ESG Funds Upend Retirement Investing
The “Go Woke – Go Broke” mantra is now hitting retirement funds. The White House issued new 401(k) regulations. Fund managers are empowered to offer investment options that consider ESG issues. ESG stands for environmental, social and governance. Managers can invest based on some undefined social justice score instead of financial returns. Financial experts see ESG funds hurting industry, delivering worse returns, and changing the fiduciary relationship between investor and asset manager.
Biden’s measure is no small feat. The total value of all US 401(k) account was $7.3 trillion in 2021. Mountains of money will be funneled into the White House’s hard left progressive agenda.1
ESG funds force everyday Americans into financing causes against their will. An employer may only offer a choice between ESG focused investment funds at their jobs. They can also make the ESG fund the default 401(k) choice. Employees may not even know their money is being used to fund radical left-wing aims.
Go Woke – Go Broke
Blackrock is leading the “woke capitalism” charge. CEO Larry Fink stated that it aims to invest a portion of its $8.5 trillion in holdings in ESG funds. Blackrock wants to prioritize climate change and workplace diversity over profits.2
However, ESG funds do not perform as well as regular funds. A Harvard Business Review article noted, “ESG funds certainly perform poorly in financial terms…none of the high sustainability funds outperformed any of the lowest rated funds.”3
BlackRock’s ESG Aware fund charges fees five times higher than those of its Core S&P 500 fund. In fact, ESG investment funds have 43 percent higher fees than conventional investment funds.
Professional investors are troubled by the ESG mandates. The standards to keep the “ESG” label keep getting stricter. Less than 20% of them meet European standards. Europe wants to prevent ‘green washing’. They don’t want funds to benefit from the label unless they meet their draconian socialist standards.4
There is also a lack of reliable ESG data. A Coalition Greenwich senior analyst said, “If you don’t have reliable ESG data about an issuer or issuance, then it’s harder to calculate what the negative consequences might be.” Investors are getting exposed to considerable losses. And without any real data, achieving ESG goals may be impossible. What ‘feels’ right will soon supersede actual results.5
States Are Fighting Back
States are fighting back against the ESG mandate. Louisiana and Missouri divested a combined $1.3 billion from Blackrock. Florida divested $2 billion worth of assets from them as well. Florida Governor Ron DeSantis vowed to fight against “woke capitalism”.
“BlackRock CEO Larry Fink is on a campaign to change the world,” Florida CFO Jimmy Patronis said in a statement. “BlackRock’s social-engineering project isn’t something Florida ever signed up for.”6
Texas Attorney General Ken Paxton said, “They go to these companies and force them to change policies. In the end, that costs shareholders who are retirees, and people in my state, literally thousands of dollars, and it could be millions of dollars over a lifetime.”7 That would compound losses already suffered by retirement funds.
Advocates against the ESG mandate say woke capitalism negates our whole government process. It forces changes that couldn’t get passed in Congress. Government is no longer respecting the will of the people and protecting their rights. It gives Big Finance the power to shape every American’s life. Personal choice will soon be gone. Unaccountable groups of elites can now force everything from energy policy to pronouns usage.
If your employer or pension manager makes it hard to avoid contributing to a ESG 401(k), consider other investment opportunities. An individual retirement account could help you save your freedom. Our Gold IRA can protect your wealth and keep you from supporting a left-wing agenda that can harm our country.