Not far from West Virginia’s State Capitol building is Leon Sullivan Way, a street in Charleston named for the famous Baptist minister and civil rights leader who was born there. He developed The Sullivan Principals, moral guidelines for companies to follow that led them to stop doing business with South Africa, which helped bring an end to apartheid.
The Sullivan Principles were a precursor to today’s environmental, social and governance investment strategy known as ESG. A growing number of companies and money managers are considering environmental performance and social impact of their investments.
Proponents of ESG argue, among other things, that it is just good business. Opponents decry the approach as “woke capitalism.” The leading critic of ESG investing in West Virginia is State Treasurer and 2nd District Republican Congressional candidate Riley Moore.
Moore led the charge for HB 2862, just approved by the Legislature and sent to the Governor, that would change how the state’s Investment Management Board (IMB) operates. The IMB manages billions of dollars invested on behalf of the pension programs for tens of thousands of the state’s public employees. It has a fiduciary responsibility to produce the best return for beneficiaries.
Moore argues the legislation updates board policies to prevent proxy voting by mangers of the pension fund moneys whose “stated goals are to vote for things like net-zero carbon emissions, gender equity, racial justice, LGBTQ, things like that that fall under the ESG parameters.”
But leaders on the state’s investment board strongly disagree with what they see as Moore’s move to further his political ambitions. Board member Mike Hall said Moore never brought his concerns to the board before crafting the bill, and that the board has never had a political agenda.
There is irony here.
The law governing the creation of the IMB says it “shall operate as an independent board… immune to changing political climates, in order to provide a stable and continuous source of professional financial management.”
The “woke capitalism” argument goes that ESG is politically motivated. However, by passing a law that interferes with the board’s primary fiduciary responsibility of producing the best returns and directing investments away from myriad companies and money managers that adhere to ESG, the state is injecting politics into its investments.
The law will also be a roadblock for West Virginia’s Development Office. It has ongoing efforts to bring companies—particularly tech businesses—to West Virginia that adhere to ESG principles.
The Sullivan Principles were controversial at the time but, interestingly enough, the consideration of certain ideals in addition to the bottom line turned out to be good for business. The current practices of the state’s investment board are not woke—they are practical and profitable.
Unless or until the state’s investment board fails to do its job, politicians should stay out of the way.