{"id":1727831,"date":"2022-11-07T06:07:08","date_gmt":"2022-11-07T11:07:08","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1727831"},"modified":"2022-11-07T08:49:35","modified_gmt":"2022-11-07T13:49:35","slug":"is-following-esg-criteria-breaking-the-law","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/is-following-esg-criteria-breaking-the-law\/","title":{"rendered":"Is Following ESG Criteria Breaking the Law?"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">14<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fis-following-esg-criteria-breaking-the-law%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1727831&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p><em>Analysis<\/em><\/p>\n<p>One problem for CEOs who direct their companies to follow the goals of environmental, social, and governance (<a href=\"https:\/\/www.theepochtimes.com\/t-esg\">ESG<\/a>) criteria is that in doing so, they may be breaking the law. According to legal experts, ESG initiatives can cause companies to break antitrust, civil rights, and Employee Retirement Income Security Agency (ERISA) laws.<\/p>\n<p>\u201cThe way ESG is being implemented is completely antidemocratic, which is to say that they are just flouting laws,\u201d George Mason University law professor Todd Zywicki told The Epoch Times. \u201cThey\u2019re flouting democratically elected laws and bringing things about that are often illegal.\u201d<\/p>\n<h2>Violation of Antitrust Laws<\/h2>\n<p>According to a report titled \u201cLiability Risks for the ESG Agenda\u201d (<a href=\"https:\/\/www.texaspolicy.com\/wp-content\/uploads\/2021\/06\/2021-06-RR-Gray-LP-Corporate-Collusion.pdf?__hstc=123760149.3f33f168ae85d5bd2d6b583cebca22bd.1667248333679.1667248333679.1667248333679.1&#038;__hssc=123760149.1.1667248333679&#038;__hsfp=3110353702\" target=\"_blank\" rel=\"noopener\">pdf<\/a>), by Washington D.C. law firm Boyden Gray, companies that take part in coordinated actions against other companies or industries could be violating U.S. antitrust laws. The report states, \u201cFederal law prohibits companies from colluding on group boycotts or conspiring to restrain trade, even to advance political or social goals.\u201d<\/p>\n<p>It cites the Sherman Act of 1890, which prohibits \u201cevery contract, combination \u2026 or conspiracy in restraint of trade or commerce.\u201d Supreme Court Justice Thurgood Marshall wrote on this subject, commenting that \u201cantitrust laws in general, and the Sherman Act in particular, are the Magna Carta of free enterprise. They are as important to the preservation of economic freedom and our free-enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms.\u201d<\/p>\n<p>Hundreds of the world\u2019s largest corporations have signed joint pledges through international clubs such as Climate Action 100+, the Glasgow Financial Alliance for Net Zero (GFANZ), the Net Zero Banking Alliance, the Net Zero Asset Managers Alliance, and others to reduce the use of fossil fuels.<\/p>\n<p>GFANZ, which includes 550 global corporations as members, states that \u201call members have independently committed to the goal of net zero by 2050, in addition to setting interim targets for 2030 or earlier and reporting transparently on progress along the way.\u201d GFANZ banking members include Bank of America, Citibank, JPMorgan Chase, Wells Fargo, BlackRock, Morgan Stanley, and Goldman Sachs.<\/p>\n<p><a href=\"https:\/\/www.climateaction100.org\/whos-involved\/investors\/\" target=\"_blank\" rel=\"noopener\">Climate Action 100+<\/a> includes 700 investment companies representing $68 trillion in assets; it also includes 166 companies with a combined market capitalization more than $10 trillion. Among the hundreds of members of Climate Action 100+ are some of the world\u2019s largest and most powerful companies, including Boeing, BP, Caterpillar, Chevron, Dow, Exxon, Ford, Honda, Lockheed Martin, Mercedes, Nestle, Nissan, PepsiCo, Proctor &#038; Gamble, Raytheon, Siemens, Coca Cola, Toyota, United Airlines, American Airlines, Walmart, BlackRock, State Street, Goldman Sachs, Fidelity, PIMCO, and Allianz. It also includes America\u2019s largest state pension funds, such as CalPERS, CalSTRS, New York City Pension Funds, and New York State Common Retirement Fund.