ESG: Woke to Broke - YouTube

Why do millions of people  invest in retirement accounts?

The answer is obvious: to have money to  live on when they're no longer working.

The best way for those accounts to grow is  to invest in companies that make a profit.  

Less profit for those companies  means less money for retirement.

This might seem like common sense  but it's becoming less common,  

thanks to a new investment strategy called  ESG. ESG stands for Environmental, Social,  

and Governance. If you're wondering  what that means, you're not alone.

Generally, it means that a company's first concern  should no longer be how much money it makes,  

but rather how much social good it does.  In other words, get woke, or get shamed.

If you're an oil company, for  example, you're out of luck  

because, by the nature of your business,  it's assumed you're destroying the planet.  

Never mind that you're powering homes  and hospitals. That doesn't count.

In fact, if you're a company just trying  to make a profit, you're the problem.

ESG proponent Klaus Schwab, chairman of  the World Economic Forum, puts it this way:  

"We can't continue with an economic system driven  by selfish values, such as short-term profit..."

The message is clear: we need  ESG to save us from ourselves.

Really?

The pursuit of profits has  fueled many of mankind's  

greatest innovations and greatest companies.

It led Elon Musk to build electric cars,  Andy Grove to design computer chips,  

and Reed Hastings to develop the  world's most popular streaming service.

Everything from aspirin to  commercial airplanes, to yes,  

solar panels and wind turbines came  about because of the desire for profit.

Profit is why you have a  job, clothes, a house, food,  

and every other necessity,  not to mention luxuries.

It's the reason why you can live in Phoenix and  stay cool, or live in Buffalo and stay warm.

The genius of capitalism is that it requires  

businesses to do good things  for society to make a profit.

Think about it:

If you want to start a business—whether  it's a dog hotel or a shoe factory—you'll  

have to create a product or service that  helps others—at a price they can afford.

If you want to hire employees,  you'll have to offer attractive  

wages and safe working conditions.  Otherwise, nobody will work for you.

If you want customers, not only will you have to  make a good product, but you'll need to cultivate  

a good reputation. That means treating those  customers well and offering competitive prices.

In a free enterprise system, you can't  make money without providing a social good.  

Capitalism is, by its very nature, conscientious.

It turns out, then, that profit isn't selfish—it  

motivates us to contribute  our talents to help others.

ESG threatens this system. By denigrating profit,  

it lessens the incentive and the  means to do good. Without profits,  

companies won't have the capital to provide  jobs, pay investors, or fund innovation.

But that's the world ESG wants you to live  in: a world where profit takes second place  

to a preoccupation with income inequality, race  and gender sensitivity, and climate alarmism.

But even if you wanted to address those  concerns, how would ESG help you do it?

That's a fair question because  there's no consensus on ESG standards.

Here's a good example:

Three self-proclaimed ESG  watchdogs have given Tesla  

three completely different  ratings: best, worst, and middling.

In capitalism, there is a simple metric to  determine success: how much money you're making.

Under ESG, there is no such  thing. It's a judgment call.

To make ESG investment  strategies even more problematic,  

according to Meir Statman, professor  of finance at Santa Clara University,  

"in the long run, ESG investors are likely to earn  lower after-fee returns than non-ESG investors."  

Over a period of say, 30 years, those fees alone  could cost you hundreds of thousands of dollars.

So, if ESG endangers profits, offers no clear  metric for success, and is a mediocre investment,  

why is it even a "thing?"

For two main reasons:

First, ESG allows people like Larry Fink, CEO of  BlackRock, the world's largest investment company,  

to feel good about themselves. It's a "get out  of jail free" card for "guilty" billionaires.  

They preen in the New York Times—and  the rest of us are stuck with the bill. 

And second, it's about control.

ESG enables an "enlightened" elite to tell  everyone else how to run their companies.  

Submit to ESG or you won't get  that loan or that investment,  

whether or not it's good for your  bottom line and your shareholders.   

That's how companies and whole  economies go from woke to broke.

Including your 401k. 

So, if somebody tries to sell you on  Environmental, Social, and Governance investing,  

hold on tight to your wallet and to your values.

ESG is coming for both. 

I’m Andy Puzder, Senior Fellow at the School  of Public Policy at Pepperdine University,  

for Prager University.