The Environmental and Social Governance (ESG) movement appears to be growing more in vogue, with large corporations – especially investment firms – more pressured than ever to restrict investments to companies who “fight climate change” or commit to “diversity and inclusion.”
ESG investing has been promoted heavily by mainstream media but also appears to be finding favor with the federal government.
According to Reuters, some executives at large publicly traded companies already have 5%-15% of their pay dependent on ESG goals, and the trend is not likely to slow down considering recent proposals by the Securities and Exchange Commission (SEC).
In May, the SEC proposed requiring certain investment firms who purport to be ESG “compliant” to disclose details about their ESG activities. Last month, the SEC announced it is requiring public firms to disclose more details about “pay versus performance” - how much executives are being paid in relation to the firm’s financial performance. Together, these announcements signify a coming trend of ESG performance-based compensation.
But according to a recent CNBC survey, most financial executives of large corporations are against the idea.
The survey, which included 21 CFOs from Fortune 500 and Fortune 100 companies, found that only 25% supported the SEC’s proposal, 55% are opposed and 35% said they are “strongly opposed.”
It is unclear whether the executives are opposed to ESG investing or only their compensations being tied to the practice; but for Americans, it may allay fears of an ESG social credit system.
America’s Frontline News previously reported that according to some economists, the government won’t need to mandate an ESG social credit system; institutions will enforce ESG behaviors voluntarily.
“I think it is highly likely that within the next two years, you’re going to see financial institutions start to use a personalized social credit score of some kind to make decisions about things like your access to loans, your interest rate, or whether you’re eligible for insurance coverage,” said Heartland Institute Director Justin Haskins, according to an analysis by The Epoch Times. “All the signs are pointing to that happening very soon,” he said.
American Legislative Exchange Council Chief Economist Jonathan Williams predicts that if enough progressive pressure is brought to bear on the financial system, it would mean “having people’s freedoms eroded without any legislation ever having to be passed, whether it’s companies with a radical take on ESG or FICO personal credit scores.”
Indeed, the consumer credit rating agency FICO openly said in December that personal ESG scores will soon be enforced, stating that “one example would be the inclusion of property energy ratings data in mortgage valuation and decisioning.” In other words, consumers who pay their debts and have excellent financial credit may have trouble getting a mortgage, car loan, bank loan, or credit card if they are not environmentally conscious.
BlackRock CEO Larry Fink, who heads one of the world’s largest investment firm, was candid about how his company approaches ESG.
“You have to force behaviors, and at BlackRock, we’re forcing behaviors,” said Fink in 2017.
Two years ago, the mere suggestion that banks and other corporations would refuse service to individuals based on their carbon footprint would have been dismissed out of hand as a conspiracy theory.
But COVID-19 vaccine mandates have proven that even when not under legal pressure, many companies are more than willing to discriminate against prospective customers if public sentiment is strong enough. As of May 2022 four out of ten companies still impose some kind of vaccine mandate, reports Bloomberg Law.
This may be why Chase Bank felt comfortable closing former Trump national security adviser Lt. Gen. Michael Flynn’s bank account in 2021 due to “reputational reasons,” according to The Heritage Foundation. Chase's decision followed an earlier decision by Wells Fargo to close the bank account of 2020 Delaware Republican Senate Candidate Lauren Witzke. Bank of America, of its own volition, decided to track its customers who may have been at the Capitol on January 6, 2021, and report them to the FBI. Following the Capitol breach, payment processor Stripe stopped processing payments for Trump’s campaign and anyone who was at the Capitol that day.