<\/p>\n<p>The Boyden Gray report notes that the argument that ESG advocates make\u2014that companies which follow ESG guidelines are better investments \u2014\u201crelies heavily on bandwagon effects.\u201d In other words, if enough asset managers collaborate to shift their investments toward ESG-compliant companies, the shares of those companies become more valuable; and even more so if governments subsidize industries like wind and solar, while punishing fossil fuel companies.<\/p>\n<h2>Violation of Civil Rights Laws<\/h2>\n<p>Beyond antitrust, another area where ESG may run afoul of America\u2019s laws is where the push for racial and gender equity violates the Civil Rights Act of 1964, which prohibits discrimination on the basis of race, color, sex, religion, or national origin. In step with ESG social justice goals, United Airlines <a href=\"https:\/\/www.newsweek.com\/united-airlines-sparks-debate-pledge-diversify-pilot-staff-1581733\" target=\"_blank\" rel=\"noopener\">announced<\/a> in April 2021 that it would set racial and gender quotas when hiring pilots.<\/p>\n<p>The company stated that \u201cour flight deck should reflect the diverse group of people on board our planes every day. That\u2019s why we plan for 50 percent of the 5,000 pilots we train in the next decade to be women or people of color.\u201d<\/p>\n<p>A number of recent court rulings have underscored the validity of U.S. laws regarding racial discrimination. In June 2021, a federal judge ruled that the Biden administration\u2019s farming grants, which gave preference to racial minorities, were <a href=\"https:\/\/www.nytimes.com\/2021\/06\/23\/us\/politics\/biden-debt-relief-black-farmers.html\" target=\"_blank\" rel=\"noopener\">illegal<\/a>. In a separate case, the courts <a href=\"https:\/\/www.forbes.com\/sites\/evangerstmann\/2021\/06\/03\/federal-appellate-court-rules-that-biden-administration-cant-deny-covid-relief-funds-to-white-restaurant-owners\/?sh=5d265efcd996\" target=\"_blank\" rel=\"noopener\">ruled<\/a> that COVID-relief grants by the Biden administration that excluded white restaurant owners were also illegal.<\/p>\n<p>But America\u2019s civil rights laws go beyond government policy to include private industry as well, opening companies up to lawsuits from employees. In August, for example, American Express became the latest company to face an <a href=\"https:\/\/www.foxbusiness.com\/politics\/american-express-slapped-lawsuit-alleging-discrimination-white-employees\" target=\"_blank\" rel=\"noopener\">employee lawsuit<\/a> for racial discrimination. Brian Netzel, a decade-long employee who was fired in 2020 on what he claims are racial grounds, stated in his class-action lawsuit that American Express \u201cgave preferential treatment to individuals for being black and unambiguously signaled to white employees that their race was an impediment to getting ahead in the company.\u201d<\/p>\n<p>In October 2021, a white male employee was <a href=\"https:\/\/www.cbsnews.com\/news\/reverse-racism-white-male-executive-10-million\/\" target=\"_blank\" rel=\"noopener\">awarded $10 million<\/a> by a jury that agreed with his claim that he was fired as part of a race-based policy by his employer, Novant Health. After five years of positive work reviews, David Duvall was fired \u201cwithout warning or cause as part of an intentional campaign to promote diversity in its management ranks; a campaign [Novant] has boasted about publicly,\u201d his suit stated.<\/p>\n<p>\u201cIt\u2019s been well known for decades that quotas are illegal,\u201d Zywicki said. \u201cBut when you start looking at things like racial sensitivity training, they\u2019re engaging pretty much in rampant stereotyping, negative stereotyping of certain groups, and they are engaging in rampant preferences for others. All of this runs pretty clearly up against existing civil rights laws.\u201d<\/p>\n<p>Diversity, Equity, and Inclusion (DEI) programs, a component of ESG, are coming under fire, both as mandatory employee training and as hiring criteria.