Your Survival Guy

Preparing your investments and family for when disaster strikes.

Disclosure

  • Home
  • Your Survival
    • Special Report: FOOD SHORTAGE: Crazed Hoarding Is Not Preparing
    • Your Survival Guy’s Super States
    • Constitutional Carry
    • EMP Threat
    • Tucker Explains
    • Newport Gas Outage
    • Water
      • Emergency Water Storage
      • Let There Be Water
    • Get Your Gun and Your Training Now
    • Satellite Phones
    • Navy SEAL Survival Kit
  • Your Money
    • Coronavirus Infects Stock Market
    • Looking for a Better America
    • You Invest, They Win
    • Where to Keep Your Cash
    • Paris
    • How to Buy a Boat
    • Dead or Alive? The Future of Long-Term Investing
    • Is Vanguard too Big?
    • Cryptocosm and Life After Google
    • The Last Intelligence Report
    • The Truth Behind the S&P 500
    • RAGE Gauge
    • How Many “Retirees” Will Keep Working?
    • Your Retirement Life
    • You’ll Love This if You’re Dreaming of an Active Retirement Life
  • Weapons
    • Self Defense
    • Every Family Should Own at Least One Shotgun: Here Are Three
  • About Me
    • Your Survival Guy: “Life on Main Street Hasn’t Been This Hard in a While”
    • Preparing for Times Like These
    • My Videos/Pics
    • Music
      • RIP Neil Peart: You Will Always Be Remembered as a “Modern-Day Warrior”
    • Your Survival Guy: Make Your Bed and The Hero Code
  • You
    • Our Cabin on Kodiak, Alaska
    • If You Are in Pain, this May Help. It Helped Me.
    • How to Save for a Grandchild
    • FIRE! Financial Independence, Retire Early
    • Compound Interest
    • Arithmetic of Portfolio Losses
    • Maximum Portfolio Withdrawal Rate
    • An Efficient Frontier
    • Retirement Compounders
    • Counterbalanced Total Returns
  • Survive & Thrive
    • January 2023: Stacking Wood and Compounding Money
    • December 2022: Your Survival Guy Prefers Bombardier’s Global Express 7500
    • November 2022: Arriving in Style at Le Bristol Hotel, Paris
    • October 2022: Sink Your Teeth into These Bond Yields
    • September 2022: Do You Have the 7 Habits of Highly Effective People?
    • August 2022: “Watch This Boat off Our Stern,” My Dad Said “He’s Coming in HOT”
    • July 2022: MONEY TALKS: Your Survival Guy’s Best Service in Paris
    • June 2022: “I’ve Been with Richard Young for Over 30 Years Now”
    • May 2022: Survive “If You Fail to Plan, You Plan to Fail”
    • April 2022: Dream On! Fishing the Double Down in Key West
    • March 2022: Your Survival Guy Hears the Craziest Investing Stories
    • February 2022: Your Survival Guy’s 2022 Super States
    • January 2022: The Least Affordable Housing Market in the U.S.
    • December 2021: Listen Your Survival Guy is not “Mr. Peanut”
    • November 2021: Joe Biden is Weaponizing Your 401(k) Against You
    • October 2021: Time to Get Your Lazy Cash Off the Couch
    • September 2021: What’s Your Survival Guy Investing in Right Now?
    • August 2021: To Where Will You Flee?
    • July 2021: This Bubble’s Popped Baby
    • June 2021: Your Survival Guy’s Summer Job, Inflation & You
    • May 2021: You’re Telling Me Friends Ask You This Question
    • April 2021: Is There One Best Place in America for ‘Liberty Retirees?’
    • March 2021: America’s Growth Corridors
    • February 2021: Troops in D.C. & Your Authoritarian Virtual Panopticon
    • January 2021: Are You Ready for The Great Reset?
    • December 2020: Disaster Prep in Our Newport Bunker and Your Survival
    • November 2020: Election 2020 Edition: Stock Market is Predicting a Trump Win
    • October 2020: You Invest They Win, AGAIN
    • September 2020: Proud to be an American: Pro-Trump Parade Turns Rhode Island Red
    • August 2020: The Clock is Ticking: You Must Protect Your Family
    • July 2020: What Will Her Life Be Like Now?
    • June 2020: Your Survival Guy’s Home (and Money) Protection Plan
    • May 2020: Future Look at Covid-20, or the Next Deadly Virus
    • April 2020: Only Trump Saw the Risk in America’s Relationship with China
    • March 2020: Coronavirus Infects Stock Market
    • February 2020: Escape the City: Live Small, Cheap, and Safe in America
    • January 2020: Is Your Cash Safe? Probably not This Safe
    • December 2019
    • November 2019
    • October 2019
    • September 2019
    • August 2019
    • July 2019
    • June 2019
    • May 2019
    • April 2019
    • March 2019
    • February 2019
    • January 2019
    • December 2018
    • November 2018
    • October 2018
    • September 2018
    • August 2018
    • July 2018
    • June 2018
    • May 2018
    • April 2018
    • March 2018
    • February 2018
    • Welcome

ESG Is Another Way to Attack Conservative Principles

May 10, 2022 By E.J. Smith - Your Survival Guy

You know from here, here, and here how I feel about ESG investing. It’s a politicized money grab for finance and government to extract more fees from investors and to choose winners and losers subjectively. It’s good to see Utah is standing up against the mob.

