Asset Managers Dispute Biden’s Claim That ‘Extensive Evidence’ Supports ESG Investing
President Joe Biden used his veto power on Monday to block a bipartisan action from Congress that would have prevented pension fund managers from investing retirees’ money according to environmental and social-justice criteria.
“There is extensive evidence showing that environmental, social, and governance factors can have a material impact on markets, industries, and businesses,” Biden stated.
However, despite attempts by its advocates to brand environmental, social, and governance (ESG) criteria as an effective risk-management tool, recent bank failures such as Silicon Valley Bank (SVB) suggest the opposite.
In defense of ESG, Senate Majority Leader Chuck Schumer (D-N.Y.) wrote in a Wall Street Journal op-ed that “America’s most successful asset managers and financial institutions have used ESG factors to minimize risk and maximize their clients’ returns. In fact, according to McKinsey, more than 90 percent of S&P 500 companies publish ESG reports today.”
This echoed a statement by Bank of America CEO Brian Moynihan in 2020 that “our research shows that companies that do well on ESG end up doing better, or fail less.” Also advocating for ESG, The New York Times was quick to “fact check” critics who claimed that ESG was partly to blame for SVB’s demise.
In an op-ed titled, “No, ‘Wokeness’ Did Not Cause Silicon Valley Bank’s Collapse,” the Times argues that SVB “was not an outlier in its diversity goals or its ESG investments,” which is accurate as far as it goes. But the fact that most other financial institutions are doing the same thing is not reassuring to many who are concerned that ESG will now be used as a risk-management criteria for pensioners’ money.
Hiding Management Failures
“If management is focusing on ESG, then important functions like risk-management can easily fall to the wayside,” Aharon Friedman, a former senior counsel to the House Ways and Means Committee and former senior advisor to the Treasury Department, told The Epoch Times. “ESG metrics are inherently subjective and unquantifiable, so using ESG factors to measure a company’s performance can hide bad management practices.”