Roff: Woke investing may threaten your retirement security

More than a few economists predicted a period of record economic growth would follow the end of the lockdowns associated with the pandemic.

It didn't happen. What America got instead was a period of prolonged, rapidly rising inflation that devalued wages and retirement savings. Now, as USA Today recently pointed out, more and more older Americans living on fixed incomes are realizing they may need to "unretire" to make ends meet.

Bidenflation certainly plays a part in that. The Consumer Price Index rose by nearly 5% between April 2022 and April 2023. That's forced retirees to spend more, perhaps more than they had planned or can afford to keep living the way they want.

There may, however, be another problem most people currently saving for retirement have not yet recognized. The large money management firms to whom they have entrusted their savings may not be generating the maximum possible return on their investment because they've joined the woke crowd on Wall Street.

Economists believe these firms own about 75% of all the publicly traded shares available in the United States. This gives them tremendous power to set the agenda for individual corporations, which they do by casting proxy votes in favor of intrusive, ESG-related (Environmental, Social, Governance) resolutions opposed by company management at stockholder meetings.

The ultimate effect of this, says the Committee to Unleash Prosperity in a report available at Pensionpolitics.com, might be to flatten the income stream for retirees and other investors. Despite what some of the most notable Wall Street wizards claim, the ESG investing strategy does not produce the best returns.

Some people believe corporate power should be used to push for social justice, racial and gender equity in the C suite, responsible climate policy, and other progressive nostrums. On a case-by-case basis, individual investors should be free to pursue that course. After all, it's their money.

If, on the other hand, fund managers use their positions to push policies that work against their ability to obtain the highest return on investment for their shareholders, they are abusing their power and turning their back on their fiduciary responsibility.

"More than half of the total investment in stock-based funds is allocated to passively managed ETFs and index funds, which simply mirror benchmarks such as the S&P 500," the Committee to Unleash Prosperity says. Yet, as many people are unaware, participation in a fund does not convey ownership of the stock in the fund to its participating investors. The fund owns the stocks, with the voting rights attached to them vested in its manager or managers.

The bigger the fund, the more power the relatively small universe of fund managers (when compared to the total number of people invested in those funds) have to use other people's money to dictate how publicly traded corporations should operate. They can vote Exxon out of the oil business and gasoline engines out of General Motors products because it's allegedly good for the climate, even if leaves the people who depend on their investments in those funds even a little bit poorer.

All that's fine with Joe Biden. His commitment to fighting climate change is total, even if it causes hardships for seniors living on fixed incomes. It was his administration, after all, that promulgated the rules loosening the requirements on investment firms to put their need to generate the best rate of return as the thing they needed to consider when making investments.

Instead, Biden wanted to make it possible for ESG concerns to carry equal weight. When Congress objected, passing on a bipartisan basis a measure to repeal those new rules, Biden cast the first veto of his presidency.

At the corporate level, whether the decision to vote in favor of these ESG resolutions meant to change corporate behavior is being made at the top or by younger, less experienced middle managers whose social conscience dictates are ultimately at odds with their obligations to their clients, it's putting social politics into boardrooms where they don't belong.

At the moment, the remedies available to retirees whose portfolios are making as much as they should or could have little recourse. The only way to fight back right now is for investors to move their money out of the hands of people using it to pursue social justice and into the hands of those who are using it to make money. That's rarely the same thing.

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The only way to fight back right now is for investors to move their money out of the hands of people using it to pursue social justice and into the hands of those who are using it to make money.