A Republican-led bill aimed at preventing pension fund managers from considering environmental, social and corporate governance (ESG) issues for investments cleared Congress, likely setting up the first veto of Joe Biden’s presidency.
John Tobin is professor of practice at Cornell’s SC Johnson College of Business, and a former Managing Director and Global Head of Sustainability at Credit Suisse. He says ESG remains good business for investors and bankers.
“The notion of socially responsible investing, or ESG investing, got started many decades ago with church leaders seeking to align their churches’ investments with their religious convictions, excluding gambling, alcohol, armaments, and other ‘sin stocks’.
“If ESG opponents wanted to stop any consideration of environmental or social issues in investments, they should have started a long time ago—that train has left the station. Today, executives at just about every major company consider and manage ESG issues—and to not do so would pose big reputational and litigation risks and endanger their social licenses to operate. Not evaluating and managing ESG is just no longer an option.
“Maximizing risk-adjusted returns on investment and protecting the environment are not mutually exclusive. Anyone suggesting that has apparently never heard of a company called Tesla.
“It is actually true that ESG investing can be risky and can hurt retirement assets—but this applies to all investments, not just ESG. There have always been good and bad investments, and this is why investment decisions should be made by investors and their financial advisors, rather than by industry lobbyists or politicians.”