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ESG Managers Fail the China Test

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You know by now that ESG fund managers are using investor dollars to pursue their own political goals. That’s why Your Survival Guy encourages you to invest in individual stocks and bonds with the help of an investment advisor who has a fiduciary responsibility to you.

ESG funds, on the other hand, are selling you something different. They want you to buy their view of the world. And while they may talk a big game, the reality is that their ESG principles only seem to apply to countries in the U.S.A. In National Review, Andrew Stuttaford implies that when there’s money to be made in China, those ESG rules seem to be ignored. He writes:

Another day, another large pension-fund manager playing politics with pension money.

Canada Pension Plan Investment Board, the country’s biggest pension fund, said on Thursday that directors of its portfolio companies presiding material environmental, social and corporate governance (ESG) failures should be asked to resign immediately.

The change is part of revised proxy voting rules for the fund, known as CPP Investments, which will allow it to vote against a director seeking re-election following failures of oversight, along with voting against the director deemed most responsible for failing to remove them from the board.

CPP Investments, with C$550.4 billion ($431 billion) in assets, will also consider voting against all directors at portfolio companies with classified boards where ESG oversight failures have occurred. Classified boards are companies in which only a subset of directors are up for election…

The move is aimed at ensuring that CPP’s portfolio companies are compliant with climate change, board gender diversity and corporate governance issues, which are high on investors’ minds.

I wonder how high these issues really are on investors’ minds. High perhaps on the minds of professional investment managers, but on the minds of the people whose money they manage?

“We cannot nor do we choose to walk away from companies by selling our shares every time we disagree with a position taken by management or a board of directors,” said Richard Manley, Managing Director, Head of Sustainable Investing, CPP Investments.

Ah, a “Head of Sustainable Investing,” just one of the many jobs that the flourishing ESG ecosystem has thrown up. ESG may be going through a slightly rockier patch at the moment, but the amount of people who now have a vested interest in its continuance means that it will, I fear, be around for a very long time yet.

“We plan to step up our engagement in cases of oversight failures related to climate change, board gender diversity and governance,” Manley said in the statement.

Meanwhile, quick googling throws up this line in an October story from China Digital Times:

Canada’s Pension Plan Investment Board has invested US$2.23 billion in Alibaba and US$3.51 billion in Tencent.

Perhaps CPP will have sold those investments by now, along with any other investments in China. If not, perhaps it is its directors that need to be considering their position.

ESG. China. Pick one.

Action Line: It turns out that ESG investing, in its current form at least, may not even be legal. Arizona AG Mark Brnovich is suing to put a stop to what he calls the antitrust violations of ESG funds. ESG has been turned into a tool for pushing forward the progressive agenda. Unless you want your money used to pursue the progressive agenda, you should build a portfolio of individual stocks and bonds, rather than relying on index funds. If you need help, I would love to talk with you. If you would like to get to know me before we talk on the phone, there’s no better way than signing up for my free monthly Survive & Thrive letter. In the letter each month, I encourage and push you to achieve the personal and financial security goals you’ve set for your family. Click here to subscribe. We’ll get to know each other, and get serious about your future success.

Your Survival Guy has been raising the alarm bells over ESG investing for years:

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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.