Utah’s treasurer, Marlo Oaks, is fighting back against an effort by S&P Global Ratings to issue credit ratings for states and municipalities partially based on ideological criteria. S&P wants to apply ESG to muni bond ratings. It doesn’t take much deep thought to realize that rewarding or punishing democratically elected governments based on their policies is a bad idea. Oaks writes in The Wall Street Journal:

Ideological criteria will now influence the credit ratings of state and local governments, thanks to S&P Global Ratings. In addition to rating governments on meaningful financial criteria, in March the biggest of the top three credit-rating firms began to apply an environmental, social and governance, or ESG, rating system. But Utah isn’t about to submit to these subjective standards. State officials, including myself, recently wrote a letter to S&P objecting to the ESG indicators and ratings it has assigned to Utah and calling for the company to withdraw them.

ESG is sometimes dressed up to look objective with quantitative “metrics” and complex “analytical frameworks.” But this blurs the distinction between subjective judgments and objective financial assessments.

S&P Global says it “incorporates [ESG] risks and opportunities into the credit rating analysis” of public issuers. This includes ambiguous and open-ended categories such as how a state scores on “managing carbon,” “political unrest stemming from community and social issues” and “adverse publicity that results in reputation risk.” Leaving no doubt as to the measurement’s subjectivity, S&P notes, “reflecting ESG risks and opportunities within our credit rating analysis will require a qualitative view of an entity’s capacity to anticipate and plan for a variety of emerging risks.” Unlike quantifiable financial metrics, this qualitative view depends entirely on the beliefs of whoever constructs it.

It’s easy to see that those beliefs are left-wing. S&P assigns a lower ESG score to states that have both “physical risks” like earthquakes and natural disasters and a larger percentage of their economy tied to natural resource extraction, such as Texas, Alaska and Louisiana. S&P’s Environmental category, after noting federal-state partnerships’ financial mitigation of natural disasters, focuses its assessment on the costs of making the transition to “net zero” and the policy changes it predicts will be necessary to “curtail” greenhouse-gas emissions.

Certainly, if a state’s finances are overly concentrated on any one particular industry this will affect its financial outlook because of the risk that revenue could decline should that industry’s fortunes contract. But a traditional credit rating takes into account the diversity of industry in a state already, so why create an ESG metric that could be politicized? Instead of focusing on the financial risk associated with economic concentration, the ESG metric highlights if a state or local government allows what S&P thinks is too much oil, gas or coal extraction.

Further, there are national security, economic and even environmental benefits for U.S. states to produce traditional energy. Many countries are searching for sources of natural gas and oil so they can lower their dependence on Russia after its invasion of Ukraine. In that environment, states like Texas, Alaska and Louisiana have a tremendous market advantage and could see improved cash flows. Not only are their fossil fuel revenues benefiting a free democracy, Russia’s natural gas exports to Europe burn 41% dirtier than American natural gas. Exporting U.S. natural gas would create a significant environmental benefit. Authoritarian regimes like Russia threaten, among other things, the environment, human rights, free societies and democratic government—all factors that should be important to ESG proponents. That S&P’s ESG metrics completely ignored or missed these variables exposes some of the major flaws of ESG ratings. Such scores place a value judgment on political issues that do not have one right or wrong answer, are highly complex, and are impossible to predict.

As the Russian situation has shown, ESG assessments depend on variables that can change rapidly. Before Russia attacked Ukraine, Europe was moving away from fossil fuels and military spending. That changed almost overnight. This is why markets are so valuable; they encapsulate many different views of the future and their organic structure allows for quick adaptation. ESG scores, by contrast, rigidly hold to one viewpoint and are slow to pick up on changes in the world. The minds behind S&P’s ESG metrics seem to believe that a transition to green energy is inevitable and therefore punish states that produce traditional energy for “climate transition risk.” But no one really knows what this “climate transition” will look like. There are no widely accepted, economically viable alternatives to fossil fuels in the market. No one knows where they’ll come from, what they’ll be or when they’ll arrive.

ESG metrics’ false certainty about future events, and consequent inability to keep up with unanticipated current events, causes capital to be misallocated. They create bubbles in favored industries while starving others that could be profitable.

