Here’s one way to solve the ESG culture wars with red states

Remove the ideology by removing the special overlay of ESG status.

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Which way is the wind blowing? Strong winds hit Florida’s gulf coast on Boca Grande Island ahead of Hurricane Ian’s landfall Wednesday. Photo: Meteorologist Simon Brewer via Twitter.

(Mark Hulbert, an author and longtime investment columnist, is the founder of the Hulbert Financial Digest; his Hulbert Ratings audits investment newsletter returns.)

CHAPEL HILL, N.C. (Callaway Climate Insights) — The culture wars have taken on a new enemy — ESG investing.

I’m referring to the efforts in more and more states to prevent managers of their state pension systems from taking “ideological” considerations such as ESG into account. Florida was the most recent state to adopt such rules, requiring that pension fund managers’ investment decisions “be based only on pecuniary factors” with the goal of maximizing investment return.

In announcing the new rules, Florida Gov. Ron DeSantis declared: “Corporate power has increasingly been utilized to impose an ideological agenda on the American people through the perversion of financial investment priorities under the euphemistic banners of environmental, social, and corporate governance...”

The problem with Florida’s and other states’ similar proposals is that there’s no surefire way of knowing whether a manager is violating them. Consider the following three hypothetical situations: