The investment practice is neither left wing nor right wing.
Originally published in the Wall Street Journal, 16th May 2022
Regarding Marlo Oaks’s op-ed “S&P Hits U.S. States With Politicized Credit Scores” (May 9): The integration of environmental, social and governance (ESG) investment practices is not left-wing or right-wing. It is an apolitical practice geared toward delivering transparency so that investors can make informed decisions.
Mr. Oaks states that ESG is a “qualitative view” that “depends entirely on the beliefs of whoever constructs it,” but the opposite is true. For example, recent proposals by the Securities and Exchange Commission to bolster ESG disclosure requirements have fairness at their core, with the simple goal of generating consistent and comparable information on material ESG issues for all investors. Enhanced disclosure provides the transparency that allows investors—both asset owners and managers—to make informed comparisons between issuers.
The factors that inform ESG ratings are just that: factors for assessment, not cut-and-dry law. Like any rating, it is up to investors to use this data as they see fit. If investors identify climate risk as a material factor with implications for the value of an investment, then they should be able to access the climate data they need to assess risk and return potential.
No law requires investors in Utah, Texas, California or anyone anywhere to make investment decisions based solely on ESG information, but it’s in their best interest to take it seriously.
Greg Hershman (Head of US Policy)
Carol Jeppesen (Head of US)