The environmental, social, and governance movement is attempting an “end run around democracy” by forcing companies to adopt climate policies without passing any legislation, warns Tennessee Attorney General Jonathan Skrmetti.
While ESG “is not entirely bad as a concept,” Skrmetti, a Republican, warns that a “sort of hardcore behind-the-scenes approach to ESG” involves inserting “really radical environmental commitments into the DNA of every major corporation.”
“At the end of the day, the biggest problem with it is, it’s an end run around democracy,” he contends in a Monday interview with “The Daily Signal Podcast.”
Skrmetti joins the podcast to explain his first-in-the-nation lawsuit against BlackRock, alleging that the world’s largest exchange-traded fund provider violated the Tennessee Consumer Protection Act by misleading the public about its climate and ESG commitments.
Skrmetti claims BlackRock misled consumers by claiming that some of its funds do not follow ESG goals, even while the company has made aggressive ESG commitments that implicate all assets under its management. He also claims BlackRock misled consumers by saying that ESG goals align with increasing returns on investment, even though studies—and BlackRock’s own data—show they do not.
BlackRock allegedly uses this deception to foist its ESG goals on companies it partially owns through stock purchases. The Tennessee attorney general claims that this kind of strategy is undemocratic.
“If you take the financial companies that are essential for functioning in the modern economy, and you line them all up, and you have them telling everybody who wants to do business that you need to do things this way, you can’t do this, you have to do that, it’s essentially governance. It’s essentially making policy, and they either have to follow those rules, or they’re going to suffer,” Skrmetti says.
“There are antitrust implications there, I think, but more broadly, there are democracy implications,” the Tennessee AG adds.
“You have a small sliver of society with an incredible amount of financial power who are able to dictate how society functions,” Skrmetti warns. “There’s no transparency; there’s no accountability; and that’s the exact opposite of what America is.”
“If you’re going to make decisions about how companies should have to behave to do business, those are decisions that ultimately have to flow from the people,” he explains.
While this undemocratic aspect of ESG may be troubling, it is not essential to the lawsuit, which alleges deceptive business practices in violation of the Tennessee Consumer Protection Act.
Listen to the podcast and read the lawsuit below.
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