ESG (Environmental, Social, and Governance) investing is an investing strategy that invests in companies that engage their businesses in actions that advance social purposes, such as protecting the environment, eliminating discrimination, and promoting corporate transparency and accountability.

ESG investing has been around since the 1970s and it now accounts for about $3 trillion in assets under management.

But, as a man who has been in the Senate since 1984, McConnell wants to ignore this development.  Maybe it is because he knows Republicans are the party of big business. That has been the case since before the New Deal and it was embodied by the Reagan Administration.

Since then, a split has emerged between some segments of big business over climate change and social issues, but this has not impacted the Republican’s role as the party of huge corporations.  Nor, has it impeded its ability to rake in hundreds of millions annually in corporate contributions to pass pro-business legislation, regulations and make favorable changes in the tax codes and the federal budget.

The Republican’s pro-corporate policies were formalized when Lewis Powell sent his

infamous memo that essentially said “capitalism is under attack” to the U.S. Chamber of Commerce in 1971.

In that memo, written a few days before he assumed his new position on the Supreme Court, the Californian said the free enterprise system was under attack from liberal arts departments at college campuses, the New Left, television, Ralph Nader, the clergy, books, and intellectual journals. Looking back, Powell provided the fuel to start the culture wars that have become the daily fodder for the right-wing.

Powell wrote the Memo to the head of the U.S. Chamber of Commerce, the nation’s top lobbyist for the largest US corporations.  He chose this group because these huge multi-national corporations were natural allies for Republicans. Powell knew big business was always going to work with the Republicans.

Powell’s Memo encouraged corporations not to compromise with critics, and to embark on a national, multi-level intellectual offensive against what he thought were any teachings, media coverage, or sermons, which disparaged the free-enterprise system.

Powell encouraged corporations to take “more direct political action,” and to take the lesson from labor unions that “political power is necessary; that such power should be assiduously cultivated and when necessary, it must be used aggressively and with determination and without embarrassment and without the reluctance which has been so characteristic of American business.”

So, it is astounding when McConnell told corporations to not get involved in rebutting or working to repeal Georgia’s voter suppression legislation. On April 6, McConnell said “My warning, if you will, to corporate America is to stay out of politics. It’s not what you’re designed for.”

Why would McConnell turn on his benefactors? Or, is McConnell just posing for his party loyalists?

Rewriting ESG’s History and the New Big Lie

Here are a few theories:

• McConnell is now making historical revisionism an official Republican policy. As we saw during the Trump administration, trying to convince the public that what they just saw was an illusion, McConnell is now doing this with a verifiable history.
• McConnell is threatening the business community. His statement is a warning to stay out of Republican issues unless they give card Blanche support and contribute large amounts to support Republican policies.
• Republicans are desperate that their voter suppression strategy now moving ahead in 43 states is going to backfire and snowball into a national anti-Republican movement.
• McConnell’s anti-big business rhetoric is part of a new limp attempt to reposition Republicans as champions of the working class because they have abandoned efforts to attract minority voters.

Desperation is a common denominator here.  Somewhere in the archives of the Republican National Committee is a confidential report that shows American demographics are changing into a Democratic block.  Racial minorities, young people, new immigrants, college-educated voters, and people concerned with social issues will not have anything to do with Republicans.

As all this relates to big business, the evidence is here today that businesses worldwide have already adopted investment policies that directly contradict Republican policies, Republican proposed legislation, and all issues related to the Republican’s version of social reform.

All this is nowhere in the form of the ESG investment movement.

Global ESG Business Dwarfs the Republican Threat

ESG investing has now accumulated some $3 trillion in assets worldwide. This includes companies, foundations, pension funds, endowments, and municipalities that employ investment policies that meet various social policy screens and operational practices.  These investments are then made in individual companies that meet business goals that are widely regarded as being positive for society.

ESG investing is the most recent evolution of Socially Responsible Investing (SRI) that began in the late-1970s as a response to apartheid policies in South Africa.  At the time SRI was being developed, South Africa was under intense international and United Nations scrutiny for its repressive policies against its black citizens.

