14 Aug PUBLIC PENSION CORNER, #52: Ordinary Voters and Ordinary Investors
NEWS:
I. Ambassador Andy Puzder Fights for American Companies
The United States – through its EU Ambassador, the inimitable Andy Puzder – has made it clear that it will do whatever is necessary to protect American companies from the EU’s ESG/sustainability rules:
The Trump administration “will take any actions necessary to address unreasonable burdens on US commerce” if the European Union doesn’t rein in its ESG regulations, according to a letter addressed to the EU by the US government.
The comments were accompanied by a post on X by US ambassador to the EU, Andrew Puzder, who said “it’s time for the EU to deliver” on what he described as an earlier commitment by the bloc to ensure American companies won’t face “undue restrictions” on trade.
The comments threaten to revive a standoff between the US and the EU over the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive. The frameworks have been watered down after pushback both from within and outside the EU. But they’re still intended to apply to companies that do business in the EU, no matter where they’re based.
II. AI Continues to Prove the Hypocrisy of Sustainability Demands
Hopes and dreams about AI and other tech have largely kept markets afloat over the past couple of years, despite the fact that AI companies generally have no interest in reporting the sustainability data the asset management giants once claimed they valued above all else:
In a few short years, US artificial intelligence startups have grown into some of the most powerful and influential businesses in the world, reaching near-trillion-dollar valuations. As two of them, Anthropic and OpenAI, prepare for initial public offerings, there’s a notable absence: The companies haven’t disclosed their greenhouse gas emissions, made net-zero pledges or published sustainability reports. (Anthropic did join a carbon-removal coalition called Frontier.)
Not too long ago, investors would have cried foul. Even fossil-fuel stalwarts like ExxonMobil Holdings Corp. have been voluntarily producing sustainability reports for years. The Big Tech companies scaling up AI infrastructure — Alphabet Inc.’s Google, Meta Platforms Inc., Amazon.com Inc. and Microsoft Corp. — have net-zero goals and report their emissions, which are now spiking due to the data-center boom….
The rise of AI has coincided with the decline of environmental, social and governance investing. ESG took off after countries adopted the Paris climate accord in 2015 and reached its zenith in the early 2020s. Back then, BlackRock Chief Executive Officer Larry Fink called climate change a major financial risk, and the US Securities and Exchange Commission was working on rules requiring companies to disclose their carbon emissions and climate vulnerabilities.
COMMENTARY
By Stephen R. Soukup, President and Publisher, The Political Forum
“Ordinary Voters and Ordinary Investors”
I hate to give away the secrets of the people who are responsible for measuring public opinion – pollsters, in other words – but as every schoolboy knows, the primary determinant of the answers one gets is the question one asks. The devil, as they say, is in the details, and the details can all be found in the language used to construct polling questions.
For example, when asked directly about “climate change,” the risks it poses to the planet, and their desire to see something done about it, 40% of poll respondents say that it’s important, that they fear for the future, and that they want someone, somewhere, to do something about it. Climate change is a big deal to a huge chunk of ordinary people – just as the environmental activists say it is.
Of course, when you change the question, when you ask people how much of their personal wealth and freedom they’d give up to “do something” about climate change, they hedge a bit. It’s still important, but it’s not that important. Specifically, when you ask potential voters to rank the issues that matter most to them, jobs and the economy are always near the top of the list, while climate change is almost always far outside the top ten voter priorities. Or to put it more bluntly: climate change matters to most people only in the abstract, only when it’s not concretely pitted against other priorities, namely their personal well-being.
CNN found this out – again – just this week. Based on the most recent Washington Post/Ipsos polling about voters’ midterm election priorities, people care about the economy and immigration. Indeed, 54% of voters rated the economy as their top concern, making it the nation’s number-one priority, while 28% listed immigration as their top issue, putting it second. A mere 3% thought climate change was the most important problem, placing it in a distant 14th place. As CNN Chief Data Analyst Harry Enten put it, voters “simply put don’t care” about climate change – at least not when it’s put in the context of the rest of their lives.
Now, I know the parallel here is imprecise, but if you look at the capital markets, “retail” investors are probably a good surrogate for “ordinary” voters. They’re your “Average Joe/Jane,” the people who work outside of finance and politics, who keep up to date on issues and trends, but who try not to eat, drink, and sleep the stuff. The same can probably be said about public pension beneficiaries. These are police officers, firefighters, teachers, state, county, and municipal employees, people who did their jobs and have “investments” as part of their retirement plans, not as part of the vast portfolio in which they house their excess wealth. These are “ordinary” people – both in terms of investing and voting.
The data, in financial terms, generally mirror what we’ve seen in political terms. When they are asked directly about their interest in “sustainable” investing, retail investors tend to tell the question-askers that they care about it a great deal and would like to make a positive impact on the world. In 2023, for example, 69% of retail investors (vs. 76% of institutional investors) said they were interested in ESG investing. Even after the pushback against ESG began in earnest, almost half of retail investors said they preferred ESG-aware investing. That’s a pretty significant number, given the ferocity of the anti-ESG movement.
At the same time, however, when they are asked to put their money where their mouths are, retail investors have considerably less interest in ESG. Morningstar’s fund-flow data – which tracks open-end funds and ETFs, the vehicles retail and advisor-directed money predominantly uses – shows US sustainable funds registered a third consecutive year of net outflows in 2025, with about $21 billion leaving ESG over the year. That compares with more than $760 billion in net inflows to the overall US fund universe. In short, when placed in the context of the real world and the rest of their interests, needs, and wants, retail investors are far less supportive of sustainable investments than they are of investments that focus strictly on returns. Like ordinary voters, ordinary investors are more concerned about their personal economic circumstances than they are about the political predilections of environmental activists.
In this space last week, I noted that Vanguard – the second-largest asset manager in the world – had filed a comment opposing the SEC’s decision to rescind its Biden-era climate-related disclosure rule. This, I argued, demonstrated that Vanguard was part of the problem, not part of the solution, despite its reputation as the least ESG-captured of the Big Three passive asset managers. All of the above confirms that conclusion.
Of the Big Three, Vanguard is universally acknowledged as the leader in the retail investment business. Because it’s not publicly traded, hard numbers are very difficult to find, but the general sense is that somewhere in the neighborhood of 75% of the firm’s almost $12 trillion in AUM is direct retail or RIA-intermediated retail. Maybe another 4-7% is 401(k) pension money. To be clear, these are estimates, piled upon estimates, and may not reflect the precise breakdown of Vanguard-managed funds. Nevertheless, there is enough general data to conclude that Vanguard is inarguably the biggest and most important firm catering to “ordinary” investors. Yet its actions, purportedly taken on their behalf, contradict their own demonstrated preferences. Vanguard is in favor of climate change mitigation efforts through SEC enforcement, while its customers/clients/fund owners do not appear to be similarly inclined. That’s a problem.
Presumably, Vanguard sees an advantage to itself as a company from tighter SEC regulation (scale of operation, rent extraction, etc.). It’s hard to see, though, how that translates into any advantages for its customers. If anything, it does the opposite, in addition to violating their (admittedly poorly expressed) beliefs.
Ordinary folks see climate change and sustainability as important issues, but only in isolation. When weighed on the scales against their financial well-being, it is found wanting.
And so, for that matter, are many of the fiduciaries who are supposed to represent them.
