DAILY SIGNAL: Consumers’ Research Head Breaks Down Dangers of ESG Policies in Investing

Will Hild, executive director of Consumers’ Research, has a message for everyday Americans.

“Here’s the only definition of ESG you really need to remember,” Hild says, talking about environmental, social, and governance standards. “ESG is when the financial services industry uses their market power to push through environmental and social policy that they could not get passed through the ballot box.”

“So, take the E for example, that stands for environment. What that really means is pushing companies to hit net-zero carbon emissions by 2050,” Hild says.

“S stands for social,” he adds. “What that really means is pushing companies to engage in LGBTQ propaganda, transgender ideology, pro-choice propaganda or policies at the corporate board level, or weighing into board makeup of companies in terms of setting racial and sexual quotas at the board level.”

“And then, the G … stands for governance, and that’s really just the enforcement mechanism,” he adds.

Consumers’ Research, a nonprofit founded in 1929, describes itself as “an independent educational 501(c)(3) nonprofit organization whose mission is to increase the knowledge and understanding of issues, policies, products, and services of concern to consumers and to promote the freedom to act on that knowledge and understanding.”

Hild joins today’s episode of “The Daily Signal Podcast” to discuss the long-term effects of ESG policies, his thoughts on House Republicans’ focus on the subject, and two types of legislation that have been passed on ESG at the state level.

Listen to the podcast below or read the lightly edited transcript:

Samantha Aschieris: Joining today’s episode is Will Hild, executive director of Consumers’ Research. Will, thanks so much for joining us today.

Will Hild: Thanks for having me.

Aschieris: Consumers’ Research has been one of the leaders fighting back against ESG—or environmental, social, and governance—policies. It’s certainly a topic that’s been making news more recently. We’ve seen congressional hearings being held on it. If you were to meet someone who had never heard of ESG policies before, how would you describe these policies to them?

Hild: That’s a great question. Well, obviously, ESG is an acronym. I’ll go into what the actual letters mean. Here’s the only definition of ESG you really need to remember: ESG is when the financial services industry uses their market power to push through environmental and social policy that they could not get passed through the ballot box.

So, take the “E” for example, that stands for environment. What that really means is pushing companies to hit net-zero carbon emissions by 2050.

“S” stands for social. What that really means is pushing companies to engage in LGBTQ propaganda, transgender ideology, pro-choice propaganda or policies at the corporate board level, or weighing into board makeup of companies in terms of setting racial and sexual quotas at the board level.

And then, the “G” is really just the enforcement mechanism that they use that stands for governance, and that’s really just the enforcement mechanism. They use the stick and the carrot to hit these companies with, to get them to do what Larry Fink and other asset managers want them to do.

Aschieris: I do want to talk about Larry Fink. But before we do that—we’ll talk about him a little bit later—I wanted to get your thoughts on, in continuing this conversation, maybe with someone who doesn’t know ESG policies, what they are, what are some of the dangers with using ESG policies in investing, for example?

Hild: Certainly. Well, there’s sort of different manifestations of ESG. As I said before, the overall phenomenon is the financial services industry, whether that’s asset managers, banks, or insurers pushing these policies that normally would be set by the legislature of federal or state. But there’s different ways in which they do that.

So the simplest to think about is funds where the ESG is on the label. And in some ways, I would defend people’s right to do this. This is people taking their money and saying, “I want people like BlackRock or Vanguard or State Street to use my money to push these policies,” that’s probably the least offensive part of it.

That is a very small percentage of the overall ESG phenomenon because what these asset managers, for example, have done is they have committed to using all of their assets that they manage across every client to push ESG priorities.

So, for example, let’s say you have a 401(k), you’re invested in the most vanilla thing there is, which is probably the S&P 500 Index Fund, you just own a broad swath of the entire economy.

If you have that fund with the iShares fund, that’s the BlackRock brand fund, you are invested in an ESG fund even though you didn’t sign up for that because Larry uses the stocks in that portfolio to push at the corporate board level his ESG priorities, which I said before is pushing net-zero targets, pushing social policy.

And the danger is that the way a free market is really supposed to work, the reason we have this cool thing that allows us to allocate capital very well toward new ventures is you actually need disagreement. You need people saying, “No, I think the future is fossil fuels. No, I think the future is fusion. I think the future is wind farms,” that’s fine, too. But they need to be spending their money, betting their money because if they lose, they suffer the consequences.

