The Left’s weaponization of investment and retirement accounts through
environmental, social, and governance
has encountered serious opposition. In response to legal, legislative, and PR challenges, BlackRock — the largest asset manager in the world — and many others are at least rhetorically backing away from ESG because it has gotten “too political.” Larry Fink, BlackRock’s CEO, even said
he was “ashamed”
to have gotten caught up in the debate over ESG.
But we shouldn’t take a victory lap.
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While some very significant firms are changing their messaging and proxy voting, there is a real danger that the ESG agenda will be pursued in the shadows and under new names. Another imminent risk comes from European regulations.
Right now, ESG is baked into the new European Corporate Sustainability Reporting Directive and the International Sustainability Standards Board proposals. The CSRD will begin affecting multinational corporations in fiscal year 2024 and can deny American companies access to the important European market. Even companies that don’t operate in Europe will eventually be forced to comply if they are downstream suppliers for the vendors of larger companies.
To add insult to injury, a United States House committee is investigating the Biden administration’s SEC for quietly working with its European Union counterparts to make European regulations as impactful as possible. In the process, the SEC is,
as several U.S. lawmakers observed
, “willfully circumventing the U.S. regulatory process by actively coordinating with foreign governments to dictate climate and economic policy to U.S. companies.” At the same time, the SEC has proposed its crushing Climate Disclosure Rule.
Europe is already gloating about the impact. Mairead McGuinness, the EU’s financial markets and services commissioner, has said that companies that do not comply with ESG regulations
have no future in Europe
.
But even pro-ESG U.S. Treasury Secretary Janet Yellen
has said this goes too far
, warning of its “negative, unintended consequences.”
EU policies have weakened its economies, leaving its leaders with no reason to gloat. If there is any truth about economies in the 21st century, it’s that they must enjoy low-cost, abundant, and reliable energy. ESG regulations, however, have undermined energy security, forcing Europe to look to Russia and elsewhere. Now Europe is paying the price.
This is only the capstone to
a decade of weak economic growth
, much of which preceded both COVID-19 and the war in Ukraine.
It’s been said that the Paris Climate Accords are the hammer for the E of ESG. But it’s important to remember that the agreement has not been ratified as a treaty by the United States. Therefore, American companies do not have to comply with it. In response, the EU is forcing compliance via regulations.
Thankfully many Americans and Europeans are awakening to the politicization of investments and corporations by the Left via ESG. Europeans, in particular, are bearing the brunt of it every single day. The EU and individual nations’ overreach has increased costs for food, made energy more expensive and less reliable, manipulated transportation, choked the economy, increased reliance on Russia and China, and changed the political landscape across Europe.
Needless to say, the U.S. is not far behind, but it cannot afford to follow Europe on ESG.
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The fight against ESG is entering a new phase at home and abroad. The “compliance wars” have already begun. Under no circumstances should we sacrifice our national sovereignty and prosperity for the sake of entering an increasingly stagnant European market. With friends like these, who needs enemies?
Paul Fitzpatrick is president of the 1792 Exchange, an organization dedicated to advancing freedom by protecting small businesses and nonprofits and moving corporations back toward neutral.
