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ESG is increasingly becoming another front in the political battle between Democrats and Republicans. Over the last decade, ESG has been embraced by many asset managers and has been used to encourage corporations to evaluate decisions beyond just finances and consider environmental, social justice, and governance implications. This has led to a pushback among conservatives who are opposed to corporate activism and want a return to when investors and companies focused on financials.

It culminated with legislation passing in many red states that bars asset managers from considering ESG factors when making investment decisions with state funds. The same battle has raged at the federal level. In a Reuters article, Daniel Wiessner covers the Biden Administration’s filing to toss a lawsuit from a consortium of 25 Republican-led states which is looking to uphold the Trump Administration's ban on socially conscious investing by employee retirement plans. 

The ruling would impact retirement plans of nearly 150 million Americans, representing $12 trillion in assets. According to the Department of Justice and the Biden Administration, retirement plans should consider ESG factors in addition to financial information due to their impact on a company’s long-term health.   

Finsum: Republicans are looking to fight back against ESG investing. In turn, the Biden Administration is looking to toss a lawsuit from Republican states which would ban ESG investing for employee retirement plans.


Published in Wealth Management

In an article for Bloomberg, Anchalee Worrachate covered a recent note from Goldman Sachs’ Della Vigna who was critical of the ESG movement and said that it is leading to underinvestment in energy production. In turn, this would lead to higher prices down the road and hurt the energy security of developed countries as was briefly experienced in the months following Russia’s invasion of Ukraine.

He believes ESG has focused too much on divesting from fossil fuels rather than investing in renewable energy. Over the last 10 years, capital expenditures on energy production have fallen short of what’s necessary. Vigna notes that spending on renewables is rising, but it’s not close to enough to make up the gap.

Another criticism of ESG is the focus on absolute emissions rather than the carbon footprint of emissions. Vigna says this is misguided, because it simply means less energy production rather than boosting zero emission energy production.

Vigna is worried that the US and Europe have lost the urgency that they felt in the spring of 2021 to expedite the energy transition process given its numerous secondary effects. He warns that the equilibrium remains very tight, and there is the risk of another surge in prices. Despite this threat, the momentum to transition has slowed, and ESG proponents have gone back to a focus on emissions rather than new sources of energy. 

Finsum: Goldman Sachs’ Della Vigna believes that the energy transition to renewable sources needs to be expedited, in part, due to ESG’s focus on reducing emissions.


Published in Wealth Management

In an article for Forbes, Jon McGowan discusses how five out of the eight insurance companies, who were among the early signers of the agreement, are leaving the United Nations’ Net-Zero Insurance Alliance due to antitrust concerns and a backlash regarding ESG. 

The alliance was formed in 2021 to encourage the insurance industry to proactively work on solutions towards climate change. The goal was to get to net-zero emissions by 2050 by promoting change of internal practices and to use investment decisions to encourage other stakeholders to reduce their emissions as well. It also mandates disclosures of decisions related to climate change and is modeled on financial disclosures that are required by the SEC. 

This has raised antitrust concerns given the coordination of companies within an industry. It also has led to opposition due to the recent, heated pushback against ESG investing which has intensified with Republicans taking over Congress. At the statehouse level, Republicans have also mobilized to ban use of state funds from using ESG factors in investment decisions. 

Finsum: Insurers are leaving the UN Net-Zero Insurance Alliance due to antitrust concerns and the backlash over ESG investing. 


Published in Wealth Management
Tuesday, 23 May 2023 17:14

ESG Fails to Catch On With Public

Over the last decade, ESG investing has grown increasingly popular among asset managers as a way to evaluate investments and reward corporations for considering environmental, social, and governance factors when making decisions. 

Like any trend, there has been a backlash as many conservatives believe that corporations should focus on financial metrics. And, there has been a wave of legislation from Republican governors and state legislatures banning the use of ESG factors by asset managers, managing state funds, when making investment decisions.

Given its prevalence in institutions and rising salience as a political issue, it’s interesting to look at recent Gallup polling which shows that the issue has had little impact on most Americans regardless of their political affiliation.

Even though the issue has entered the political arena in the last couple of years, only 38% of Americans are familiar with the term which is unchanged from 2021, the last time that Gallup conducted a poll on the issue.  In addition, 40% of Americans were not aware of ESG at all, while 22% were somewhat familiar with the concept.

Clearly, ESG investing is a big deal for institutions and politicians, it’s failed to break through to the public.

Finsum: ESG investing has grown in prominence among investors and politicians. However, Gallup polling shows that it’s not on the radar of most Americans.


Published in Wealth Management
Friday, 19 May 2023 10:44

In debt to whom?

Someone say doomsday scenario?

Or at least strongly imply it?

Democrat; Republican -- you can just shunt the ideologies aside. Both have a separate point of view with no end in sight in order to circumvent default as the government edges toward its so-called debt ceiling x-date, according to cnn.com. That, of course, is when the Treasury could find its pockets empty, meaning paying all government obligations would require extraordinary measures.

Okay, so while the odds still are relatively low that the government will default on its debt, Wall Street’s no fan of the impact the equity markets would feel in light of debates flashing no indications that the credits are anywhere near rolling.

Meantime, investors should devote rapt attention over the next few weeks and, as one expert suggests, stand poised to become “a bit more defensive,” according to cnbc.com.

At this point, at least, setting aside the fact the short term Treasurys have priced in reluctance, significant volatility isn’t necessarily in the cards as far as the markets are concerned.

“Congress was willing to play the game of chicken, but there were fewer members of Congress actually willing to crash the car,” said Betsey Stevenson, professor of public policy and economics at the University of Michigan.

Published in Eq: Total Market
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