Are your financial investments being weaponized to undermine your political beliefs?

Investment firms, banks, and many other companies have embraced environmental, social, and governance, also known as ESG—a politicized rating system that advances the left’s agenda.

In Utah, Treasurer Marlo Oaks is fighting S&P Global Ratings, which adopted ESG to make decisions about the credit ratings of state and local governments. He’s also warning Americans that it’ll soon affect them as well—if it hasn’t already.

“Most Americans don’t want to be exposed to politics in the workplace and in our choices as consumers, but that’s where we’re going,” Oaks tells The Daily Signal. “They’re using our money against us, to drive a political agenda that most of us don’t want.”

Listen to our interview on “The Daily Signal Podcast” or read a lightly edited transcript below.

Rob Bluey: You are a leader, not only in your state, but nationwide when it comes to fighting back against ESG, known as environmental, social, governance. Before we get into some of the things that you’re doing in Utah, just to take a moment to explain, for our listeners, what ESG is and why they should be concerned about it.

Marlo Oaks: ESG stands for environmental, social, and governance, and it’s a rating system that’s used by investors, mostly to determine if a company typically is complying with particular ESG factors.

So environmental, there’s a big push for net-zero carbon emissions. And so, the environmental factors tend to look at that kind of thing. And then, the social’s any number of issues. I think we’ve seen this year a couple of proposals at companies to pay for abortions, things like that. So that might be a social issue. And then governance is typically around executive pay or things of that nature.

And the reason that it’s so problematic is that you have, really, two significant layers of subjectivity. No. 1 is, who’s deciding what the ESG factors are? And No. 2, who decides what the correct answer is to those factors?

And when we’re doing a traditional investment analysis of a company, you’re looking at very quantitative numbers that, you might look at them a little bit differently and include things in some of the footnotes in an annual report, but by and large, it’s fairly cut and dry what you’re working with. ESG is not that way at all. And in fact, some people would say, my friend Vivek Ramaswamy would say, “That’s a feature, not a bug.” And so generally, that’s what ESG is.

Bluey: And where did this come from? Why are we seeing companies embrace this agenda? What is the motivation for them to decide to go down this path?

Oaks: That is a little bit complicated, but I think there’s a lot of virtue signaling today. There’s a fear of maybe being viewed negatively if you don’t do it. So I think there’s a number of different reasons why companies offer ESG information and they’re doing it voluntarily today.

They may believe it and be advocates for this. They may see it as an opportunity to virtue signal in the marketplace and show their clients and their shareholders that they’re good corporate citizens. Or they may feel like they need to to stay competitive. And so, those reasons lead to groupthink in a lot of cases.

And what’s unfortunate is that in February, there were 1,800 lawsuits globally related to ESG disclosures, three-quarters of those were in the United States. And so, if we’re forcing companies to make these disclosures, that number’s only going to go up. And it’s a way to go after companies, unfortunately, for any number of reasons, given their own disclosures. It’s very unfortunate.

Bluey: What steps are you able to take, as Utah’s treasurer, and why have you decided to make this a priority?

Oaks: The reason that I’m making this a priority is, I’ve been talking for months in the state of Utah, that we have the highest credit rating in the world. And we do, we’ve never been rated below the highest credit rating, an AAA. And so, we’re known as an AAA-rated state, because the three major credit rating agencies give us their highest rating. But that may not matter if we have an ESG score.

And basically, the credit rating determines how expensive or inexpensive it is to borrow money in the capital markets. And so, it’s just like a personal credit score, the higher your credit score, the lower you pay on interest for borrowing money.

But if we have a separate ESG score, then investors could look at the state of Utah and say to other investors, “Well, we really shouldn’t give the state of Utah the best rates in the marketplace because of this factor or this factor, this factor.” They are really political by nature.

And so, you suddenly have politicized the capital markets, and you can weaponize them against entities that are not following the line of what ESG advocates believe you should be doing.

So that is very problematic, because you are bypassing the democratic process, our legislative process, where we pass laws to essentially go backdoor and say, “OK, you need to have these policies, or you’re not going to get the best rates in the marketplace.”

And it also undermines free-market capitalism, because what happens is, the investors begin to collude and point to things that are not related to their finances, to an entity’s finances, and decide that you shouldn’t get the best rates in the marketplace.

So I’m just very concerned about the politicization and the weaponization of capital, because I believe that this is the greatest threat to our American form of our constitutional republic and free-market capitalism in my lifetime.

Bluey: You’ve led a letter to S&P Global Ratings with the entire Utah congressional delegation and other state officials. You’ve also written about this for The Wall Street Journal. What was behind that action? And have you received a response from S&P to your letter?

Oaks: I had been talking about our credit rating, talking about the impact of an ESG score, what that would do. And then on March 7, I received an email from S&P saying, “Treasurer Oaks, we’d like to talk to you about the ESG indicators that we plan to apply to the state of Utah.” And I thought, “OK, here we go.” And so, they didn’t ask me for my input. They just said, “We want to talk to you about what we’re doing.”

