Blaine’s Bulletin: The INDEX Act
Washington, July 29, 2022
Tags: Financial Services
There is an alarming trend taking place in our country. Political agendas, specifically climate change, are seeping into areas that have absolutely nothing to do with them. Environmental Social and Corporate Governance (ESG) refers to pressure from progressives on corporate America to take positions on political and social issues that should have no bearing on their business. ESG is nothing more than a fabricated metric from the far-Left that is now being used as a fear tactic in corporate America. The parameters for who is “environmentally responsible” and who is not are murky at best. For example, Exxon Mobile received a higher ESG rating than Tesla which one would assume is the other way around. But there are no real metrics, nor do the ratings actually mean anything. It’s simply about applying political pressure on businesses to declare themselves aligned with the left instead of focusing on serving their customers, paying their workers, and supporting their local economies.
And it’s not just politicians or Twitter warriors pressuring companies. Some of the largest corporations in the world are using their influence and boardroom seats to advance progressive priorities at the expense of American jobs. Even worse, they’re doing it with your retirement money.
Oftentimes, retirement plans like 401(k)s or pension plans invest in mutual funds or exchange traded funds (ETF). Those funds are made up of hundreds of thousands of businesses whose stock is purchased and held at the fund. For example, if your retirement fund invests in an ETF tied to the S&P 500, your money is used to buy stock in every company listed on the S&P 500. Stockholders of these companies – even if it’s just one share – have the right to vote in shareholder meetings and play a role in the decision making of the company. But when was the last time you were contacted to participate in a shareholder vote? Probably never. That’s because these large funds are owned by asset managers like BlackRock or State Street, and they vote on your behalf. They obviously don’t ask your opinion, nor do they want it. They vote for you based on their own opinions.
Because of the popularity of these funds, the three biggest investment advisors – BlackRock, Vanguard, and State Street – are the largest owners of 96% of S&P 500 companies. Again, this is because of the shares purchased by other people but remain under the advisors’ control. That is an enormous about of control and power concentrated in just three companies, and they’re putting it to use – for their political beliefs. In a letter to America’s CEOs, the CEO of BlackRock, Larry Fink called on every company to set “set short, medium, and long-term targets for greenhouse gas reductions.” He makes that demand with an implied threat that if companies do not comply, he’ll use the shares he controls (that he didn’t buy; you did) to undermine the companies’ leadership. If you’re like me, you want your retirement savings to grow and provide for you during your golden years, not be used to strongarm companies that don’t prioritize climate change over all else.
This week, I introduced the Investor Democracy is Expected (INDEX) Act. Simply put, this bill gives individual investors – retirement savers, pension holders, and owners of these index funds – the ability to participate or not participate in shareholder votes. Investment advisors would no longer be able to utilize the shares your money buys to steer companies in a direction that satisfies their political desires.
This bill should not face opposition. I assume that people on all sides of the political spectrum can agree that the stock individuals buy should not be completely controlled by some of the largest companies on earth. We have not received any Democrat support yet but it’s only a couple days old. I hope allowing people to speak for themselves is one thing we can all agree on.