And over time, the winners will allocate more and more capital, they’ll make more returns. And so the people best at allocating capital will allocate more and more of it over time.

That is not the way ESG works in practice. What happens is, instead of assets being allocated at the investor level where you have some people who want to bet on moonshots and some people who want to bet on normal bread and butter investments, these asset managers go into already existing companies.

So, for example, if you’ve got BlackRock, State Street, and Vanguard together own about 25% of most of the major companies in the country, so they go into a company like Exxon. They own those shares because their clients bought these index funds, they’re not allocating their capital differently. What they do is they use the power of owning their shares to force Exxon to allocate its capital differently.

So, I know that’s a very nuanced difference, but instead of the investors risking their money, they are pushing companies that are already good at one thing or the other to do something else.

So they go into Exxon that’s, obviously, got a decadeslong track record of being good at oil, gas discovery and recovery and delivery to the ultimate to consumer. And they say, “We don’t want you to do that anymore. We want you to get into things you know nothing about, solar panels and wind farms.”

The danger here is not only is the consumer made worse off by companies doing not what they’re good at and not focusing on their consumers, but focusing on what Larry Fink and others want, but those other investors, the other 75% of the shares, they’re carried along in the ride for this.

So you could say, “Well, they could vote differently,” because of the concentration of power in these large asset managers, just that 25% allows them to set the agenda for the entire company.

So, really, two groups are hurt by this: you have your consumers who are worse off because the company isn’t focusing on what they should be serving their consumers and you have the other shareholders who they just wanted to buy an oil company, and now you have Larry Fink forcing them, the company they own into all these green boondoggles that don’t really work.

Aschieris: Just from your experience, you’ve obviously been dealing with ESG policies, the issue itself for a while, what are some examples of companies or businesses using ESG in our everyday lives that people can look to that you could point to as an example?

Hild: Absolutely. Well, whenever I do interviews, I usually get the same question, which is whether it’s the Bud Light thing or Target pushing LGBTQ propaganda on kids, or we did a campaign on State Farm where they were pushing transgender ideology on 5-year-olds.

I always say, “Why are they doing this? Why do they seem so excited almost to go and poke their own customers right in the eye?” Right?

We’re supposed to live in this free market system where every day these companies wake up and think, “How can I build a better mousetrap or a cheaper mousetrap to compete for customer business?” And they seem to be going the other direction.

And that, I think, is the clearest manifestation of this ESG complex. You see it at the retail level with the Dylan Mulvaney nonsense, and I guess, as I mentioned, the Target nonsense, and all these companies just doing stuff that seems offensive to a broad swath of Americans.

And the answer for why is, strangely enough, because of the aggregation of so much power in these large asset managers and in some of these banks as well. I talked about that. They have to worry more about upsetting Larry Fink than they do about upsetting their customers.

Now, I think that’s changing because customers have really gotten fed up with it in the last six months. We’ve seen this huge reservoir of frustration with corporate America really finally be unleashed.

And as a consumer advocate, I fully support that. This is fantastic. Nothing makes me happier than to see consumers feel empowered that they can make a difference in their purchasing decisions.

But that explains how we got here in the first place, because that’s where you see that the retail level, this ESG manifestation may sound like this wonky thing with banks and asset managers, “I don’t even know what that is,” but where you see the manifestation of it is these companies going woke because their real customer is, unfortunately, right now Larry Fink, and not the actual people paying their bills.

Aschieris: And just speaking of Larry Fink, what I wanted to discuss was just last month we saw him saying that he was going to stop using ESG, noting that “it’s been misused by the far left and the far right.” What do you think of this move by Larry Fink?

Hild: Well, this has been his MO from the very moment we launched our multimillion-dollar ad campaign against BlackRock. His tactic—and it hasn’t worked out that well for him, I’m happy to say, but he’s drudging along nevertheless—is to speak out of both sides of his mouth, depending on the audience he’s talking to.

So, he’ll go to Davos and World Economic Forum and brag about all the ways that he’s using his assets to push a far-left agenda. He will write letters to the New York City comptroller and the pension funds of California, who are big clients, and say, “Look at all the ways I’m using your money and all the money that I manage, whether that’s California’s or Florida’s or South Carolina’s or Texas’, to push these far-left agenda items.”

When he gets in front of a more mixed or conservative audience, suddenly his tone changes and he will talk about all the stocks that he owns in the fossil fuel industry and all the ways he’s invested in this.

