Biden Vetos Rebuke of Federal ESG

On March 20th President Biden vetoed a bipartisan resolution to overturn the ESG initiative put forth by his administration last year. The legislation passed through a democrat-controlled senate, garnering support from Republicans and a handful of Democrats before being struck-down by President Biden on Monday morning.

Many representatives hold concern that the ESG rule will hurt the financial position of many American citizens, and have expressed that investment managers are better off focusing on their fiduciary responsibility of creating financial growth. Biden, on the other hand, believes that these major fund managers must prioritize environmental, social, and corporate governance (ESG) over economics. The rule says that fiduciaries are allowed to weigh “the economic effects of climate change and other ESG considerations” so long as financial return is a plausible future outcome. However, vague topics like climate change, or inclusivity, diversity, and equity being accepted as legitimate financial risk factors creates some question marks. Who is quantifying climate change? Who decides when diversity trumps competence in the workplace? And to what exact degree are these “risks” quantifiable from a long-term economic standpoint?

A statement from Biden on Monday claimed, “There is extensive evidence showing that environmental, social, and governance factors can have a material impact on markets, industries, and businesses. But the Republican-led resolution would force retirement managers to ignore these relevant risk factors, disregarding the principles of free markets and jeopardizing the life savings of working families and retirees,” but the recent collapse of Silicon Valley Bank, along with mass-layoffs from big tech across the board this year might lead us to believe otherwise.

In a Daily Wire article published on July 15th 2022, Ben Zeisloft reported on ESG-focused investment funds yielding lower return rates on average than the S&P 500 Index. These funds were heavily invested in tech companies like Apple, Amazon, Microsoft and Tesla and—even in the low expectations of a volatile market—managed to underperform. However, when fund managers invested in energy companies that were focused on stable growth, they experienced return rates around 16%.

Major skepticism of the ESG initiative is based around the idea that these are political issues being shoved down the throats of American taxpayers by big corporation. Giant corporations working alongside government to force unpopular policy on American citizens not only blurs the lines of the private sector, but it also jeopardizes individual liberties.

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