The solutions to our most difficult challenges—such as climate change—can come only through innovation. Foisting rigid ESG factors onto the market discourages innovation by mandating conformity, penalizing creativity and punishing the industry with the greatest incentive to find alternatives—the energy sector. Fracking has reduced U.S. carbon emissions immensely, but it could cost you under S&P’s ESG metrics.

Utah has prudently managed its finances over decades and as a result maintains the highest possible credit rating from all major firms, allowing the state to borrow money at the lowest rates and save taxpayer dollars. But under the new ESG regime, those financial factors may be supplanted by subjective, political ones.

These metrics also threaten Utah and other states’ democratic sovereignty. The ESG disclosures many corporations have felt compelled to release have also led to frivolous legal action and shareholder resolutions, an additional fiscal drag on businesses. Extending this regime into the municipal sphere is an invitation to litigation and other coercive tactics that will sabotage states’ self-determination and independence.

States like Utah value our constitutional republic, which has ensured freedom, and free markets, which have fostered innovation and generated prosperity for generations. Any states, governmental jurisdictions, corporations, individuals, and investors who also hold those beliefs should join us in standing against ESG.

Action Line: Oaks lays out how states that prudently manage their residents’ wealth could be harmed by S&P’s ESG ratings, but the opposite will be true for poorly managed states that happen to promote the ideologies S&P is looking for. Poorly run states will get an unearned boost by saying the right things, even while still mismanaging residents’ wealth, and that of muni-bond buyers. You need to avoid falling into this trap as an investor. If you need help, let’s talk.

P.S. Read more about the problems with ESG here:

  • ESG Creator: “It’s a Marketing Mania”
  • Arrogant ESG Strategies Exposed by War in Ukraine
  • The Anti-ESG Movement Has Begun
  • ESG Managers Fail the China Test
  • Progressives Manipulate War, ESG Funds, to Push Great Reset Agenda
  • Who’s the REAL Winner from ESG Investing?
  • ESG Funds: You Invest, They Win—Here’s Why

P.P.S. If your state’s leaders would rather appeal to S&P’s subjective credit ratings than pursue prudent policies, it’s time to look for a new home. Start with my Super States.

The following two tabs change content below.
  • Bio
  • Latest Posts
My Twitter profileMy Facebook profileMy Instagram profile

E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.
My Twitter profileMy Facebook profileMy Instagram profile

Latest posts by E.J. Smith - Your Survival Guy (see all)

  • CATO: Global Freedom Is in Sharp Decline - January 27, 2023
  • TIME FOR A GONDOLA? Little Cottonwood Canyon Jammed with Traffic - January 27, 2023
  • Biden Administration Destroying Retiree Fiduciary Protections - January 27, 2023
  • 4 Life Changing Words for Your Survival Guy: “You Should Try This” - January 26, 2023
  • Anti-Carbon Crusaders in Davos Talk ESG and OPM - January 25, 2023

If you enjoyed this post, email it to a friend:

  • Email
  • Print
  • Facebook
  • LinkedIn
  • Twitter
  • WhatsApp

Related Posts

Money 101

Trending

  • Invest with Peace of Mind and Comfort
  • LOSING POWER: Your Survival Guy's Nightmare Scenario
  • The Importance of a Balanced Portfolio
  • Stocks Go Up and Down: Get Paid Along the Way
  • The World Economic Forum's Record of Destruction
  • Don’t Worry, I Won’t Tell Them Our Secret
  • Don't Let Your Lazy Cash Eat all Your Food
  • WATER STORAGE: California's Missed Opportunity
  • Hey, Where'd All the Moving Vans Go?
  • Your Survival Guy's 2022 Super States

Must Reads

  • Get Out the Map, Make a Plan, and MAKE IT HAPPEN
  • Why Investors Should Forget Prices and Focus on Income
  • Your Survival Guy: Emerging Food and Energy Crisis
  • Survival: Lost in the Woods Bending the Map
  • How to Avoid Going Back to Work after Retirement
  • Some Lessons You Just Can’t Get from a Textbook
  • HELLO: “How’s It Going? I Don’t Know Anything”
  • Your Survival Guy’s Fishing Stories: From Key West to Newport
  • FIRE AND ICE: Defeat the Cold by Stocking Firewood
  • When Markets Fall, All Is Not Lost
Only if You’re Serious
Crazed Hoarding Is not Preparing
How to Save Rainwater Effectively
Your Survival Guy in Paris
Your Survival Guy's Fishing Stories
Financial Independence, Retire Early
Money 101
Pandemic Creates Virtual Panopticon
Emergency Water Storage
Find Freedom in America
Second Amendment
How Can You Save Money for Your Grandchild
Great Reset
See Who's Missing the Boat
Richard  Young Reports
How You Can Save Money for Your Grandchild
Why Fidelity is Number One
The Best States for Survival
You Invest, They Win
Escape the City
Why Vanguard is Too Big for YOU
Island Life

Copyright © 2023 | Terms & Conditions

loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.