Washington Wednesday: Campaigning against ESG

MARY REICHARD, HOST: It’s April 12th, 2023.

Glad to have you along for today’s edition of The World and Everything in It. Good morning, I’m Mary Reichard.

NICK EICHER, HOST: And I’m Nick Eicher. It’s Washington Wednesday.

President Biden recently used his veto pen for the very first time. That came after multiple Senate Democrats crossed the aisle to approve a measure already approved by Republicans in the House.

The bill would have overturned Biden administration regulations on so-called ESG investing. That stands for Environmental, Social, and Governance.

The rules allow retirement-plan managers to weigh things like climate change and left-of-center social causes when making investment decisions.

REICHARD: The White House promised the veto weeks earlier if the bill crossed Biden’s desk. Press Secretary Karine Jean-Pierre:

KARINE JEAN-PIERRE: The bill would bar fiduciaries from considering significant risks like extreme climate threats and poor corporate governance when they make investment decisions. It would give investment professionals less flexibility to make prudent decisions. This is unacceptable to the President.

And on this point, the White House was true to its word. A few weeks later, President Biden had this to say:

PRESIDENT BIDEN: I just signed this veto because legislation passed by the Congress would put at risk the retirement savings of individuals across the country. They couldn’t take into consideration investments that wouldn’t be impacted by climate, impacted by overpaying executives, and that’s why I decided to veto it.

But critics have a very different take on the administration’s rules.

One of the more moderate Democrats who voted with Republicans, West Virginia Sen. Joe Manchin blasted the veto. He said—his words:

“This administration continues to prioritize their radical policy agenda over the economic, energy and national security needs of our country, and it is absolutely infuriating.”

EICHER: One likely Republican presidential candidate, Florida Gov. Ron DeSantis, has talked a lot about ESG. And one already-declared GOP candidate is largely building his campaign upon that issue.

His name is Vivek Ramaswamy. Announcing his White House bid in a video message, he said we’re “in the middle of a national identity crisis.”

RAMASWAMY: Faith, patriotism, and hard work have disappeared, only to be replaced by new secular religions like covid-ism, climate-ism, and gender ideology.

And those are issues directly tied into the ESG movement.

REICHARD: Ramaswamy is a successful businessman. Several years back, Forbes estimated his worth at about $600 million dollars. He made his fortune on lucrative bets in venture capital and the biopharmaceutical arenas.

Ramaswamy’s also the author of several books, including Woke, Inc.: Inside Corporate America’s Social Justice Scam.

He explained some of his concerns to CNBC:

RAMASWAMY: If you’ve got to see you as an Exxon, Shell, Chevron, and Conoco Phillips in a room, say, and then coordinate to say we’re gonna reduce gas production and gas prices spike result, that would be the stuff of movies. There would be handcuffs. People would be locked up on antitrust violations. Yet today, when the largest owners of those firms effectively direct them and mandate them to do the same thing, somehow that gets celebrated as ESG instead.

EICHER: Some biographical facts:

Ramaswamy is a native of Ohio. He attended Harvard and Yale. He’s Hindu, the son of immigrants from India. And he’s the co-founder of Strive Asset Management.

As a candidate most Americans have never heard of, his White House campaign is a longshot to say the least. But he’s undeterred.

Ramaswamy believes the FBI has been politically corrupted and should be dissolved. On immigration, he has vowed to create a merit-based system. And he says he wants to “work with Congress to enshrine political speech as a civil right.”

But fighting what he calls corporate woke-ism is where Ramaswamy is looking to make his mark.

REICHARD: Someone who’s thought a lot about ESG investing and the Ramaswamy campaign is Jerry Bowyer.

He is a WORLD Opinions contributor and author of The Maker vs. the Takers: What Jesus Really Said About Economics and Social Justice. I’ll welcome him now. Jerry, good morning!

JERRY BOWYER, GUEST: Good morning, Mary. Good to be with you again,

REICHARD: Well, some people are comparing Ramaswamy to a Democratic candidate who ran in the last election, and that's the person of Andrew Yang. These two men are very different in terms of their worldview. But Yang was seen largely as a single-issue candidate with his focus on universal basic income. And then like that Ramaswamy is focusing largely on one on one issue as well, in this case, ESG. Jerry, what can you tell us about Ramaswamy? His history on this issue?

BOWYER: It goes back a few years, I don't think we have like a career-long interest in this. But I think you know, we have an interest that goes back. Maybe I forget when he wrote his book might have been three years ago, something like that. So it's kind of it's kind of a recent interest, there's a lot of newcomers to this issue. And he would be one of them. I think, clearly, he's tapped into something that he knows that the base is interested in. So I think you know, that he's somebody who has been involved with venture capital, and they're good at spotting trends. And he spotted a trend among conservatives, that they were interested in this topic. So that having been said, he can probably shift to something else if some other topic becomes the big topic. And I'm seeing a little bit of him shifting a little bit more to China. Geopolitical, geopolitically, you know, not even when he was with Strive, you started to do commentaries that were basically just about China and the geopolitical threat of China that weren't really directly related to ESG or to investment. So I think he can kind of, you know, pick up whatever is the wave of the moment, the wave of the moment for the past couple of years has been anti-ESG.

I would not expect him to be the nominee. But I can expect other people to pick up that issue and run with it. And frankly, DeSantis is probably the best because of his fight with Disney. I mean, DeSantis is the only guy who's actually done anything about, quote unquote, well, capitalism. There are a lot of p eople who talk about it. But I'm talking about presidential contenders. There are a lot of state treasurer's, who have done enormous amounts. They've really been the leaders in this battle. And you're seeing a lot of stars in the making there. Who are you know, who were in the sort of the boring job of auditor general or Comptroller, or treasurer, but none of the none of the presidential candidates has really done much of anything on ESG, except DeSantis.

REICHARD: Let's drill down on this concept a bit that Ramaswamy says the ESG movement has a quote, deep seated conflict of interest. Jerry, do you agree or disagree with that? And why?

BOWYER: Oh, I agree. And I would give it less credit. I wouldn't call it a movement. I'd call it an industry. I mean, it's completely monetizing what it's doing. It is ESG is an industry. So what's the conflict of interest? I think there's lots of them. One of the biggest ones is that you have companies like for instance, proxy advisory services, which rank companies on their ESG, and also consult with companies on how to be good at ESG. It's very much like the conflict of interest you saw with rating services regarding credit worthiness, that then was brought into disrepute with the crisis of 2008 and 2009. They were getting large fees from asset managers who had toxic assets. And they were ranking those assets as safe. The ESG industry has that conflict in terms of fees, etc, it's got another more fundamental conflict, which is that it is allegedly looking out for the good of shareholders, except ESG doesn't really reflect a shareholder interest. It reflects a stakeholder interest. And essentially, what it does is it pretends that all of the things that companies do, that these activists don't like, are not only bad for society, but somehow they must eventually turn out to be bad for shareholders, like eventually, like, if you are a bank, and you do business with gun manufacturer as well, eventually, the politics are going to turn against gun manufacturers, and we're going to, you know, amend the Second Amendment, or we're going to do something to hurt them. And then you'll be stuck having invested in these gun manufacturers, or eventually the politics will catch up with the global warming crisis, and then we'll ban fossil fuels, and then you'll be stuck owning all these fossil fuels. It's a really tenuous argument, you know, or if you're engaging in something else, whatever it is, you're not sufficiently LGBTQ allied, well, eventually, the culture is going to shift in such a way as it'll hurt your reputation. And customers won't do business with you. So that's it. So they tried to take their political agenda and make it risk management. So ESG has a fundamental conflict and that it is based on a falsehood. And the falsehood is that you can reconcile a stakeholder approach, which means there's a social agenda. That's part of your investment decision that you can reconcile a stakeholder approach with the idea of a fiduciary responsibility to push shareholders first. That, to me, there's no way to bridge that conflict. It's inherent. It's that ESG is not a fixable thing, that essentially it's genetically flawed from its origin comes out of the UN paper the UN sponsored, I think in 2005. It is, it has always depended on a falsehood, that what we don't like politically must be bad for investment, when the fact is the data goes the other way. Fossil fuels did extremely well, last year, socially responsible funds over time tend to underperform non socially responsible funds. And so I think that's another form of a conflict of interest.

REICHARD: Okay, so we've talked about conflict of interest. Talking about it is one thing, but what has Ramaswamy proposed to do about ESG? What would he do if elected, do you think?

BOWYER: Well, that's a good question. I haven't seen a lot of specifics. So and by the way, personally, my view is that the solution is not mainly a political fix. I think the solution is mainly shareholders property rights, shareholders are the adult supervision. And until we show up and vote, I'm not sure we should expand the power of government to do our job for us.

So I think we should take our vote back, so I'm really into a self governance approach on this. I think politicians can kind of have their thumb on the scale one way or the other a little. But I think mainly as in all things, real change comes from the bottom up, not the top down.

So this is to me, this is really a social responsibility movement. And I think Ramaswamy can put it on our agenda and put us on our consciousness. But if we think just watching Tucker and getting mad and saying things on social media, and voting for a particular candidate is the answer, I think we really are shirking our responsibility.

REICHARD: Jerry Bowyer is a WORLD contributor and we're so glad he is. Jerry, thanks so much.

BOWYER: Always a pleasure.

WORLD Radio transcripts are created on a rush deadline. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of WORLD Radio programming is the audio record.