October 20, 2022

Oran P. Smith, Ph.D

Senior Fellow

Conservative author and commentator William F. Buckley famously said that “a conservative is someone who stands athwart history, yelling ‘Stop!’”

He also suggested that there would be consequences for attempting to shovel sand in the gears of the progressive machine.

Among those who were thought to be Chicken Littles were conservative financial policy experts who predicted that progressives in power would find new ways to use your money to advance their agenda.

The amorphous dangers they have been predicting have now coalesced around a phenomenon known as ESG.

ESG stands for Environmental, Social, and Governance. Its work is to use the nation’s financial system (including your money and your finances) to reward progressives and punish conservatives. Here are a few examples of how ESG works:

  • Dinging your personal credit score if your personal investment choices do not support a progressive agenda…you would be assigned a sort of “social credit score.” [Planned Parenthood=good. National Right to Life=bad. Driving a Prius=good. Owning a Tahoe=bad.]
  • Using investment firms like Blackrock to direct state government trust funds away from oil and natural gas companies and toward solar companies or companies that have affirmatively embraced climate change politics.
  • Using mutual fund ratings to impact world politics. Support for the State of Israel can hurt a firm’s score in Morningstar’s Sustainalytics ratings. (You read that right. It’s the BDS movement at work.)
  • Using the power of government to pass legislation (or insert regulations) that would require companies active in the state to report ESG scores calculated on the basis of factors like whether the company has racial quotas for hiring, has a personal pronouns policy, compensates employees based on meeting certain social agenda goals, or supports progressive causes.

It is not hard to see where this madness leads….

  • Your credit score is lower, so it costs you more to borrow money for a home, a car, or provide a college education for your children.
  • The actual profitability of a company becomes less important. Financial soundness bends to political box-checking. Downstream that means you make less in returns on your investments. Goods and services cost more for everyone.
  • Solid companies that have done nothing wrong earn the Scarlet A and are suddenly losing customers, struggling to borrow money for capital improvements, being kicked off of stock exchanges, or even being picketed. A company need not be conservative to be in the crosshairs. Simply opting out of the culture war would be sanctionable.
  • If you are a cartoonist, like Dilbert’s Scott Adams, you could find yourself cancelled by 77 newspapers nearly overnight for pointing out all of the above.

The fight against ESG will not be easy. But (for now) states can take action to protect pension funds and investments from ESG bullying. The State Financial Officers Foundation (composed of State Treasurers and State Auditors including our own Curtis Loftis), have spoken out and are taking action as well. (And as Mr. Buckley predicted, these eighteen elected officials are being attacked for saying: “Stop!”)

Palmetto Promise Institute will work with likeminded state organizations already deep into this fight and recommend a menu of actions South Carolina can take to protect our state’s economy and its people from social agenda-driven financial manipulation like ESG.

Note: For a more in-depth analysis than we have had space to present here, the State Financial Officers Foundation is an excellent resource.