On Tuesday, the city council of Riverton, Utah announced it "unanimously approved a resolution" objecting to placing its financial management in the hands of investment firms utilizing ESG scoring criteria.
"ESG policies are a deliberate politicization of financial institutions," Riverton Mayor Trent Staggs stated following the council's decision. "An individual or organization's political views should not be a consideration when determining credit scores or whether to lend money."
ESG, or "Environmental-Social-Governance," is an investment screening method utilizing a rating system that determines the social merits of companies.
A statement from the city of Riverton outlines that the approved resolution, "No. 23-29, makes the city's position on ESG clear and directs the city's financial advisors to work with investment firms that are committed to focusing solely on financial interests," i.e. not extrensic social interests.
Following the council's decree, Riverton will now conduct a review of its investments to see which incorporated an ESG score.
Staggs adds that "we simply can't allow communist-style social credit scoring to take one more inch forward in America. Every local mayor, councilmember, and state legislature across the country needs to stand up and push back against these dangerous and destructive ESG policies."
According to the investment firm Vanguard, ESG investments are "about investing in your values."
But by extension, this statement presupposes that "your values" align with ESG's scoring criteria. ESG is a social credit scoring of companies and is used as a metric in some financial institutions, but as indicated, offers no justification for the economic performance of such companies.
As Vanguard's own CEO, Tim Buckley, put it in a Wall Street Journal article, "Our research indicates that ESG investing does not have any advantage over broad-based investing."
Notwithstanding ESG screening being out-competed by other investment metrics, the very reason for its social benevolence may be null and void.
According to the Harvard Business Review, "Researchers at Columbia University and London School of Economics ... found that companies added to ESG portfolios did not subsequently improve compliance with labor or environmental regulations."
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