Does boycotting ESG help me save money?

Will I save on taxes if I boycott ESG?

No. In six states which have proposed bans on contracting with financial companies that account for ESG factors, these rules could cost state taxpayers up to $700 million in excess interest payments on municipal bonds. Studies conducted by in-house legislative analysts, pension fund managers, universities and research centers show that these bans result in less competition amongst banks and asset managers and drive up costs for taxpayers and pensioners. Where laws are already in place, the effects have been clear: it is estimated that taxpayers in Texas, “will pay an additional $303 million to $532 million in interest on $32 billion in bonds,” while Texas state pension funds face a $6 billion loss over the next 10 years. Similar analyses show the costs to retirees and taxpayers in Oklahoma and Florida.

Is ESG prejudicial to my retirement?

No. The goal of retirement investment products is to ensure the best return for retirees over a long period of time by not overreacting to short-term economic turmoil (such as fluctuating gas prices after Russia’s invasion of Ukraine) and focusing on what will be the best investment strategy over 25+ years. Taking environmental, social, and governance factors into consideration when investing for the long-term is seen as a safer strategy, because they consider and project looming risks that can occur in the next quarter century, not just the next few months. 

For instance, a pension fund could think about the impact of environmental regulation and consumer awareness of plastic pollution affecting entire industries that currently rely on plastic, and engage with those companies to get them to implement better plastics policies early so they stay relevant. Or, a pension fund could choose not to make certain investments to protect retirees’ funds from being invested in less profitable businesses. The AFL-CIO — the largest federation of unions in the United States — noted in an executive council statement that “the proper stewardship of retirement savings requires the freedom to consider all relevant investment considerations, including ESG risks.”

Do 401K plans consider environmental, social, and governance factors and invest responsibly?

In 2022, the U.S. Department of Labor finalized a rule that helps private sector retirement plans including 401(k)s  invest responsibly. The rule makes explicit that those managing our retirement savings are allowed to take into account risks and opportunities related to environmental, social, and governance factors, while also strengthening the shareholder rights of retirement savers, giving workers more of a say in the companies they are invested in. The rule also allows the consideration of “collateral benefits” in investment decisions, like stimulating union jobs and investing in the areas where the retirement savers live and work, as long as it does not sacrifice the financial interests of the retirement savers.