Environmental, Social and Governance (ESG) investing is just "the left's new way of imposing their worldview on the country," according to Alabama Attorney General Steve Marshall.
ESG is an approach to evaluating how a corporation aligns itself to social goals beyond earning a profit for its shareholders. These goals often pertain to environmental sustainability but also to advocacy for certain social movements and commitment to "diversity, equity and inclusion" (DE&I).
Organizations, such as MSCI, award ESG scores to corporations supposedly based on their adherence to ESG values. Large asset management groups, such as BlackRock Inc., Vanguard and State Street, and banks such as JPMorgan and Bank of America, use ESG ratings to choose where to direct capital.
Other critics have called ESG investing a "wokeness report card" and compared it to China's social credit score system.
Marshall said in an interview with 1819 News Friday that "ESG is simply another mechanism for the left to impose their philosophy on this country."
"We've seen the Biden administration, through various rule-making attempts, use that as the mechanism to enforce policies as opposed to getting Congress to pass it or to get states to adopt it," Marshall said.
Marshall has been one of many Republican attorneys general to petition against measures at the federal level which might benefit companies for ESG investing or having good ESG scores, or require companies to issue something along the lines of ESG reports.
SEE ALSO: ESG criteria used for some of Alabama's best-known brand names — 'Important and a factor'
On June 15, 2022, Marshall signed a letter with other state attorneys general to comment on proposed rule amendments from the Securities and Exchange Commission (SEC) titled "The Enhancement and Standardization of Climate-Related Disclosures for Investors."
The proposed rule sought to require companies to disclose climate-related information to investors.
"The Proposed Rule appears to be an intentional step toward a command-and-control economy in which investors, as a practical matter, are permitted to invest only in companies palatable to massive shadow banks and federal government functionaries," the letter read. "... the Commission is now trying to intimidate boardrooms into reordering these priorities—profit will become secondary to political interests, and capitalism will fall by the wayside."
On December 31, 2021, Marshall signed another letter against a proposed rule of the U.S. Department of Labor (USDOL) that would allow Employee Retirement Income Security Act (ERISA) fiduciaries to "make investment decisions that reflect climate change and other environmental, social, or governance considerations, including climate-related financial risk, and choose economically targeted investments selected, in part, for benefits apart from the investment return."
Marshall and other authors of the letter did not believe that fiduciaries should consider social and political issues in decisions about what to do with an employee's retirement savings.
Marshall said he believes there is a great deal of pressure on corporations in the United States to comply with the ESG agenda, fearing the loss of capital if they do not. He even said he fears the left could eventually use ESG scores to hurt civilian firearm manufacturers.
"We've already seen stories about where firearms manufacturers are having trouble securing insurance," said Marshall.
In Alabama, public employee pensions are handled by the Retirement Systems of Alabama (RSA). 1819 News asked the RSA in August whether they used ESG scores as a factor in its investments.
"The [RSA] does not, like states such as California, have an [ESG] policy," explained Jo Moore, the RSA's deputy director for administration. "However, ESG criteria [are] important and a factor to be considered in selecting an investment because of its impact on the Wall Street trading of companies. RSA relies upon many factors such as historical and projected growth, cash flow, and wide diversification among numerous asset classes in pursuit of the best risk-adjusted rate of return for its members' retirement."
1819 News requested further clarification about the comment from RSA, either from Moore or another representative.
In response, Moore stated that the RSA "does not utilize an ESG scoring system" but would not specify whether ESG scores are used in determining which investments the RSA decides to make when asked for a yes or no answer.
Moore also declined to comment on why ESG scores are important or respond to the criticisms of ESG investing.
Marshall said he doesn't know whether or not the RSA uses ESG scores as a factor in making investments due to how the RSA is set up. He said he is committed to battling ESG criteria from making their way into federal law.
"Most folks don't have any idea what ESG is," Marshall said. "It needs to start grasping people's attention. This is just another way for the left to leverage financial advantage to accomplish their policy ends."
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