By Kim Jarrett
(The Center Square) – The use of environmental, social and governance considerations in financial issues could raise the cost of capital for Utah and hurt individuals’ 401K plans, Utah’s chief deputy treasurer told a committee on Tuesday.
S&P Global Ratings gave Utah a “moderately negative” score when they issued their ESG global ratings in March, Deputy Treasurer Kirt Slaugh told the Federalism Committee. ESG factors include carbon management and “political unrest stemming from community and social issues along with publicity that results in reputation risks,” he said.
“By calling out the environmental and social risk separate from all other credit factors, it gives investors only interested in investing in companies that fit ESG criteria a reason not to invest in Utah bonds and therefore over time will likely push up the cost of capital for Utah,” Slaugh said.
The effects could also trickle down to an individual’s 401K plan, he said.
“There have been an alarming number of federal proposals encouraging ESG at the detriment of the fiduciary standard,” Slaugh said. “Anyone who has investments in a 401K should be outraged by proposed changes to the fiduciary standard under the guise of ESG. This means that regardless of your politics, asset managers can use your money to pursue their interests instead of yours and they have the protection of the SEC in doing so.”
Members of the committee have differing views on ESG.
“I’m disappointed in the position that the Utah State Treasurer has on this point,” said Rep. Brian King (D-Salt Lake City) who also said climate change issues that are a part of ESG are important.
Rep. Keven Stratton (R-Orem) said he believes ESG has nothing to do with the environment.
“It’s about control and money,” Stratton said. “It’s an insidious, sinister way to take control of our economy and put us on our knees as a nation.”
About 30 bills dealing with ESG have been filed in the Legislature, Slaugh said. The treasurer’s office is also considering a “wide range” of options. But the situation doesn’t need to be political, he said.
“It’s our belief that politics should be taken out of the financial markets so we are probably not in favor of things like boycotts of certain banks or things that would force us to take certain banks or financial providers off the list,” Slaugh told the committee. “We just feel like that escalates some kind of political tension. We’re not interested in just making statement legislation or things that don’t really help.”
Originally published by The Center Square. Republished with permission.
Kim Jarrett is an Associate Editor at The Center Square. Her career spans over 30 years with stops in radio, print and television. She has won awards from both the Georgia Press Association and the Georgia Association of Broadcasters.
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