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McRae: ESG Presents A Slippery Slope

By David McRae, Mississippi Treasurer

You may have heard — and I have written previously — about the ESG movement. ESG stands for environmental, social, and governance. In business and investing, ESG is supposed to be a method of rating and evaluating how sustainable and ethical various companies are, but in practice, it is a political football that unjustly cherry picks winners and losers (and all too often, it is you who loses)

According to NerdWallet, an ESG assessment of a company reviews its policies related to the environment, such as waste management, energy use, and emissions; its social policies, such as how employees are treated, diversity in the workforce, and human rights practices; and its governance policies, such as how leaders operate the company, the diversity of leadership and board members, political donations and lobbying, and legal issues.

Whether you agree with the objectives or not, the fact is that ESG standards are being applied subjectively, often according to perceived political ideology rather than hard facts.

Consider this: One might think that Tesla, the world’s largest electric vehicle manufacturer, would earn a high ESG rating for its environmental stewardship. But no, it was kicked off the S&P ESG Index earlier this year.

Who remains? Left-leaning Apple and Nike (both of which have been accused of historic human rights violations that directly contradict the stated mission of ESG). Oil juggernaut Exxon also holds a spot on the list. It doesn’t quite make sense, does it?

While Elon Musk’s Tesla has taken some heat from ESG scorers, the main focus of their ire today is on the coal industry – and they’ve been quite successful. The U.S. coal industry has largely been destroyed by a combination of overly-stringent federal regulations and capital starvation from ESG-aligned investment funds. Meanwhile, China and India are building new coal plants every day. What if the oil and natural gas industry is next? How will that affect rig jobs in Mississippi? What if the agriculture industry becomes a target for methane production? What will happen to our beef, pork, and chicken producers? What if Mississippi’s timber industry gets blacklisted by the ESG crowd? That industry alone supports thousands of Mississippi jobs.

And will it stop at industry targets? Some say Mississippi’s conservative state laws could make the state itself a target, jeopardizing our credit rating and costing taxpayers millions. It’s a slippery slope.

The fact of the matter is that ESG is nothing more than a feel-good agenda written by liberal elites. If you invest in retirement funds, it won’t get you closer to retirement. If you have a college savings account, it won’t help you afford an education for your child. And frankly, if you care about the earth, it won’t even clean up the environment as it promises to do. Instead, ESG policies undermine the free market, your free will, and our economic freedom. As a financial officer for the state charged with supporting a strong economy and ensuring the college savings and pension systems remain funded with good returns, I will continue to fight the radicalized ESG agenda.

As always, please contact your Treasury office at (601) 359-3600 if we can help you with unclaimed money, college savings, or other issues.