The American culture war that raised investment was about the essence of capitalism

The American culture war that raised investment was about the essence of capitalism

In Washington, Joe Biden announced this week that he would use his presidential veto for the first time since Republicans won congressional elections in November. Another, as-yet-unknown politician, Republican Vivek Ramasamy, ran a week earlier than Biden in the 2024 presidential election.

The two phenomena are not directly related, but they have substantial interfaces. They are the subject of a heated debate, or culture war, now being waged in the US over ‘ESG’. environment, Social And reign. These are criteria for sustainable investment in the areas of environment, social conditions and good governance. Until recently, ‘ESG’ was considered a technical, not to say boring, topic for experts. Now there is Fox News Let’s talk about it.

The Biden administration wants to give pension funds the legal option to take these green and social criteria into account in their investments. This is not possible under the current rules established under President Trump: pension funds are allowed to focus only on (expected) investment profits. Republicans blocked Biden’s legislation last week with the help of two Democratic senators. Republicans can see ESG left and right got up: It can be a hindrance to making money in the capital market. Biden announced that he would use his veto because: Most “successful” investors prefer to take ESG factors into account.

Ramasamy is one of the spiritual fathers of the Republican Party against ESG. The 37-year-old entrepreneur, who now works as a property manager, wrote the bestseller in 2021 Vogue Inc. He has since been a frequent commentator in the right-wing media. The book is a sweeping indictmentPartnerCapitalism: A corporation is not only its shareholders (Partners) to serve, but also to social interests such as employees, disadvantaged groups and the environment. Essentially, ESG is about the same thing. Ramasamy’s company, Strive Asset Management, says on its website that we are moving away from “money-sucking social activism” and focus on “maximizing shareholder value”.

ESG delivers value

Incidentally, proponents of ESG investing argue that it actually creates value in the long term, including for shareholders. Companies that ignore climate will miss out on new opportunities and threats. And companies that don’t focus on good governance are usually poorly managed.

According to Ramasamy, this is nonsense. ESG will destroy American households’ stock investments and invested pensions. With crony capitalism, the “elite” responded to the “insecurity” of Americans with “a mixture of morality and consumerism.” According to a text In it he praises his book.

The ESG debate fits into a longer debate about what (US) capitalism should and shouldn’t be. The American Business Roundtable, a business lobby organization, released a 2020 report by 181 CEOs of large companies in which they argued that business should be more important than stock price. Larry Fink, CEO of global asset manager BlackRock, made a similar call in the same year. Companies should focus on ‘all stakeholders’. “Climate risk is investment risk,” Fink wrote at the time. American business is really starting to look a lot like Europe PartnerThinking is very deeply rooted. Until the bitter war against ESG erupted shortly after.

Ford and Friedman

Corporate America has not always focused solely on maximizing profits for shareholders. At the turn of the twentieth century, car manufacturer Henry Ford wanted his own employees to be able to buy the cars they produced themselves. But certainly since the 1970s, the tendency to see profit maximization as the goal has dominated America. Economist Milton Friedman wrote the most cited piece in 1970 The social responsibility of business is to increase its profits: Corporate social responsibility is about increasing profits.

Republicans are looking for the latter in the current debate about ESG and got up Capitalism is now entrenched. With new elements of striking, they want to crack down on companies that don’t meet the criteria for maximizing profits. Traditionally, Republicans have been a friend of big business, which is appeased by lower taxes and deregulation. After all, companies should not be deterred.

Now Republicans are positioning themselves next to “ordinary” Americans, whom they believe are victims. got up businesses. Florida Republican Gov. Ron DeSantis may run for president, he wrote last week In an opinion piece Inside The Wall Street Journal that “old time“Republican support for the business world won’t work today because businesses are said to be politicized by the left. These policies “don’t necessarily serve the interests of the American people and the economy.”

DeSantis fights back and wins a political victory got up, ended the special status, tax breaks, and extensive autonomy enjoyed by the Disney World theme park in Florida. This allowed Disney’s public opposition to the DeSantis Act, which would restrict education about sexual orientation or gender identity.

Florida is one of the states (Texas and Oklahoma, among others) to pass anti-ESG legislation. Pension funds are prohibited from using ESG criteria in their investments.

Republican Senator Ted Cruz accused Fink of BlackRock, which recently started doing ESG (even though it still invests heavily in fossil energy), that by focusing on ESG he is misappropriating “yours and mine and millions of old women’s” investments. “That’s not capitalism, that’s abuse of the market.” Cruz wants to reduce Blackrock’s power.

Republicans seem to be returning to earlier accusations against big corporations in American history. Think of the Populist Party that opposed monopolistic corporations in the late nineteenth and early twentieth centuries. Or public anger over the enrichment and abuse of power by the Rockefeller oil family in the years before World War I.

Free market democrats

The paradox now arises that Republicans, who generally defend the free market, are accused by Democrats of wanting to restrict the free market. Democrats say fund managers just want the ability to factor sustainability into investment decisions. They are not obligated to do anything. A Biden spokesman recently said that Republicans are “putting handcuffs on investors.”

BlackRock CEO Fink emphasizes this point: ESG is a “choice” of how you want to invest. In an interview At the World Economic Forum in Davos in January. As the boss of the world’s largest asset manager, Fink is almost the epitome of capitalism, but now considered got up, for support for ESG. “For the first time in my life, attacks are now personal in nature,” Fink said in Davos.

This U.S. culture war could have tangible consequences for companies operating internationally — even if Biden vetoes Republican legislation that would only deal with U.S. pension funds. ESG goes further, and the US lags behind Europe in this area. The EU is trying to promote sustainable investment and business with legislation. An EU directive on sustainability reporting for large companies came into effect earlier this year, and from 2021 such a directive will apply to asset managers. Last week, agreement was reached on criteria for green bonds in Brussels.

In the US, the financial regulator SEC has put forward draft rules for sustainability reporting by large firms. Among other things, they must report climate-related risks and emissions. But the SEC is now regarded in Republican circles as well got up. A SEC “Far Left Social Agenda” to continue. Republicans are likely to challenge the SEC rules through lawsuits.

2023, So he wrote Economists November should actually be the year of international harmonization of ESG-type standards so companies don’t have to deal with different rules everywhere. This is because of the heavy war in America Raised capitalismbecome very uncertain.

Green Bonds Page E9

read more: The European Union was the first to set criteria for green bonds

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