The fear of extreme weather and civic unrest has inspired investors of all sizes to buy environmental, social and governance (ESG) securities. The global
Banks have appropriately responded by making it easier to invest in a greener and more equitable world with ESG dedicated funds. Companies and governments have more frequently added a green or social label to their bond issuance to attract investor interest — lowering interest costs.
The rise of ESG investing exemplifies supply meeting demand in the free market, but some conservative leaders seem to have forgotten their Econ 101. Instead of recognizing growth in ESG as an apolitical outcome of free markets, they are attempting to intervene through partisan rhetoric without any rational basis. Their proposals would raise costs for taxpayers while diverting investment from good causes — a double whammy.
Florida Gov. Ron DeSantis is the latest critic without an argument. Last month, he
Ironically, ESG investments have
More dangerous are the anti-ESG laws promulgated by Texas and several other states which seek to ban banks that have increased ESG practices in response to market demand. Texan lawmakers have made it illegal for local governments to conduct business with financial companies who have policies limiting exposure to the
Texas took an additional and more illogical step with a law that attempts to protect the
Texas' decision to ban these banks limits competition — hindering the free market. With a smaller pool of financial companies driving up prices,
Oddly, the anti-gun stance of banks does not even fit the definition of ESG, which means to invest in projects or companies with a positive impact on the environment or society. Businesses deciding not to act in a way that could harm their communities is not really ESG, but simply responsible corporate behavior.
Despite some conservative's claims, it's not true that companies should prioritize profit above all else. Take a look at the pharmaceutical companies like
In a May op-ed,
His argument misconstrues investor demand and law-abiding behavior with a supposed radical agenda; but the logic does not hold. If Pence truly wants the market to be free, then he would recognize banks' ESG practices as a rational response to demand from their customers. The only agenda driven by extreme ideology is the vitriol against ESG, and it presents a dangerous threat.
Pence and others want to stop the remarkable growth in ESG, but that would mean tampering with free markets — not protecting them. And what is their reason? Do they want to make it harder for people to invest in green projects or buy stock in companies that promote social responsibility?
What else would right-wing extremists try to outlaw under this inaccurate, irrational argument? Would they attack companies with diverse hiring practices that give opportunity to racial minorities? Would they backlash against businesses that support LGBTQ+ employees?
But Pence and DeSantis don't care about the majority. The argument against ESG has no grounding in free market ideology. They only care about imposing their own political beliefs on others at whatever cost. And that cost would be enormous.
Kevin Bain is the Debt Manager for the City of Detroit and a Partner in