Despite growing opposition to Environmental, Social, and Governance (ESG) investment practices, government agencies are colluding with Big Business to mandate the assessment of climate change risk in financial investments.
The Federal Reserve Board recently announced a partnership with the nation’s six largest banks to pilot a “climate scenario analysis exercise” to measure and track climate-related financial risks. The program will commence in early 2023 and conclude by the year’s end. The six participating banks include Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo — banks that are sipping the ESG Kool-Aid and have discouraged the financing of domestic oil and gas projects.
ESG funds have been shown to greatly contribute to and perpetuate inflation.
This comes after the Biden administration’s Financial Stability Oversight Council identified climate change as a threat to financial stability. While the agency claims the pilot analysis will identify risks and promote risk management practices, the announcement warns that “no firm-specific information will be released” after this exercise concludes.
With the Federal Reserve already raising interest rates in response to inflation, this policy will only undermine our central banking system.
Much to the chagrin of the Fed and these six banks, as financial institutions pursue ESG funds, they will soon learn that the financial returns don’t match up with their supposed touted benefits. Highly rated sustainability funds may attract more capital, but, when assessed for stability, they tellingly don’t outperform lower-rated funds. Rather, the companies that are bullish on ESG funds ironically perform very poorly in terms of sustainability and environmental stewardship.
Available data from Columbia University and the London School of Economics, for instance, found that ESG fund portfolios had horrible track records for labor standards and environmental rules compared to non-ESG portfolios. “In fact, on average, ESG funds pick firms with worse employee treatment and environmental practices than non-ESG funds,” the paper asserted.
The findings also determined that ESG funds charge exorbitant management fees and “obtain lower stock returns relative to non-ESG funds run by the same asset managers in the same years.”
Even the Harvard Business Review concluded that ESG investing won’t save the planet.
In addition to having a poor return on investment, ESG funds have been shown to greatly contribute to and perpetuate inflation. The “E” and “S” prongs, when reflected in funds, have ruinous effects on the economy.
Most notably, en-flation — defined as net-zero policies that force a transition from fossil fuels to unreliable renewables like solar and wind — leads to higher energy prices that are ultimately passed down to consumers.
When companies similarly focus on Diversity, Equity, and Inclusion initiatives, the very act is cost-inflationary because they dedicate too much time to fulfilling subjective political quotas and not enough time on perfecting their business model. Furthermore, as social initiatives are adopted, businesses will have to spend more and accrue high labor costs — ultimately passing costs down to consumers as climate funds do.
Since ESG funds aren’t profitable and are shown to significantly exacerbate inflationary woes, even chief financial officers want financial institutions — including big banks — to refrain from politics and social causes altogether. One ESG reporting expert, Bob Eccles, was quoted as saying, “[W]e would be better off if ESG investing would just go poof.” CFOs also agree with Eccles.
A September 2022 CNBC CFO Council Survey revealed executive frustration with both regulators and asset managers that force ESG behaviors on business practices. Only 25 percent of CFOs polled support the proposed Security and Exchange Commission Scope 3 rules, compared to 55 percent of CFOs who oppose it. Thirty-five percent of respondents “strongly oppose” the SEC rule. With respect to states banning ESG considerations in state pension funds, the same survey revealed that 45 percent of CFOs support Republican governors banning them, compared to 30 percent who were neutral on the issue and 25 percent who were opposed.
The Federal Reserve Board’s mission statement is to “foster the stability, integrity, and efficiency of the nation’s monetary, financial, and payment systems so as to promote optimal macroeconomic performance.” The agency promises the pilot analysis will have “no capital or supervisory implications,” but ESG proponents have proven unprincipled and opportunistic.
A pilot program that mandates adopting ESG metrics to risk assessment will create vast financial instability, foment more distrust in top banking institutions, and undermine American free enterprise. It would be wise for the participating banks, should they desire to build rapport with consumers, to rescind their participation.