A monolithically progressive ESG landscape does not serve investors well. Crowding out diverse (read: conservative) viewpoints from the environmental, social, and governance investing industry, whether by regulation or bullying, is anti-competitive and bereaves investors of a robust marketplace from which to choose investments that align most closely with their objectives, both financial and ideological.
Dr. Erik Davidson, CFA®, previously served as Chief Investment Officer of Wells Fargo’s The Private Bank, where he oversaw the management of $200 billion in assets and 400 investment professionals and is currently Adjunct Professor of Finance at Baylor University. Dr. Davidson sees the inclusion of conservative, faith-based perspectives as critical to the long-term success of the ESG industry,
“For ESG to have a meaningful impact on the free market exchanges of financial capital, it needs to embrace a free and diverse market exchange of intellectual capital, including faith-based views. Without viewpoint inclusivity, ESG will be hard-pressed to gain the momentum necessary to achieve the substantive changes that humankind needs.”
The value of a free market of ideas has not kept some of the world’s most influential investment managers from building progressive walls around ESG and creating de-facto standards for what it means to be ESG. Abortion funding and Equality Act support is in. Pro-life belief and religious liberty are out. Gasoline is evil. Batteries are holy. White, heterosexual males on the Board are passe.
Not to be outdone, President Biden’s SEC Commissioner appointee Gary Gensler, has also begun taking steps to create a prescriptive definition that any investment with ESG on the label would have to comply with. This potential regulation is proffered under the noble banner of transparency and accountability, which I agree are important in the war against “greenwashing” and other misleading advertisements,
but the general consensus is that the resulting definition would qualify “ESG” as a synonym for “woke”. Transparency is one thing, excluding ideological dissidents from the marketplace is another.
As the CEO of a faith-based ESG fund company, I can tell you that we and others who share our conservative viewpoints on ESG issues have gotten the cold shoulder more often than a warm handshake. Far from being a welcoming, inclusive community, the ESG investing playground is being dominated by progressive bullies who push and shove smaller players with different viewpoints out of the sandbox. To point, several publishers (who will remain nameless) of databases, rankings, and lists of ESG funds routinely refuse to include many faith-based ESG funds because these funds, though comprehensive in their address of the widely followed Sustainability Accounting Standards Board’s ESG materiality categories, do not toe the progressive party line on issues such as diversity and bioethics.
The result has been a chilling effect on the promulgation of investment options with conservative takes on ESG issues. The hijack of ESG by progressives has also sparked opposition to ESG in general from many conservatives in Congress and elsewhere, creating roadblocks to what could be beneficial investor access to values-aligned investments in their 401(k) and other retirement accounts once the political winds shift back in their favor under a new administration.
A recent The Stanford Review article titled “Toward A New ESG” addresses this conservative chilling effect and suggests a more inclusive approach,
“Conservatives have tended to either tacitly accept ESG investing under the presupposition that it benefits the common good, or oppose it due to their Miltonian dispositions toward shareholder returns. Both approaches are inadequate. Conservatives wielding capital ought to consider building a distinctly alternative ESG, optimizing the best themes out of available ESG investment products while substituting in their own flavor of values-aligned investing. Rather than condemning or copying mainline ESG investors, they should rigorously form new investment theses and financial products that align with specific moral visions advancing the common good.”
If the SEC truly cares about the best interests of investors, Commissioner Gary Gensler should eschew attempts at discriminatory definitions of ESG that favor certain political and social viewpoints over others. And if progressive ESG investors truly value diversity and inclusion, which they demand so vehemently their portfolio companies embrace, then they should welcome conservatives and faith-based investors to the ESG industry, dissenting viewpoints and all. The result would be a robust marketplace of competing viewpoints where investors are free to align their capital with the approach they believe best supports their preferred financial and ideological future.
Sounds like a free market, which in today’s America might explain the resistance.