Now, what he doesn’t go into detail is, when he makes those investments, he uses those investments, as I mentioned before, to push those companies to do destructive things that actually hurt the companies and the consumers.

So, this trying to rebrand and talk out of both sides of his mouth, he basically admitted during that same interview, he’s going to stop using the term ESG, but he’s just going to rebrand it. And it almost seemed like he was brainstorming in real time, he said, “I’ll call it conscientious capitalism, so I’m still conscientious capitalist,” which basically means, “I’m not going to change any of my behaviors. I’m just going to see if I can confuse people by changing what I call them.”

Aschieris: And I just want to talk a little bit more about what we’ve been seeing here in Washington, D.C., with congressional hearings. Republican Rep. Andy Barr of Kentucky has named July “ESG Month.” Just last week we had four hearings on ESG. I believe we’re set to have two more this month as well.

What are your thoughts on the focus that we’ve been seeing from congressional leaders, notably in the House, Republican lawmakers on this topic?

Hild: It’s very encouraging to see, and you’re seeing it across multiple committees, both Judiciary, their Oversight Committee has been looking at it, and then Financial Services has gotten into the game.

They were at a bit of a disadvantage earlier in the year because, with the regional banking crisis, they had to focus on that. But I’m so heartened to see Rep. Barr, as you noted, say July is ESG Month. And he has been, I’ll just note, a true champion at the federal level in this fight, introducing some great pieces of legislation—that hopefully will get passed—pushing back on ESG.

And it really, what I would say is that we’ve seen a ton of work done at the state level. We had 15 states pass anti-ESG legislation. That’s not going to be the end of the fight, but that’s a great beginning in those states to start chipping away at the power of these banks and asset managers. And it’s great to see now the federal levels start to come along, even with a divided Congress.

There’s a ton that can be done in these hearings to get these companies I mentioned, BlackRock, speaking out of both sides of their mouth. The problem is, when you’re under oath and you have a threat of perjury if you lie, that makes that tactic a lot more difficult. And so, I’m glad to see the amount of focus that’s been placed here. I hope they will take the time necessary.

Sometimes the ESG phenomenon can be defended if you don’t dig much during the survey, if you got surface-level questions, they will try to say that this is just about making corporations give more information to investors or incorporate different types of risks into the way that they view their business.

As soon as you dig into, “Well, what do you mean by that and where do you get these metrics?”—and it’s funny how all these things line up with the progressive left platform—their excuses start to fall apart and you really start to see what this really is about.

So I’m glad to see what they’ve done so far, and I hope that they will take the time necessary to really dig in and start to tease out these lies and contradictions that the ESG advocates are using.

Aschieris: And you brought up legislation both at the federal and state level. Could you speak to more about what types of legislation have been introduced at the federal level and then I also wanted to ask you about state-level efforts as well?

Hild: Absolutely. Well, at the federal level, what you’ve seen is a push to really get the federal agencies in line with where their mission really is and not pushing ESG.

Both the [Securities and Exchange Commission] and the Department of Labor have both issued rules in the last year that support and push ESG. This is in direct contradiction to both the statutes that their authority supposedly comes from and their mission.

So, for example, the SEC is asked for climate disclosures from every corporation, which is supposedly—their job is to really just focus on publicly traded companies and information that’s material to investors, and they are off on a wild goose chase asking for information that has nothing to do with what the average investor would need.

And in addition, they’ve included in these disclosures information about what the … publicly traded company’s vendors are doing in terms of climate change and their customers are doing.

The SEC is supposed to just have authority over publicly traded companies, but through these disclosures, they are really trying to regulate not just privately-held companies that are vendors to these big corporations, but get down to tracking customer behavior.

It sounds crazy to say, but the net effect of these regulations really is setting the groundwork for a Chinese social credit score-style system when it comes to the average American’s emissions.

And in addition to that, you’ve seen the Department of Labor in direct contradiction of their mandate when it comes to private pension funds across the country to focus on the fiduciary duty. They have issued rules that basically abrogates the asset managers, allows them a free hand to really turn that into whatever they want. And so, what you’ve seen is a huge pushback at the agency level with these rules.

Unfortunately, because a Democrat currently holds the White House and control of some of the other agencies like the [Federal Trade Commission] and the [Justice Department] that would normally be looking into a lot of the, in my opinion, illegal activities that these asset managers are engaging in, that’s probably going to have to wait until there’s a new person in the White House.

Now, at the state level, what you’re seeing is two types of legislation be passed across the country.

