Biden's ESG Investment Rules Threaten Your Retirement Savings

Townhall ^ | 01/17/2023 | Steve Moore

[SeekAndFind]

President Joe Biden's Labor Department recently announced a new rule that will permit money managers to play politics with trillions of dollars of people's retirement savings.

The administration is pushing environmental, social and governance investing, which allows retirement fund managers to select stocks of companies based on their positions on social and environmental issues.

Put simply, retirement savings will be used as leverage to force companies to reduce their carbon emissions and establish racial and gender quotas and other social justice fads completely unrelated to securing a high return on workers' lifetime savings.

For example, to reduce greenhouse gases, money managers have divested in traditional oil and gas companies such as Exxon or Chevron. How has that worked out so far? Last year, these were two of the highest-performing stocks.

Socially conscious investing has been around for decades. I have no problem with individual shareholders choosing stocks that comport with their personal values. I have friends, for example, who refuse to invest in Starbucks because the coffee company is fighting unionization by employees. Fine. It's a free country.

But it's an entirely different matter when trillion-dollar investment and retirement funds such as BlackRock inject their own biases into the way they invest people's savings without their knowledge or consent.

It's even worse when these biases rob investors of a high rate of return on their nest eggs.

Terrence Keeley, a former executive at BlackRock, blew the whistle on this scam in the Wall Street Journal by noting that since 2017, when the ESG fad took hold, these funds have had an annual rate of return of 6.3% -- versus 8.9% for the stock market as a whole. Investors lost 2.6% per year on their retirement funds. There goes the down payment on that retirement home in Arizona or Florida.

What is insidious about the new Biden administration ESG rules is that they permit and even tacitly encourage portfolio managers at firms such as BlackRock to violate their fiduciary duty to their clients by allowing ESG factors to trump sound investment decisions. Federal regulators are supposed to be ensuring the soundness of retirement funds, not shrinking them.

To make matters worse, researchers at Columbia University and the London School of Economics found ESG funds may not even be achieving their goals. The study compared the ESG records of American companies in 147 ESG fund portfolios to ones in over 2,000 non-ESG portfolios and found that the ESG companies were often worse when it came to labor and environmental law compliance.

The good news is that there is a backlash emerging against ESG. Late last year, one of the largest money managers, Vanguard, wisely announced it was withdrawing from the Net Zero Asset Managers Initiative, a major climate change alliance.

Going forward, ESG investment policies should be illegal unless individual investors check the box to have their money invested in such politically motivated investments.

By the way, victims of the law policies are often unionized workers -- America's truckers, factory workers and teachers -- whose lifetime savings are put at risk.

Bravo to Vanguard for pulling out of the ESG scam. If you've invested your money with BlackRock or State Street, you might want to ask why they haven't done the same.

[Mr. K]

If pResident stupidhead had done nothing (after stealing the election) but go golfing for 4 years he would have gone down in history as one of the greatest presidents in history

[semimojo]

...it's an entirely different matter when trillion-dollar investment and retirement funds such as BlackRock inject their own biases into the way they invest people's savings without their knowledge or consent.

Anyone who puts their money into BlackRock without doing the slightest bit of due diligence deserves sub-par returns.

No one has been a more visible or vocal proponent of ESG investing than Larry Fink.

Steve Moore is talking out of his butt, again.

[kabar]

Most of those pension plans are in serious trouble, especially state and municipal public employees. Taking them over means having the nation's taxpayers cover the shortfall. It would be similar to the government's takeover of the college loan program.

State, municipal pension plans have wider funding deficit

State and local pension funds had a $1.4 trillion funding deficit at the end of 2022, according to Equable Institute. Over the past year, assets fell by 4.5% to $4.9 trillion, while liabilities increased 3.7% to $6.4 trillion. The funding gap, which was just under $1 trillion at the end of 2021, jumped to $1.4 trillion, in line with previous years.

The funding ratio was 77.3%, down from 2021's 83.9%. From 2017 to 2021, it ranged from 71% to 73%.

[DCBryan1]

Ive been buying 4-5% coupon tax free munis. Haven’t seen 7-8% TEY in several years.

[SaxxonWoods]

“Ive been buying 4-5% coupon tax free munis. Haven’t seen 7-8% TEY in several years.”

I’ve been doing the same with short-term Treasuries since last June. 3mon was 4.65% today, 6mon is 4.83% Beats bank interest and no taxes. I have laddered them, so they come due frequently in case when I want to change allocation. Sitting on plenty of preferred stocks too, they are paying 7-8%.

[Vaduz]

Permit money managers to play politics with trillions of dollars of people’s retirement savings.

The slow take isn’t noticed as easily but it still takes.