With a traditional credit rating, we pay one of the credit rating agencies to provide that. In this case, they provided it without us paying for it. And so, it’s not something that we requested or wanted. And so, that’s when I became very concerned, because we view the credit rating of the state of Utah as a key asset of the state.

We’ve always been very conservative in how we manage our finances and that’s why we have the best credit in the world, but this would impact that.

And so, the constitutional officers of the state of Utah, five constitutional officers, the governor, lieutenant governor, attorney general, auditor, treasurer, the speaker of the House, the president of the Senate, and then our two senators, all four congressmen signed this letter to S&P, basically calling out what ESG is, and that’s a political writing, and that we do not want this published on the state of Utah. And we believe that it is inappropriate and highly problematic, and that we do not want them published.

So we did receive a response back a few weeks ago and it really didn’t address all the questions that we had, and they stuck to their position, which was unfortunate. And so, that’s where we’re at.

Bluey: Do you find that other states are joining your effort to raise awareness about this? And what work are you doing with other state treasurers to make sure that it’s maybe a coalition effort, not just Utah doing this alone?

Oaks: Idaho has recently sent a similar letter to S&P and West Virginia was very supportive of what we did. They came out a couple days after we submitted our letter. And I think other states are working on things, because frankly, they see the risk here and it’s a significant risk.

It puts all of us at risk, and it’s really not good for any state or any municipality because the pendulum today is on the left, but it could swing to the right. And suddenly entities might be forced to make pro-life contributions to organizations, whatever it is. I’m just as against that as I am with what ESG is doing because you’re politicizing the capital markets, that’s just not appropriate.

We need to keep our capital markets and businesses neutral so that we can focus on doing the business of business. And in the case of states, we focus on the finances of a particular state and whether you’re going to get paid back, that’s appropriate. And if there is an ESG metric that has a material, financial component to it, that should be part of the credit rating, not an ESG score.

Bluey: I’ve seen a response from your critics to your Wall Street Journal piece who suggest that it’s not political. And they say that ESG simply provides more transparency. What do you say to them?

Oaks: Transparency is a tricky thing, because that may be the motivation, but whether intended or not, this information can be weaponized. And so, we have to be very careful about providing information that really isn’t relevant to a credit rating.

And frankly, we’re looking at one cost—the cost of carbon emissions or things of that nature. We’re not talking about the cost of what would happen if we dropped traditional energy, traditional fossil fuel, what kind of cost would that create?

And I can tell you, that would be much more significant and much more negative to all of us. Cheap or inexpensive clean energy, like what we produce in the United States, is the foundation for society.

And what’s happening today with inflation, with gasoline prices, and trying to cut off capital to the energy companies, leading to inflation, is hurting the people who can least afford it. It’s very, very sad. So our poorest and most disadvantaged communities are really suffering from this. And so, it’s tragic and we’re not talking about the cost to those people.

Bluey: I think you’re right. And I think that some of that might be intentional. The president himself has acknowledged that we need to go through this transition, and it seems that he’s willing to put Americans through this pain and suffering. Thank you for bringing it down to the individual level. I want to make sure that listeners understand how this could impact them in their daily lives.

Oaks: Yes.

Bluey: And I think one of the things that we’ve heard people like Vivek Ramaswamy mention, you referenced him earlier, is that this could lead to a situation where, hopefully not, but we end up on a slippery slope like they have in China, and there’s a social credit system.

So what is it that an individual who might be listening to this interview needs to recognize that, yeah, it’s not just the state of Utah and it’s not just corporations that are struggling with this, but ultimately, they could be suffering the consequences as well?

Oaks: A lot of people are feeling the politicization of our business community just by what’s happening at work and having to go through [diversity, equity, and inclusion] training or [critical race theory] training or any number of things. We have an environment like in our universities as well, where free speech is frowned upon, that you have to have the right thinking in order to survive. And that’s very stressful for all of us.

Most Americans don’t want to be exposed to politics in the workplace and in our choices as consumers, but that’s where we’re going.

One of the keys to remember is that a lot of the investment money that is being used to drive this—so the BlackRocks, the State Streets, the Vanguards—they’re using our retirement money. The money that’s in your 401k, if it’s sitting in one of those fund managers’ portfolios, it’s being weaponized against you.

And so, I talk a lot about that, and I know Vivek as well. They’re using our money against us, to drive a political agenda that most of us don’t want. And so ultimately, we’re going to have to move that money away from them because that’s the power that they are using against us. But unfortunately, there aren’t a lot of choices right now, but … down the line and hopefully not too far in the future, those choices will be there.

But there are some choices today and it’s important that people let their voices be heard at their companies to say, “I don’t want my retirement money politicized. I expect my retirement money to be managed for a financial return.” And people are going to start feeling that if they do use ESG in a retirement fund, most don’t, but that’s something that will impact everyone.

And so, we all need to be aware of and demand that we go to a neutral environment in business and have the fiduciary standard, which is to manage money in our retirement plans for our financial benefit, not another reason like politics.

Bluey: Treasurer Marlo Oaks of Utah, thank you so much for that advice. Thanks for the work that you’re doing and bringing us up to speed on ESG and some of the challenges that we’re having to fight back. We appreciate you being with The Daily Signal.

Oaks: Thank you very much.

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