Domestically, U.S. corporations were still adjusting to the legislative and social advances made by the Civil Rights movement about a decade earlier. Acknowledging the grass-roots and legislative achievements from this legislation, activists turned to the power of corporate pension funds to promote change.

One of their first goals was to use pressure on South Africa to change its apartheid policies towards its African citizens.  To do this, activists began a campaign to publicize, educate and campaign for restricting the investment of pension fund assets and boycott companies that had significant business dealings, investments, or operations with South Africa.

One of the first pension funds to adopt SRI policies was the Jane Addams Hull House in Chicago. As a reporter with the trade publication Pensions & Investments in the mid-1970s, I covered this story as being a national breakthrough.

The Hull House pension fund was small even at the time, a few million dollars, yet its pension fund board followed the original mandate of Jane Addams, who along with Ellen Gates Starr, founded a settlement house in Chicago’s West Side for new, indigent immigrants, in 1889. As the neighborhood expanded, Hull House provided social services to Italian, Irish, German, Greek, Bohemian, Russian, and Polish Jewish immigrants. By the 1920s, African Americans and Mexicans also were being served.

From this social activist framework, the Hull House pension fund adopted a South Africa-

free investment mandate following the Sullivan Principles. These principles were developed in 1977 by Rev. Leon Sullivan, a Black member of the General Motors Pension Fund, which at the time was the largest auto pension fund in the U.S. with $11.5 billion in assets. These principles were based on ethical investing standards which called for eliminating discriminatory racial and social practices between the races in South Africa. At this time, GM was the largest single employer of blacks in South Africa.

By 1980, several endowments (Colby College, University of California-Berkeley, Brandeis University the University of Wisconsin, Yale), municipal funds (the Connecticut Retirement Funds, City of Hartford), and unions (AFL-CIO) voted to divest their investments in South Africa. Adamantly opposed to outside interference, the South African government refused to abandon its apartheid policies, and by 1991 over 100 companies had stopped doing business with South Africa.

McConnell Is Ignoring ESG’s Past and the Present

So, what does this have to do with Sen. Mitch McConnell?

McConnell certainly knows history. He is well aware of the famous 1971 memo from Lewis F. Powell that encouraged corporations to become more active politically to fight the “broad attack” on the free-enterprise system from anti-American forces. Powell wrote the Memo shortly before he was named a Supreme Court Associate Chief Justice, as the successor to Justice Hugo L. Black.

Powell’s Memo became a cornerstone of the political right’s attack on social liberals, and a blueprint for organizing at all levels against any type of enemy it discovered.

McConnell’s admonition that corporations should refrain from interfering in Georgia’s decision to seriously curtail voting rights is a weak attempt at re-writing history. Since the 1970s, corporations have been politically active. The US Chamber of Commerce has led political attacks from the right for decades and there were no objections from McConnell and the Republicans, who benefitted from corporate lobbying and contributions.

But McConnell’s position is that corporate activism from the left is entirely un-American. By protecting Georgia’s restrictive new voting laws, McConnell knows his party is on a collision course with demographics and daily practices of the contemporary world. But as a conservative, he has to ignore or delay change.

The good news is that the $3 trillion ESG investment movement is influencing corporate behavior weekly, as evidenced by the news posted on the Principles for Responsible Investment website.  So, while the investment world ignores McConnell, the U.S. and global financial institutions and businesses are continuing to pursue social justice, environmental, sustainable development, anti-human trafficking, and to the surprise of many Republicans, even democratic voting standards.

So, while McConnell decries business interference in advancing the anti-democratic Republican agenda, he has been outflanked by global business and other financial institutions. And in the world of Republican political measures, where everything is measured in money and donations, these groups hold more cards than McConnell.

On Oct. 16, 2018, Republican Senate Majority Leader Mitch McConnell announced that due to an increased federal budget deficit, Republicans would have to reduce and alter some critical Social Security and Medicare provisions. In his announcement, McConnell said the only way to minimize the record-high federal deficit would be to cut entitlement programs like Medicare, Medicaid, and Social Security.

