largest wealth manager, forced Exxon Mobil to add three environmentalists to its board of directors.

Without government intervention, the ESG craze will only get worse. Mastercard recently announced that it will begin “linking employee compensation to ESG goals.” In other words, paychecks are no longer based on an employee’s performance, but on how well they match the bright political opinions of their bosses.

In April, a California court overturned state laws that required companies to select board members based on race and gender, marking a victory for the constitutional right to equal treatment. States, cities and Congress should follow suit by taking action to discourage the application of ESG principles.

States with large employee pension funds invested in the stock market would be wise to rein in massive investment firms like BlackRock, State Street and Vanguard, which together manage $22 trillion in assets and are driving a radical ESG agenda. State and local governments should entrust their money to managers who do not work against the best interests of their residents. States should also pass a model law developed by the American Legislative Exchange Council that would require managers of state pension funds to vote on the state’s stocks, rather than delegating that power to giant Wall Street corporations.

Most importantly, the next Republican President and GOP Congress should work to end the use of ESG principles nationwide. For the free market to thrive, it must be truly free.

Mr. Pence, a Republican, served as US Vice President from 2017-21 and is the founder of Advancing American Freedom.

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