There’s a new acronym making its way into our vocabulary; no it’s not “TCB”, “TGIF” or “YOLO”. The acronym I’ve been hearing a lot is “ESG”, as in “Environmental, Social and corporate Governance” but until very recently this term was known only in the investment world.
For many years, American investors have wanted new options for parking their retirement funds. ESG considerations are becoming increasingly popular as a way to gamble on companies that have strong records on issues like supporting clean energy, employing a diverse work force and holding executives accountable. By buying stock in companies with strong ESG scores, investors show their belief that those companies will succeed because future generations will increasingly value these goals. Doesn’t seem so bad?
Unfortunately ESG has become the latest political football used to pull us apart. If we follow the 24-hour cable news cycle and year-round political campaigning, we might be told that there are no grey areas, we must be 100% for or against the latest political football, and this now includes investment strategies.
Candidates and cable news hosts are clamoring against “woke investing”, and the U.S. House of Representatives recently passed a bill that would have outlawed the consideration of ESG policies by investors, essentially handcuffing the free market. The bill died when the President exercised his very first veto and kept the investing decision in the hands of the investors. It’s unfortunate that several states have already passed similar legislation, but I’m proud to point out that The Hospitality State is not one of them.
One of the biggest investment firms is BlackRock, responsible for managing $10 trillion in assets. According to the BlackRock CEO, “We believe more than ever that climate change is an investment risk, and we are seeing that through our clients and how our clients are allocating capital.” In 2020, the CEO announced environmental sustainability as a core goal for his company’s future investment decisions, including plans to sell $500 million in coal investments.
One event right here in the Pine Belt is a perfect example of why BlackRock is backing sustainability. In last week’s edition of the award-winning and very-affordable Pine Belt News, the senior staff writer celebrated Cooperative Energy’s new, high-efficiency gas powered plant in Lamar County. Power plants across the country are moving away from older coal technology toward new gas turbines, and Plant Morrow is expecting cleaner, more profitable operations with carbon emissions cut in half.
Social responsibility is part of these decisions being made by power companies across the country; they want to be good neighbors, keeping air and water clean and ensuring a healthy future for their community. But they also are businesses needing to operate profitably, and switching from old coal to new gas technology will pay financial dividends to Cooperative Energy for years to come.
This is the same concept followed by BlackRock; they look for future trends that will lead to greater profits for their clients, and investing in the shift away from coal and oil and toward renewables and an upgraded electrical grid are just smart business decisions. It is Free Market Capitalism responding to a rapidly changing world.
Investment firms understand that their clients want good financial returns, and that their clients are interested in making progress. The recent attempt to ban ESG investing would have limited the Free Market choices available to investors. It may not roll off the tongue quite like “ASAP” or “SNAFU”, but ESG is an acronym that I hope can be taken out of the political theater and left in the marketplace.
Chris Werle of Lamar County is Mississippi state coordinator for Citizens’ Climate Education. Write him at chriswerle@cclvolunteer.org.
