These elected officials, the senators wrote, are engaged in a purely ideological, anti-capitalist crusade against free-market principles.
Thus, both ends of the political spectrum end up on the same page, accusing pro-market, anti-ESG critics of subverting free-market principles.
The old left and new right are converging in other areas. The trio of Democratic senators write of the “significant economic risks” of not transitioning to a low-carbon economy. Krein agrees. Major environmental catastrophes are generally bad for business, he writes. Clean energy also gets the nod. It’s the future, Klein avers, and missing out on it represents “a major business risk.” Krein even supports some aspects of the corrosive diversity, equity, and inclusivity (DEI) component of ESG. Disney, he suggests, “can easily make a prima facie case that its management should reflect the demographics of its target audience.”
Sure, ESG is hard to pin down. It’s not a coherent investment strategy and means different things to different people. As Krein puts it, its purpose “isn’t entirely clear,” a factor explaining much of its appeal. Nonetheless, he prefers to view ESG as a passive risk-disclosure matrix, downplaying ESG as a vehicle for promoting a political agenda—surely the reason why Sens. Whitehouse, Schatz, and Heinrich are such ardent advocates of ESG and why the U.N. birthed ESG in the first place.
In this telling, index investment-product providers such as BlackRock, the world’s largest asset manager, are relatively indifferent to the performance of individual stocks, something that happens to be broadly true. Then follows confusion. Index product providers do care about beta or overall market risk, Krein says. However, beta isn’t a measure of market risk—or, as the finance jargon has it, non-diversifiable risk. Beta is a measure of the riskiness of individual securities or groups of securities compared to the market as a whole. Because macro-economic factors, such as the Fed’s monetary policy, drive overall market risk, asset managers like BlackRock use ESG to disclose such macro risks, Krein claims, even though, as its initials imply, ESG has nothing to say about interest rates, inflation, and gross domestic product growth. It’s all nonsense on stilts.
Krein argues that conservatives should drop their “silly pretense” in the efficacy of markets and promote a conservative version of ESG, incorporating “their own substantive goals”—an implicit admission that ESG is indeed a vehicle for promoting a political agenda. This is asking conservatives to accept two counterintuitive propositions: first, that Congress and the administrative state have the potential to be more efficient capital allocators than markets, and second, that conservatives can impose their cultural values and political preferences on Wall Street and blue-state pension funds such as CalPERS, CalSTRS, and the New York State Common Retirement Fund.
Entirely missing from Krein’s account of ESG is any notion of beneficiaries. Trust law, statutes such as the Employee Retirement Income Security Act of 1974 (ERISA), and the courts require fiduciaries to act in the sole financial interests of beneficiaries. This mandate is anathema to collectivists of all stripes who want access to trillions of dollars of retirees’ capital to pursue public-policy objectives purportedly necessary for societal improvement and bringing harmony between people and planet. This effort to socialize savings is already underway in Europe. By joining with the left, the new right would help bring about the very thing it deplores: the Europeanization of America. Is this what national conservatism is going to be about?
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