The first one is what they call anti-economic discrimination legislation. What that basically says is that if you are at a company like BlackRock, for example, and you’ve said that by 2050 you’re going to use all of your financial might and all of your assets to destroy the fossil fuel industry, the agriculture industry, the gun industry, whatever it is, then, “We are not going to do business with you as a state. You’re not going to manage our pension funds, we’re not going to allow you to do our banking with us. We are not going to let you use our money to attack our financial interests.”

And so, it’s not so much the state is a financial regulator, it’s the state is a market participant expressing its will, just like a lot of people stopped drinking Budweiser because they were attacking the very values of a lot of customers.

And then, the other piece of it is enhancing the fiduciary duty when it comes to managing the state’s assets. There’s already, in most states, a rule that says when you manage the state’s assets, you can only focus on returns for the pension fund. You can’t have what they call mixed motive. You can’t say, “Hey, I’m off saving the whales and also maximizing returns.” You have to focus solely on maximizing returns.

What this legislation does is it comes and says, “Listen, you are signed up for all these groups like Climate Action 100 and the Glasgow Financial Alliance for Net-Zero, where you have committed to using all of your assets under management, including ours, to push these other agenda items. That is de facto evidence that you are acting in a mixed motive. You’ve agreed to use our money for other things, and that is another reason you’re going to be disqualified and in some way, in some cases sued, for violating that fiduciary principle.”

We’ve seen about 15 states pass one or both of those over just the last six months. So, it’s been an incredible wave of anti-ESG legislation we’re seeing at the state level.

Aschieris: Absolutely. Will, just before we go, one final question for you: If you could just break down some of the long-term impacts, if the use of ESG policies is not stopped.

Hild: That is a fantastic question, and I know it sounds hyperbolic to say this, but it’s almost hard to find an area of American life that’s not hurt by this.

So, for one thing, all of the policies that ESG pushes increase costs for consumers because they increase the cost for the people who produce our goods and services every day.

For example, energy is an ingredient in the cost of everything that you use or buy. So, ESG has already contributed to the run-up in inflation that we’ve seen over the last 18 to 24 months, and that’s going to increase even in things that are not the normal.

People tend to think of ESG only in terms of oil and gas, but they’re going to agriculture producers and saying, “We don’t want you using synthetic fertilizers anymore.” Well, synthetic fertilizers are the reason you can go to a grocery store and buy bananas for 29 cents a pound. If you start getting rid of that type of thing, you’re going to see massive increases in the cost of your grocery store. So, the No. 1 thing is cost for consumers.

The second thing is, for retirees, people who rely on the stock market returns, it’s going to cut into corporate profits. And so, shareholder returns are going to decrease, and that’s going to hurt, obviously, retirees and people who are saving for their future for a lot of reasons.

And the last thing I’ll add is that, we didn’t really touch on this, but the big asset managers do not apply their ESG metrics evenly across the globe.

If you are a company in China, for example, they will finance a coal-powered plant in your country. They will finance a natural gas pipeline or power plant. They actually have this weird thing where they will allow companies in China to be increasing their carbon emissions on the “road to net-zero” and be fine helping them do that.

And the net effect is that the companies that are hamstrung are the ones here in the United States and the companies that are helped by ESG are in China. So, it’s not an exaggeration to say that ESG is a huge benefit to China at the cost of American producers. So it hurts our economy in global competition with China.

Really, every single person is hurt by this, from consumers to farmers to factory workers to pensioners. The only people who benefit from ESG are Wall Street fat cats, like Larry Fink and BlackRock, and far-left megalomaniacs, like Wall Street and like Larry Fink and BlackRock. Those are the only two people who are helped by this.

Aschieris: Will, thank you so much for joining us today. Any final thoughts before we go?

Hild: No, just, if people want to get involved, they can visit our website at consumersresearch.org. And we always recommend that people reach out to their elected officials at the state and the federal level.

ESG is a very wonky issue. You don’t have to understand every piece of it to get involved. You call up your state rep, your AG, your governor, even your treasurer, and your elected senators and state-level reps, and just tell them, “I want something done about this. I don’t want my money used to hurt my pocketbook, hurt the issues I care about.” They will hear you. Leave it to them to dig into all the wonky issues that I probably made your eyes roll in the back of your head just talking about it.

Just, if you take one message away from this, call your rep, tell them you want something done, and they will dig into the issue and do something about it.

Aschieris: Well, Will Hild, thank you so much for joining us, executive director of Consumers’ Research. Thanks so much.

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