Last year, when I was speaking at an open forum, I was asked a question about the ESG Index, which I answered. After the session, I had several people come up to me and express their surprise that I knew what these ESG rules were and had an answer for the questioner.
I suspect those people know quite a bit more about ESG now. Stephen Moore, for example, warns: “Biden’s ESG Investment Rules Threaten Your Retirement Savings.” The Labor Department “announced a new rule that will permit money managers to play politics with trillions of dollars of people’s retirement savings.” That means that retirement fund managers can select stocks of companies based on their positions on environmental, social, and governance criteria.
As I have mentioned in previous commentaries, ESG investments have performed poorly financially. Stephen Moore points to money managers who divested in traditional oil and gas companies, such as Exxon or Chevron. They were two of the highest-performing stocks last year.
But ESG investing hasn’t even achieved its goals. He cites research from Columbia University and the London School of Economics. They compared the 147 ESG fund portfolios to the 2,000 non-ESG portfolios. The ESG companies were often worse when it came to labor and environmental law compliance.
It does appear that the ESG fad is waning because of various stories in the media and research that compares annual returns. In some cases, retirement funds have lost money. Stephen Moore concludes, “There goes that payment on that retirement home in Arizona or Florida.”
That’s why more Americans are paying attention to ESG rules. It affects their investments and retirement savings.