By: Mark Glennon*
The silly, fickle, partisan impulsiveness of Environmental, Social and Governance (ESG) investing continues — at Illinois taxpayers’ expense. Illinois politicians are using your money for the far left’s political stunts.
ESG investing has been ridiculed away by most serious investors, as we described recently, mainly because returns for investors have been poor and its principles are little more than progressive fads of the day. “The latest dirty word in corporate America” is ESG, said the Wall Street Journal earlier this year. But ESG remains policy in Illinois, especially in the office of Illinois Treasurer Michael Frerichs, which manages billions of dollars of state and other Illinois money.
We have two new chapters to report.
Three Illinois state senators, Win Stoller (R-Dixon), Andrew S. Chesney (R-Freeport) and Jason Plummer (R-Vandalia) sponsored a resolution this month calling on the treasurer to end its ESG policies, take politics out of investing, stay neutral and, instead, prioritize financial returns.
Ordinarily, you wouldn’t expect such a sensible measure even to get to a vote, thanks to pro-ESG progressives in the Senate supermajority.
Initially, however, the resolution gained some progressive backers and even sponsorship. That’s because some progressives were peeved that Frerichs rushed out additional investments in Israeli bonds after the October 7 Hamas attack on Israel. Frerichs presumably assumed that sympathy would be with Israel, and didn’t expect the widespread support among progressives for doing the opposite — boycotting Israeli investments. Perhaps the progressives initially supporting the resolution hadn’t read the whole thing, and didn’t realize it opposed all ESG investing.
But when Frerichs, environmental extremists and other ESG fans got wind of the resolution they rapidly stomped out any progressive support for it. You can therefore assume it won’t get to a vote and the billions of your money will continue to be invested according to woke politics of the day.
Senator Stoller, one of the remaining and initial sponsors, said in a Thursday press release that Frerichs “is foregoing his fiduciary responsibility in favor of his political agenda. His responsibility to the people of Illinois is to maximize return on investment of taxpayer dollars. Period. Simply put, the treasurer needs to keep politics out of his investment decisions.” That’s exactly right. Too bad it won’t happen.
The other recent ESG chapter came earlier this month when Frerichs sent a letter to Exxon Mobile shareholders telling them how to vote on the election of directors and other matters. Environmentalists and ESG investors despise oil companies like Exxon Mobile and want to turn them in a new direction. Frerichs’ involvement is described in this Reuters column.
Frerichs’s standing for trying to influence the shareholder votes is based on his voting rights as a shareholder.
But hold on. Those Exxon Mobile shares are in the 529 college savings accounts the Treasurer manages. That’s according to the Reuters article. Beneficial ownership of them obviously belongs to the beneficiaries of those accounts, not Frerichs, the state or even taxpayers.
It’s not the first time Frerichs has used college savings money to bully for his own political causes. We described here earlier how he claimed to be tackling the problem of fake news, ads by Russian operatives and hate speech, as he sees them, using shares in college savings accounts. Frerichs also used stock positions of college savings accounts in pharmaceutical companies to try to push them to do what he wants on the opioid crisis.
In fact, even the college savings accounts do not directly hold the shares that Frerichs is using for political purposes. They are in broad based mutual funds and exchange-traded funds, so Frerichs is actually two steps removed from anything that should validate him as an activist shareholder.
Finally, Frerichs continues to brag routinely about how much money he is making for the state. His office collected $126 million last month on the $135 billion in the State Investments. That’s the primary account where the state keeps cash, and it’s invested almost entirely in short term bonds.
His office most recently reported that it was earning an effective yield of 4.77% on the State Investments, which have an average maturity of 435 days.
Whoopee.
You and I could have easily topped that simply by buying U.S. Treasury bills and notes. With maturities at one or two years, they currently yield 5.2% and 4.9%, respectively. They’ve been higher than Frerichs’ returns for at least two years and they are the safest investments around.
The list of our columns about how stupidly Illinois manages its cash is getting long. The list below is partial.
*Mark Glennon is founder of Wirepoints.
- Illinois Treasurer Frerichs passionately committed to what’s now a ‘dirty word’: ‘ESG’
- Get Politics Out Of Illinois Treasurer Frerichs’ Investment Of Huge And Growing Cash Hoard
- Illinois’ Latest Use Of Taxpayer Money As Political Club
- In-Kind Retaliation, As Expected: Fifteen States Demand Banks Ignore Illinois-Style Threats Favoring ‘Woke Capitalism’
- Pure Genius: Illinois Treasurer Frerichs takes money from charities to make grants to charities
- Another doozy from Illinois Treasurer Micheal Frerichs
- As markets tank, Illinois prioritizes social justice for investing public money
- Why that municipal bond purchase by Illinois Treasurer makes me nervous
- Illinois Treasurer Will Punish Taxpayers, Blameless Shareholders and Employees for Wells Fargo Scandal
- Illinois’ Latest Use Of Taxpayer Money As Political Club — Facebook Shares in College Savings Funds
- Illinois Treasurer Shoots Self In Foot Defending Activist Social Investing
- Illinois Treasurer Churns $12.5 Billion Portfolio Every 3 – 4 days — $1 Trillion Per Year
Audio and summary 
If this bill passes, say goodbye to local control over all Illinois parks and expect to see open drug and alcohol use, needles, no sanitation and fire hazards, but no ordinary park users.
The broker/ ETF creators play around with what’s loosely defined as an ESG fund. If you compare vanilla ESG fund SPDR S&P 500 ESG ETF (EFIV) to vanilla iShares Core S&P 500 ETF (IVV) the EFIV basically includes all the Magnificent 7 tech stocks (GOOG, META, MSFT, etc) that drive the market with a little more mag 7 /tech weighting than IVV. But basically EFIV isn’t much different than IVV. And actually, the EFIV has performed slightly better than IVV at 29.14% vrs 29% for 1 yr. But your paying over 3 times the Net Expense Ratio-(ER .1 vrs .03)… Read more »
Alas, Frerichs has joined that famous Illinois club the “ usual gang of idiots “.
Vote his butt out as soon as possible.
Right now
Another true idiot we’re stuck with
He is guilty of dereliction of duty at best. He has zero business doing anything but maximizing return on government funds under his direction. Please continue to pound this fact home at every opportunity. Thank you Wirepoints.
Goodness, an effortless purchase of a money market fund with any of the major firms (ex. Vanguard) will earn 5.2%+. Frerich’s press releases announcing he and his team earned much less obviously assume Illinois citizens are uneducated and stupid. He is not only a partisan operative, but also incompetent. He must be voted against in the next election.
Wirepoints has reported for us on the dismal achievements of Illinois public school students.And financial literacy requires basic literacy and numeracy. So Frerichs’ assumption may be correct.