When Wall Street firms, along with large investment banks, use clever marketing tactics combined with exaggerated claims to represent or imply that investing with them and in their products is more ESG responsible and is somehow making the world a better place, consumers should pause before eagerly jumping on board.  Exaggerated ESG claims that lack little to no proof to support such claims have come to be known as “greenwashing.”  When the administrative fee on your ESG ETF exchange-traded fund is nearly twice as much as your large cap S&P 500 ETF and lags in performance, consumers should realize this as a disingenuous attempt to disguise the real agenda of Corporate Greed which is cleverly masked as ESG activity.

The Epoch Times, in a recent article entitled “Critics Rail Against ‘Environmental, Social, Governance’ Activism in Finance Industry,” dated June 22, 2022, touches on this topic by revealing some of the unfair trade practices caused by greenwashing.  This article goes on to indicate the higher costs and expenses associated with these ESG funds are being passed on to pension funds and investors; all to the detriment of the unaware consumer.  This article then continues on to reveal some of the sizeable penalties and fines handed out to companies engaging in greenwashing. I am reluctant to call these large, considering the small percentage these fines represent to the bottom line of these companies.  Additionally, the article briefly addresses some of the unfair trade practices and undue harm caused to companies from increased regulation which will not be limited to the energy sector alone.  This article states that the estimated costs to businesses, in order to comply with these new governmental regulations, are underreported and are far more than the estimates project. These additional, unquantified costs create a significant burden on small businesses in particular. Perhaps the ongoing governmental crackdown on ESG scams will help encourage investors to invest elsewhere as people begin to realize money needs to be invested where it can earn the best return.  We could be seeing a bubble forming in ESG funds.  The age-old wisdom of ‘buyer beware’ rings true!

Moreover, these ESG scams are just one part of a much larger problem, the Woke Culture movement. The more troubling issue for me lies with the radical shift from the traditional understanding of Stockholders and the subsequent efforts to supplant this wisdom with a new narrative and meaning of Stakeholders. Stockholders vs Stakeholders have two entirely different meanings and will lead to two very different outcomes.  The great American economist, Milton Friedman’s age old, proven economic theory regarding Stockholders is not the only thing under attack by these ESG scams and Woke Culture movement. Our prosperity and individual freedom depend on the integrity of our democracy.  While ESG scams attempt to fleece investors, the Woke Culture movement threatens not only capitalism but our Democracy as well.  Vivek Ramaswamy, who trained as a scientist at Harvard and as a lawyer at Yale, grew up the child of immigrants in a small town in Ohio. He later founded a biotech firm and served as CEO until he sold this firm. Recently, in his book entitled “Woke, Inc. Inside Corporate America’s Social Justice Scam” he writes, “There’s a new invisible force at work in our economic and cultural lives. It effects every advertisement we see and every product we buy, from our morning coffee to a new pair of shoes.” The author goes on to say “Stakeholder capitalism makes rosy promises of a better, more diverse, environmentally friendly world, but in reality, this ideology championed by America’s business and political leaders robs us of our money, our voice, and our identity.”  More on this dangerous Woke movement to come in future Blogs.

Any opinions are those of J. Greg Garner and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. ETFs are sold by prospectus only. Investors should carefully consider the investment objectives, risks, charges and expenses of an investment company carefully before investing. The prospectus contains this and other information about an investment company and is available from your financial advisor. The prospectus should be read carefully before investing.

Any opinions are those of J. Greg Garner and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The Dow Jones Industrial Average (DJIA), commonly known as "The Dow" is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system.