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IPFS News Link • Economy - International

Stakeholder Statism is Coming

• By Richard M. Reinsch II

Broadly defined, ESG promises environmental activism, egalitarianism across races and genders, and an aspirational commitment to social justice, enforced in and through corporations. How should we think about this incredibly skilled and powerful movement that has enlisted our largest and most successful corporations in its efforts, along with a host of transnational institutions, NGOs, and national and subnational governments? Is ESG an actual threat to free institutions, most notably markets and civil society? Or, as advocates contend, do ESG policies provide better pricing and risk factors to what are dangerous, risky, and environmentally unsound practices? Will ESG help us to both earn money and do well by serving people and the planet?

Answering these questions in a compelling way is Paul Tice's The Race to Zero: How ESG Investing Will Crater the Global Financial System. Tice spent decades on Wall Street working for JP Morgan Chase, Lehman, and BlackRock. This book's critical analysis of ESG highlights that the entire financial industry has been co-opted in a giant swindle by an aggressive global scale humanitarian ideology. On almost every page Tice illuminates a tremendous con job being perpetrated in full sight of finance professionals, who know better, but lack the courage to state clearly that ESG's promises are fraudulent in operation, destroy investor wealth, and enrich discrete groups of players who sharply influence the allocation of capital under ESG. That effort has required Wall Street professionals to "willingly suspend disbelief and forgo the traditional financial approach" of "comparing leverage metrics, cash flow margins, and earnings momentum." Instead, they are now "sizing up carbon footprints, checking on water and electricity usage, and making sure companies are paying their 'fair share'' of corporate taxes."

In general, ESG follows the trajectory of efforts by the progressive left to replace a free, voluntary, and competitive society and its institutions with centrally ordered institutions on behalf of social justice and a plethora of auto-generating rights. In many respects, ESG is just another version of top-down coordinated efforts by progressives to engineer their preferred society. ESG's variation on left-progressive ideology, Tice observes, is sustainable investing, that "subjective environmental, social, and governance factors should drive corporate policy and investment decisions, as opposed to objective financial metrics and returns." Primary elements hold the sustainable, salvific ESG glue together: ending global poverty, preventing climate change, and striving for social justice, generally. Of these elements, Tice observes, "climate change remains the highest-priority ESG issue." The ideological urgency it adds to the entire concept of sustainable investing has made resisting the sweep of ESG incredibly difficult for financial institutions and professionals.