Dr. John Fleming, candidate for Louisiana State Treasurer, wrote the following op-ed at the request of the Louisiana Oil & Gas Association. It will be published in the coming days.

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ELECTIONS | STATE TREASURER

Better to Invest with Safest and Best Returns Rather than Goals of ESG

IN SECTION: ELECTIONS | STATE TREASURER

John Fleming, Candidate for State Treasurer

The office of state treasurer is often thought of as merely a ministerial position or even just a bean-counter role. However, like all state and federal offices, state treasurers are now being confronted with new and challenging issues requiring important policy decisions. Our current state treasurer, John Schroder, made news in 2022 when he announced that he would be fully divesting all state funds controlled by his office (amounting to just shy of $800 million) from investments in BlackRock, Inc. Schroder announced, "ESG (Environmental, Social, Governance) investing violates Louisiana law on the fiduciary duties which require a sole focus on financial returns for the beneficiaries of state funds." He went on to say, "A focus on political or social goals or placing those goals above the duty to enhance investors’ returns is unacceptable under Louisiana law." In my opinion, John made the right decision.

Ostensibly, the purpose of ESG investing is to develop environmental and energy sustainability: meaning equity growth should take a back seat to the goal of promoting political and social values. For some, this is a laudable idea. However, this means the burden falls on the taxpayer.

During a congressional hearing, I once asked an official from the Obama Administration why it was necessary to invest or loan federal taxpayer money into such companies as Solyndra (a solar panel manufacturing company that ultimately failed taking over 500 million taxpayer dollars with it). His answer was that the government must make these investments because private investors and investment fund managers view such efforts as too risky. My opinion, however, is that taxpayer money invested and spent by unaccountable politicians should be the last place to make risky investments. It is the middle-class taxpaying families who are having to struggle with "kitchen table" spending issues today. Yet families have no direct say in how their hard-earned tax money should be spent, so taxpayer money deserves the most protection.

Perhaps I am seeing more risk than exists? In a March 2022 article in the Harvard Business Review written by Professor Sanjai Bhagat from the University of Colorado entitled "An Inconvenient Truth About ESG Investing," Professor Bhagat declared that $2.7 trillion had been invested in ESG with more coming at the rate of hundreds of billions per quarter. In this article, Professor Bhagat cites a study by University of Chicago researchers who analyzed the Morningstar sustainability ratings of more than 20,000 mutual funds representing over $8 trillion of investment. The findings stated, "Although the highest rated funds in terms of sustainability (ESG) certainly attracted more capital than the lowest rated funds, none of the high sustainability (ESG) funds outperformed any of the lowest rated funds."

Perhaps some investors prefer to accept lower returns in exchange for "high" sustainability. Well, hold up! Researchers at Columbia University and the London School of Economics looked at the sustainability results of such "sustainability" funds. What they found was most troubling: According to Professor Bhagat, "They found that companies in the ESG portfolios had worse compliance records for both labor and environmental rules." Apparently, this is not an isolated finding. Other researchers have found this sobering fact among other ESG portfolios. Even after new companies are added to the ESG portfolios, their records didn’t improve. Some researchers have even suggested that some fund managers may be deliberately placing their funds into ESG portfolios to avoid criticism of their existing poor financial performances.

As a conservative Republican, I remain an "all of the above" proponent of energy. In the last decade, the U.S. has seen a clear reduction in carbon emissions, not due to the conversion to wind and solar energy, but rather due to the conversion to natural gas. It is the cleanest fossil fuel and abundant in this country. It is one of the most efficient fuels in existence today. On the other hand, there are many countries, especially in Asia where coal is a major source of their energy production, which is causing increasing amounts of carbon released into the atmosphere that we all share.

For the first time in many years, the U.S. became energy independent due to President Trump’s reduced regulations, access to leasing, and speed of permitting. This was all reversed under President Biden triggering much higher prices, inflation, loss of energy independence, and a sinking economy. However, Biden has damaged our economy through energy policy in other ways. Upon taking office, he immediately put a moratorium on oil and gas leases; he has drained the Strategic Petroleum Reserve (SPD), leading to its lowest level since its inception; and he has been importing oil from unfriendly countries.

In my view, the proper route for our nation and the world is to use the best energy technologies where each energy technology benefits us the best. For instance, where natural gas works best, use natural gas. Where solar works best, use solar. I believe it is unwise to throw the economy under the bus just to achieve some arbitrary ESG goals that few, if any, other countries are even trying to achieve.

I believe government does have a limited role in energy. Firstly, state and federal governments should make drilling and traditional energy production accessible through widely available leasing onshore and offshore, while respecting the environment. Secondly, permitting should be fast-tracked so that capital flow into production will be abundant, and costs at the pump will be low once again. Thirdly, the federal government should assist by researching and investing in new forms of energy production.

As your new treasurer, my primary role will be to save and protect the taxpayer money paid to the state treasury by the hardworking taxpayers. This can be accomplished while maintaining responsible energy and environmental policies as well.

In conclusion, I would like to be your next Louisiana State Treasurer. I grew up in a working-class home where I learned how to stretch a dollar, where missing just one paycheck could be a family disaster. I started and grew companies in Louisiana that still employ over 350 Louisianans. I know what it is to make a payroll, even when times are not good. While leading a federal agency under President Trump, I oversaw the agency budgets. While serving in the U.S. Congress, I debated and helped shape federal budgets. I voted for a balanced budget amendment and voted AGAINST the wasteful budgets created by Congress. I want to bring my private and public-sector experience to our state government and work with the incoming governor and legislature to help launch Louisiana into a new and prosperous season that’s never been seen in our beautiful state, ever.

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