Riley Moore (RM) is the State Treasurer of West Virginia. On September 22, 2022, he sat down for an interview with Jan Jekielek (JJ), host of the podcast American Thought Leaders to talk about ESG, specifically ESG mutual funds. Riley Moore reveals the truth about ESG funds. This article hits the high points of the interview.
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Mr. Moore was there to talk about why West Virginia is leading a group of states “that are terminating contracts with companies that adopt ESG policies and blocking them from bidding on such contracts.” [JJ] Here’s Riley Moore’s response:
ESG is to me, one of the scariest movements that we have going on in this country and for us here in West Virginia. Obviously, it is something that would ultimately destroy our economy, our people and our way of life. ESG, environment social governance standards, that are out there. For us this is the most near-term immediate threat, because it’s the rapid transition to green energy. We’re a fossil fuel state in West Virginia. And what they’re doing it’s happening across all facets of the financial services sector. So the asset managers the rating agencies, the banks, they’re all coordinated in this effort. So, for instance, you have rating agencies that are giving ESG scores out to states and municipalities as it relates to their environment, social standards governance, you have banks that have adopted ESG policies that have prohibitions on lending to the fossil fuel industry, coal, gas and oil, yet the asset managers that are pushing capital away from these very important industries like coal, gas and oil, that are also espousing this very left wing social policies and standards such as diversity, equity and inclusion, for instance. So but it really boils down to I mean, the thrust here, where they’re able to make their mark is in the energy space because of this coercion. of capital, that they’re pushing through their ESG ratings standards and guidelines for investment.
This is the best summary of ESG that I’ve seen. And it’s easy to believe that these fund managers, bankers, and regulators are doing this out of the good of their hearts. But I have six Bay Area bridges available — cheap — for anyone who buys that story. These folks are in it for the money. Period. My question has been where they’re getting the money. Mr. Moore has the answer:
Oh, yeah, I mean, look, that’s certainly happening. One of the things you got to keep in mind is why did the asset managers like ESG securities? It’s because of the administrative fees that are built into it. So like a large cap S&P 500 ETF, on average, maybe like 14 basis points, right? [14 basis points is an expense ratio of 0.14%.] Something like that, for expense ratio that you’re going to pay right to be able to trade one of those. It’s 14 basis points. So I think, you know, that’s 0.01 or 0.14%. So 100 basis points, it’s 1%. So 14 basis points. Now the ESG ETFs. There’s some of them that are trading as high as 90 basis points, 90 basis points. And the asset managers love them because they’re making a killing off of this stuff. Right. So there’s a lot of this kind of greenwashing that they talk about too are some of these things really ESG? Are they not, you know, so there’s a big game kind of going on here, but they’re making a killing off of these ESG products and why are they able to do that, while they’re charging you a little bit more to make you feel better and you’re doing something about the environment and you know, standing up for reproductive rights and things of that nature. It’s all you know, all that kind of stuff. They’re raking it in on all this stuff. And it is questionable on some of these ESG ETFs that are out there, how ESG compliant they actually are to their own standards.
Look around at mutual funds. Try to find an expense ratio as high as 0.90%. If you find one, avoid it like the plague. You are paying for diversification services. Promises of spectacular rates of return rarely, if ever, are fulfilled. And if you insist on buying into an ESG fund, look at their portfolio very carefully. Read the last sentence of Mr. Moore’s statement quoted just above.