It’s 2023 – do you know where your money is?
Most Americans think they know the answer to this question. Millions of everyday investors entrust their money to wealth managers, 401(k) plan administrators and pension funds.Their job is to make your money work for you while you’re busy doing your job and raising your family. But slowly over the last few years and increasingly since 2020, instead of working to make your money grow as much as it possibly can, more and more financial professionals have allowed political agendas to influence their decisions.
That means that right now, in boardrooms of companies across the country, your money is being used in ways that don’t align with your values. With your retirement funds and investments, trillions of dollars in capital is being used to advance “racial equity audits,” environmental pledges and boardroom gender quotas.
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It’s all part of the latest fad on Wall Street: ESG, which stands for “environmental, social and governance.” These are three factors by which some corporate activists, looking to advance a political agenda, judge the companies they invest in.
Some of the most powerful corporate activists are the asset managers whose job is to invest American’s pensions and 401ks and other funds into publicly traded U.S. companies like Apple, Exxon, Chevron and Disney. The “Big 3” asset managers – BlackRock, State Street, and Vanguard – collectively manage nearly $20 trillion, about the size of the entire U.S. GDP.
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So when powerful asset managers speak, companies are incentivized to listen. Lately, they’ve been listening to some bad advice, driven by the ESG obsession among some asset managers. Much of this influence is wielded behind closed doors, but every investor has the right to know whether their money is being funneled to companies to further a political agenda.
You can start by asking your financial advisor, 401(k) plan administrator or pension fund board member these questions:
*Have I invested in any funds that voted my shares in favor of racial equity audits?
*Have I invested in any funds that voted my shares in favor of emissions reduction plans or executive compensation tied to environmental and social goals?
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*Have I invested in any funds that systematically underweight companies in any of the following sectors: coal, mining, oil and gas exploration, defense, or firearms?
*Do you use ESG factors in your external fund evaluation process, internal operations, or client portfolio optimization strategies?
*If the answer to any of the above questions is “yes,” can you please inform me of alternative investment options so that I may select funds and portfolios that best align with my own values and long-term financial interests?
Your financial professional should be responsible for answering these questions and making adjustments according to your wishes. You are not obligated to share their pro-ESG agenda.
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This agenda is advanced by corporate activists in several different ways, most of which cut the average investor out of the process entirely. For instance, in a 2021 shareholder vote, Chevron was forced by the “Big Three” asset managers to assume responsibility for not only their own carbon emissions but those of their suppliers and customers.
Chevron is an oil company, and this change will undercut their ability to do their job and make money for their shareholders. Chevron’s board voted against this change, and it was only the influence of BlackRock, State Street and Vanguard that allowed them to be overruled.
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Similarly, corporate activists are forcing Apple, a company whose goal should be to create new and better technology, to conduct a “racial equity audit” over the objections of their board.
Some investors may be happy with these changes, and that’s fine. There are specific ESG funds in which people are welcome to invest (although those ESG funds underperformed non-ESG funds in 2022). They can also invest in non-ESG funds that use ESG principles to vote their shares. But many American investors prefer to put their hard-earned money in companies that are allowed to do their job and make money, unfettered by arbitrary rules and responsible to their investors rather than activists.
This new world of socially-conscious investing comes with new fiduciary responsibilities: investors must advocate for themselves and demand to know whether they’re funding ESG initiatives, and their financial advisors must be ready with honest answers.
Vivek Ramaswamy is executive chairman of Strive Asset Management and author of “Woke, Inc.: Inside Corporate America’s Social Justice Scam” and “Nation of Victims: Identity Politics, the Death of Merit, and the Path Back to Excellence.”