Canadian politicians need to follow their American counterparts and start fighting ESG
Influential institutional investors and CEOs of large multinational corporations have begun to distance themselves from the so-called ‘movement’ known as Environmental, Social and Governance (ESG) standards.
Leading figures like Larry Fink, CEO of the multi-trillion-dollar asset management firm BlackRock, and Jamie Dimon, head of the U.S. banking titan J.P. Morgan Chase, have started to question the ESG doctrine, asserting that the primary objective of publicly traded corporations should be to maximize profits.
The ESG movement appears to undermine the traditional control of corporations by shareholders and their appointed managers, who typically focus on using invested money to generate profits. These profits are traditionally either disbursed as dividends to shareholders or reinvested to bolster or expand operations – fundamental principles of capitalism.
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ESG standards are viewed by some as a backdoor method of implementing socialism, where capital allocation is dictated by governmental directives. The ‘Environmental’ aspect primarily advocates for businesses to adhere to a ‘Green Transition’ agenda, vilifying carbon dioxide as a pollutant, without tangible evidence. The objective, albeit ambitious, is to end human emissions of CO2 and methane, referred to under the ambiguous terms of ‘Net Zero’ and ‘Net Zero 50’.
The ‘Social’ component of ESG largely focuses on reversing discrimination through social justice policies like Diversity, Equity, and Inclusion (DEI). DEI aims to rectify the underrepresentation of minority groups in employment and promotional opportunities.
The ‘Governance’ element, arguably the least detrimental of the three, emphasizes the need for companies to avoid unethical or illegal practices and associations with disreputable regimes.
Adherence to ESG standards can adversely impact overall investment returns, typically driven by corporate profits. The imposition of the Green Transition will potentially escalate consumer prices and jeopardize vital industries such as oil and gas exploration, utilities, and pipelines.
Furthermore, DEI practices can potentially induce discriminatory and employee-demoralizing practices, while inconsistencies in ESG ratings of companies remain an issue. Compliance with ESG standards might also infringe upon professional investment manager codes of ethics and conduct standards. Importantly, adherence to ESG criteria could needlessly diminish returns, shortchanging public and private pension plans.
Counterarguments to the climate catastrophe narrative that fuels the ESG/Green Transition crusade exist. Various studies contest the most alarming temperature claims. Dire forecasts of impending doom have repeatedly been proven incorrect. Heatwaves in 1911 and 1936, which occurred during periods of significantly lower CO2 levels, were more severe than this year’s. Solar panels and wind turbines, far from being ‘green’, are non-recyclable and require either fossil fuel or nuclear energy as backup power. The cost of batteries and other energy storage methods render ‘green’ power reliability an expensive pursuit, as evidenced by the experiences in Germany and Texas.
Many consider ESG to be detrimental to economic growth and social harmony. Numerous U.S. states are enacting legislation prohibiting governmental engagement in business dealings, including banking, with firms adhering to ESG principles. Their primary apprehension is that ESG may be a subterfuge for covert neo-Marxist control of private firms and the financial instruments that fund them – such as stocks, bonds, loans, leases, and mortgages.
It’s imperative for Canadian investors and political leaders to align with their American counterparts in their resistance to ESG. Alberta, among other provinces, in conjunction with consumers, investors, and pension beneficiaries, stands to suffer significant harm if ESG’s distorted principles are allowed to prevail.
Ian Madsen is the Senior Policy Analyst at the Frontier Centre for Public Policy.
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