<\/p>\n<p>It was <a href=\"https:\/\/www.nationalreview.com\/news\/exclusive-new-report-accuses-uncs-medical-school-of-putting-politics-before-patients\/?bypass_key=b2VCOTQrMTZYNldXYXdwdmk0dGV2UT09OjpWRUo2ZG1aMVNXVkdkQzlQVUhsYVRtdGFSRVpRUVQwOQ%3D%3D?utm_source%3Demail&#038;utm_medium=breaking&#038;utm_campaign=newstrack&#038;utm_term=29571059&#038;utm_source=Sailthru\" target=\"_blank\" rel=\"noopener\">reported<\/a> on Nov. 2 that University of North Carolina\u2019s School of Medicine \u201cforces applicants, students, and professors to constantly prove their commitment to the tenets of diversity, equity, and inclusion as a prerequisite to advancement, rather than basing such decisions on merit alone.\u201d This was based on a report by a nonprofit called Do No Harm, which charged that one of UNC\u2019s main criteria for hiring and promotion of teachers was \u201ca positive contribution to DEI efforts.\u201d<\/p>\n<p>Stanley Goldfarb, the chairman of Do No Harm, stated in a letter to the school that \u201cit is inappropriate to require that candidates for promotion and tenure demonstrate their commitment to a political ideology. Forcing candidates to declare their support for DEI when many undoubtedly oppose it would compel dishonesty.\u201d This report comes amid a case before the U.S. Supreme Court wherein UNC was charged with having unconstitutional race-based admission standards.<\/p>\n<h2>Violation of Fiduciary Laws<\/h2>\n<p>A third area where ESG clashes with U.S. law regards the legal obligation of fund managers and corporate executives to act in good faith and in the best interests of investors and shareholders.<\/p>\n<p>The Employee Retirement Income Security Act, passed in 1974 to address corruption and misuse of pension money, requires that private pension fund managers invest \u201csolely in the interests of participants and beneficiaries.\u201d It set what is called a \u201cprudent expert\u201d standard of care for fund managers and allows fund beneficiaries to sue managers for failing to uphold this standard.<\/p>\n<p>While ERISA applies to corporate pension funds, many U.S. states have applied similar language to public pension funds. Currently, 24 states <a href=\"https:\/\/www.ftfnews.com\/24-states-forbid-esg-investing-via-public-pension-funds\/31809\/\" target=\"_blank\" rel=\"noopener\">forbid ideological investing<\/a> for their public pension funds, including ESG.<\/p>\n<p>An August letter to BlackRock, signed by 19 state attorneys general, for example, charged that BlackRock had a \u201cduty of loyalty\u201d to state pensioners who invested in its funds and that \u201cyour actions around promoting net zero, the Paris Agreement, or taking action on climate change indicate rampant violations of this duty, otherwise known as acting with \u2018mixed motives.\u2019\u201d<\/p>\n<p>In response, BlackRock wrote that \u201cone of [its] most critical tasks as a fiduciary investor for our clients is to identify short- and long-term trends in the global economy that may affect our clients\u2019 investments.\u201d The letter states that \u201cgovernments representing over 90 percent of global GDP have committed to move to net-zero in the coming decades. We believe investors and companies that take a forward-looking position with respect to climate risk \u2026 will generate better long-term financial outcomes.\u201d<\/p>\n<p>State attorneys general disagreed, stating that despite climate-change rhetoric, \u201cgovernments are not implementing policies to require net zero \u2026 In particular, the United States has not implemented net-zero mandates. Despite doing everything in his power at the beginning of his presidency to shut down fossil fuels, even President Biden is appearing to reverse course given the harm his inflationary policies have inflicted on the American people.\u201d<\/p>\n<p>In October, Swiss bank UBS\u00a0<a href=\"https:\/\/www.theepochtimes.com\/blackrock-downgraded-by-ubs-over-growing-esg-investing-risks_4796030.html\" target=\"_blank\" rel=\"noopener\">downgraded<\/a> the shares of BlackRock, stating that \u201cas [BlackRock\u2019s] performance deteriorates and political risk from ESG has increased, we believe the potential for lost fund mandates and regulatory scrutiny has recently increased.