“It’s disappointing, but it’s not a Republican problem,” McConnell said of the deficit, which grew 17% to $779 billion in fiscal year 2018.

This was an astounding announcement, especially as the nation approached the 2018 mid-term elections.  Discussions about altering Social Security, privatizing it, raising the retirement age, or cutting benefit levels have been done by Republicans since the Reagan administration, but articulating the need for a change raised the interest level among millions of people planning for retirement. This is because Social Security benefits represent about 33% of the income of the elderly.

Here was the reaction from Newsweek Magazine:

Mitch McConnell Calls for Social Security, Medicare, Medicaid Cuts After Passing Tax Cuts, Massive Defense Spending 

From the Los Angeles Times:

Mitch McConnell says it out loud: Republicans are gunning for Social Security, Medicare and Obamacare next

From the Washington Post:

McConnell says Medicare, Social Security causing ‘disturbing’ deficit increase

So when this historic announcement was made, I asked 20 of the nation’s largest investment firms, with a combined total AUM of over $14 trillion, all of which have significant retirement planning operations, this straightforward question:

During the week of October 16, Senate Majority Leader Mitch McConnell said that reductions to Social Security benefits would be needed to reduce the budget deficit. I wanted to ask if your firm has any statement on this proposal to cut Social Security and what it would mean to retirement planning.

So what did the nation’s largest financial planning firms say in reaction to McConnell’s announcement?  

Nothing.

The nation’s largest financial planning and money management firms, which spend millions in ads proclaiming their interest in building a secure financial future for retirees, did not mention this historic revelation.

There are some great reasons why the media relations departments did not want to respond to this simple inquiry.  First, I am a small website, so these giant firms don’t have to answer. That’s understandable. Second, McConnell’s announcement raises very delicate policy questions. However, many of the firms I asked had media relations people who specialize in policy, community, and retirement issues. So, if Social Security is not a retirement issue, these media relations people are being paid to do very little.

One of the few people who responded said their firm does not comment on “hypothetical” events, such as McConnell’s proposed alterations to Social Security.” When I noted that the investment industry comments daily on how market movements affect future prices and everything related to strategies and portfolios; it is all based on hypothetical scenarios. Still, when it comes to actual videotaped statements made by the Congressional leader of the Republican Party about Social Security, this program covers some 63 million people; everything became hypothetical and too fleeting for comment.

Now, we are dealing with some of the most innovative and highly-paid people in any industry, so when the media at the vast investment companies evade any discussion about the elephant in the room—Social Security- there must be a reason.  I bet that the investment industry wants all, or any part, of the $2.89 trillion in the Social Security trust fund and future revenue streams, so they can put it under their umbrella of assets under management and then sell over-priced investment products to the masses.

Why Are Large Investment Firms Silent on Social Security Changes?

The reason is simple: these firms will be the primary beneficiaries if the master plans to privatize Social Security or reduce its enrollment numbers are enacted by a Republican-dominated Congress. And even better, the long-fought battle by the financial services and insurance industries to dilute the U.S Department of Labor’s fiduciary standard (the rule that a financial advisor has to act in the best interests of their clients makes more sense when it is paired with changes in the way Social Security coverage is decreased and those contributions are diverted to private investment firms.

That is the one-two punch for average investors. When the two moves are combined—changing the way worker retirement contributions are collected and invested by financial firms and then sold in an environment that allows conflicts of interest and overpriced products to be sold to unsophisticated investors—the whole scenario makes much more sense.

Let’s face it: not many investor markets left in the world to conquer have this much money.  China is vast but poor. Europe is a mature market with few avenues left for market penetration. That leaves the average U.S investor as the last main flock of sheep to shear.

That is why the investment industry avoided any response to this historic announcement. They insist they are not political, but they are. They spend millions on lobbyists to defeat the fiduciary standard and quietly push for changes in Social Security. This is why they avoid discussing these issues. It is a plan best kept secret. It’s also a great example of a severe conflict of interest.

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