Recently, 21 state attorneys general issued a warning to financial institutions about prioritizing “woke culture” over their clients’ interests. Legal action has been threatened if financial firms act against their client’s interests while promoting social priorities.
Asset managers have been accused of behaving outside their fiduciary obligation to maximize investment returns. Instead, they have been choosing to focus on Environmental, Social, and Governance (ESG) priorities. The attorneys general have raised concerns about ESG priorities filtering into states through asset managers and proxy voting.
According to the attorneys general, activist asset managers have raised controversial political issues, such as abortion, race, and gender, which have no direct connection to the fiduciary duty of maximizing returns. In response, asset managers are being encouraged to choose between legal obligations and ESG goals of activists at shareholder meetings in 2023.
The attorneys general have sent a letter to the asset managers overseeing $40 billion in assets, which includes BlackRock and Goldman Sachs. The letter emphasizes the fiduciary obligation to maximize investment returns and warns asset managers to stay within their lane.
The letter has been well received by Consumers’ Research executive director, who has applauded the leadership displayed by the attorneys general. Consumers are becoming increasingly concerned about the politicization of investment decisions that could negatively impact their returns.
The letter’s intent is not to discourage asset managers from pursuing ESG goals, but instead, they are being asked to remain focused on their fiduciary obligation to their clients. It’s essential to ensure that the social priorities being pursued by activist asset managers are not being forced onto clients.
ESG investing has become increasingly popular in recent years, but this letter serves as a reminder to asset managers that they must remain mindful of their fiduciary obligation. It’s essential not to lose sight of the primary goal, maximizing investment returns for clients.
The attorneys general’s letter serves as a timely reminder to financial institutions of their fiduciary obligation to maximize their clients’ investment returns. It’s crucial to ensure that ESG goals are not being prioritized over clients’ interests. As consumer concern about the politicization of investment decisions continues to grow, asset managers must remain vigilant about staying within their lane.