\u201d<\/p>\n<p>In addition to the risk that ESG asset managers violate their fiduciary duty to investors, there is also the risk that corporate managers violate their duty to act in the best interest of the shareholders of the company.<\/p>\n<p>\u201cThere was a shareholder action against Coca-Cola when they had their \u2018act less white\u2019 campaign,\u201d Zywicki said. \u201cSome shareholders filed a lawsuit and basically said when you do that you are risking litigation, you\u2019re risking liability for this company. Just pretending like the laws don\u2019t apply to this situation isn\u2019t going to get you off the hook.\u201d<\/p>\n<p>In March, Disney took a political position against Florida\u2019s \u201cParental Rights in Education\u201d law, declaring that a provision of the law that banned teaching of sexual topics to children in kindergarten through third grade was \u201ca challenge to basic human rights.\u201d In response, America First Legal (AFL) issued a <a href=\"https:\/\/wordpress.aflegal.org\/wp-content\/uploads\/2022\/04\/Disney-Compliance-Notice-04052022-pdf-1.pdf\" target=\"_blank\" rel=\"noopener\">letter to Disney<\/a> on behalf of shareholders, accusing the company of \u201cwasting corporate assets and compliance violations.\u201d<\/p>\n<p>AFL charged that in pursuing a political ideology both externally and internally among its employees, as well as actively putting sexual content into its own movies and shows, Disney\u2019s executives \u201chave chosen to discriminate, create a hostile work environment, and drive away creative, loyal, and talented employees; alienate the company\u2019s core customers; and violate the law, all for the purpose of advancing a very narrow political and social agenda promoting, inter alia, sexualizing content provided to young children. Accordingly, management has placed the company\u2019s assets, including its brand, reputation, and good will, at risk.\u201d<\/p>\n<p>The U.S. Department of Labor, which regulates private pension funds, issued a directive following a 2019 executive order by then-President Donald Trump to enforce ERISA rules regarding pension funds and <a href=\"https:\/\/www.theepochtimes.com\/t-esg-investing\">ESG investing<\/a>. It stated that \u201cproviding a secure retirement for American workers is the paramount, and eminently worthy, \u2018social\u2019 goal of ERISA plans; plan assets may not be enlisted in pursuit of other social or environmental objectives.\u201d<\/p>\n<p>The Biden administration has since reversed this directive, allowing pension money to be invested in ESG funds.<\/p>\n<div class=\"author_wrapper\">\n<div class=\"one_author_block round\">\n<div class=\"top_row\">\n\t\t\t\t\t<a href=\"https:\/\/www.theepochtimes.com\/author-kevin-stocklin\"><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/11\/Kevin-Stocklin.jpg\" alt=\"Kevin Stocklin\" \/><\/a><\/p>\n<p>Follow<\/p>\n<\/div>\n<p>Kevin Stocklin is a writer, film producer, and former investment banker. He wrote and produced &#8220;We All Fall Down: The American Mortgage Crisis,&#8221; a 2008 documentary on the collapse of the U.S. mortgage finance system.<\/p>\n<\/p><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>AnalysisOne problem for CEOs who direct their companies to follow the goals of environmental, social, and governance (ESG) criteria is that in doing so, they may be breaking the law.<\/p>\n","protected":false},"author":1,"featured_media":1725342,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","fifu_image_alt":"","footnotes":""},"categories":[547],"tags":[],"class_list":["post-1727831","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-the-bongino-report"],"fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1727831","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1727831"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1727831\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1725342"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1727831"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1727831"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1727831"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}