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Blue states should let ESG die

Will 2024 be the death knell for the ESG movement? Credit: Getty

March 19, 2024 - 1:00pm

Life is going from bad to worse for the ESG movement. This weekend, activist investor Bluebell Capital began a new battle to try and force BlackRock into overhauling its commitments to environmental, social and governance (ESG) investing, marking another step back for the movement.

Whether Bluebell will be able to successfully influence BlackRock remains to be seen, but the winds are blowing in its favour. Recently, it was reported that ESG funds faced their worst year on record in 2023, while funds classified as “responsible investing” shrunk last year by more than half (down from $158 billion to $68 billion).

Those who suffer the most are the pensioners and taxpayers living in blue states where ESG investing is most prevalent. One key example is California’s CalPERS, the country’s largest pension fund, which represents roughly two million state employees and their families. CalPERS plans to boost its climate-influenced investments by $100 billion by 2030, even though it faces an enormous $300 billion pension shortfall, three times that of Texas. But considering that the fund’s returns on investment remain consistently below those of the stock market, it is difficult to see how it will dig itself out of this hole.

California’s fealty to green initiatives is clearly hurting the state, but it’s not the only one. New York’s pension funds are doing much the same, with plans to divest from oil and gas and double investments in green energy companies. New York’s pension funds are already an established underperformer in the stock market and, like CalPERS, these entities seem more interested in placating the powerful, oligarch-financed greens than attending to their fiduciary duties.

By contrast, Republican state legislatures — including those in Florida, Kansas and Idaho — have passed laws that ban or limit the consideration of ESG, providing direct opposition to these green investment pledges. It’s no wonder, then, that Idaho and Florida have earned among the highest returns according to NASDAQ.

Red states have clearly cottoned onto a reality that blue states have missed. Overall, renewable energy stocks have lost a sum to the tune of $30 billion this year, with the entire EV sector including Tesla showing weakness. Some EV firms such as Fisker, may not be long for the world while solar and wind generation facilities are wearing out about twice as quickly as expected. Apple recently abandoned its EV project, racking up billions in losses. At the same time, fossil fuel companies and stocks have once again become market favourites.

Years ago, Treasury Secretary Janet Yellen assured Americans that climate change would provide “the greatest economic opportunity of our time”. Such sentiments sparked a green gold rush, with the Financial Times estimating that more than $200 billion was invested in “cleantech” projects in the United States alone. But rising prices for materials and the end of cheap money have forced energy firms to raise their prices, which in turn have hurt consumers.

Still, states like California persist with their investments in these firms in large part because the tech oligarchs like it. Companies such as Google and Apple — both generous donors to the Democrats — can boast that their emissions are small, in large part because one makes virtually nothing material and the other is heavily reliant on manufacturing in China.

This year could be the death knell for the ESG movement, particularly if Trump and a Republican Congress are elected. But it will be a slow death: while states such as Florida have moved quickly away from it, the likes of California have dug their heels in. The Golden State clearly doesn’t care much about where it puts its own workers’ cash, but eventually it will have to. Otherwise, there will not be enough money for pensions and, as usual, the taxpayer will be on the hook.


Joel Kotkin is the Hobbs Presidential Fellow in Urban Futures at Chapman University and author, most recently, of The Coming of Neo-Feudalism: A Warning to the Global Middle Class (Encounter)

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Arthur King
Arthur King
3 months ago

The intersection of Government with corporations is an element of fascism.

Alex Lekas
Alex Lekas
3 months ago

This is what happens when people who have rarely, if ever, worked outside of govt try to dictate the workings of business. The point of a company is to provide goods and services that people value at prices that consumers are willing to pay. That’s it.
The CEO’s or board’s stance on whatever issue of the moment carries headlines is immaterial. If anything, it is counter-productive as adopting any political stance almost by definition means alienating half the workforce and customer base.

Santiago Excilio
Santiago Excilio
3 months ago

I certainly hope it does kill it. ESG is yet another completely unevidenced piece of wishful thinking. Larry Fink, CEO of Blackrock and personally responsible for its ESG policies has stopped using the word, he has yet to alter his policies though. Maybe when he loses enough money he will. Pretty much all ESG funds have failed to deliver decent financial returns relative to non ESG ones. Moreover, the majority of companies in those funds have not seen any improvement in their ESG scores. A double whammy.

Douglas Redmayne
Douglas Redmayne
3 months ago

Perhaps Kotkin, they should put the money into artificial intelligence stocks such as Nividia, Tesla and microsoft as AGI may well en up automating everything.

John Robertson
John Robertson
3 months ago

ESG investments in the UK are on the slide too, whether it dissapears completely? Its been an effective tool for the UN, EU etc to exert some control over the markets.

Pedro the Exile
Pedro the Exile
3 months ago

Where’s Mark Carney when you need him-the proponent of “stranded assets”-yeah!!!!