Landry issued a statement to Louisiana legislative leaders pointing out how the practice known as environmental, social, and governance investing in its application ran afoul of both statute and civil code. This trend involves financial intermediaries investing other entities’ money using criteria not on the basis of maximizing return but instead upon those congruent with peculiar political ideologies or foreign policy objectives.
Not an official opinion issued by his office but a document that seemed usable in the event one was requested on the subject, Landry’s issuance grew out of a review by him and over a dozen other state top legal officers of one of the three largest firms involved in money management, specifically of state retirement funds, which has advocated for and looks to be applying the ESG ideology. Ultimately, either these managers must abandon ESG goals in their investment of state funds or, the statement sets in motion, justification exists to forbid them from having that business.
He’s not the first state official to support such action. As a member of the State Bond Commission, he and several others have acted for an SBC majority not to allow banks that discriminated in their lending practices on the basis of a preferred political ideology to underwrite Louisiana debt. Republican Treas. John Schroder, a member of the SBC as well, also has joined with over a dozen state chief financial officers to declare they won’t contract management of balances in state trust funds to firms that do the same.
However, one gaping hole remains that requires legislative action or that of the three higher education management boards in the state, the Louisiana State University System, the University of Louisiana System, and the Southern University System: endowments. For over half a century it has become trendy for colleges to invest these donations according to the ESG ideology, with particular emphasis on the governance aspect.
That’s why in 1967 the University of Chicago promulgated, as a model for other universities as well, the Kalven Report that argued for university neutrality in its social and political actions. Otherwise, taking official positions on these matters could have a chilling effect on academic freedom with faculty members feeling pressured in their studies and teaching to fall in line with a school’s public dogma.
Chicago also more recently reaffirmed academic freedom through its Chicago Principles that pledge a university to articulate an overarching commitment to free, robust, and uninhibited debate. Regrettably, a bill passed by the Legislature in 2017 to enshrine an attitude of maximal, even if not totally unfettered, debate and expression on Louisiana college campuses was vetoed by Democrat Gov. John Bel Edwards (although a year later he relented to something related), but fortunately both the LSU and UL systems compensated for that politicized dereliction by binding system adherence to the Principles a year later. Shamefully, the Southern system has not, raising the threat that its institutions will propagate indoctrination rather than education.
Yet only two universities, Chicago and last month the University of North Carolina, have pledged to follow both. Of the pair, the Kalvern recommendation is the more difficult because of the choices presented. For example, since its invasion of the Ukraine many entities have boycotted Russia and its nationals and for salutary reasons, but the stricture would prohibit a university from doing this.
But in concert with Landry’s guidance, Louisiana’s university systems should implement the Kalvern conclusion, which would prohibit ESG investment strategies that in their cases would include endowments approaching $1 billion. It also would make good sense given volatile market conditions where all strategies must be available to address the turbulence (largely a product of fiscal policies adopted by Democrats who at present control the majoritarian branches of the federal government) of declining equity and debt instrument values.
Legislative action would be preferable, but Edwards’ track record of antipathy may make this impossible within the next couple of years, so at the very least system governance boards, including the recalcitrant Southern supervisors, should take this up as quickly as possible. This not only would track the legally correct course, but also the optimal one for educating free minds.