To paraphrase a saying: “A young man who does not support Environmental, Social, and Governance (ESG) investing has no heart; an old man who does support it has no head.” ESG refers to the corporate practice of using capital investments to achieve environmental, social, and political goals, a position to which most would not object. But a movement which may sound well intentioned—saving the planet and encouraging social equality—has clearly been a Trojan horse for cynical leftist elites. Under the aegis of ESG, companies now engage in practices like firing white employees en masse or oil and gas giants “greenwashing” their fossil fuel production.

Sam Gregg has written a very detailed rebuttal of ESG as an economic concept. His arguments against the practice show beyond a shadow of a doubt that ESG represents a departure from “business as usual” for businesses. This departure, he is correct to say, will result in the loss of what businesses currently contribute to society: jobs, development, and other types of growth.

However, Gregg’s argument falls into some naivete about the goals, basis, and needed response to ESG. ESG cannot be reasoned away according to moral or legal principles, nor can companies remain value-neutral. In fact, a return to “neutral values” in business, as Theo Wold pointed out in a recent address, is simply a return to “no values, or just immoral.” The only effective response to ESG is to accept that companies must embrace various kinds of social responsibility, and to use the power of law to make sure this responsibility is not manipulated irresponsibly.

Gregg’s choice of focus—the concern that ESG is unjust and unreasonable—implies that the promoters of ESG care whether their claims about the environment or society are true. Opponents of ESG must recognize that for these people, the point is not truth or justice, but power. When permitted to impose ESG tenets on corporate governance or commerce, they will. There will be no debate with Gregg or other proponents of fairness.

This is particularly true in the “S” category of ESG. There could be reasonable versions of “E” investment practices that are backed by a passionate desire to reduce, say, landfill pollution. Investors should have a way to vote with their pocketbooks for environmentally-conscious business practices, even if their current method of doing so is misguided and unscientific. “G” investments can make sense as well. Investors have a vested interest in making sure that corporate governance will result in a direction for the company that shares their interests.

But the “S” in ESG is farcical and dangerous. As businesses take on more and more political action as the core of their brands, policy leaves its rightful realm of democratic governance and legislation. Through divestment and control of global finance, companies can justify all manner of political interference under the rationale of “S” investment—and create a plutocracy where policies are made by an unelected, politically untouchable class of elites. For example, when companies disincentivize investment or even commerce for firearms manufacturers, it harms the industry and creates de facto gun bans that could never be passed legislatively. If the political colors of this elite plutocracy were different, they might find a way to undermine the abortion industry and make it next to impossible for women to obtain an abortion.

This might please or frustrate, depending on a person’s politics, but in both cases the shareholders are being cheated. The arbitrary, subjective nature of “S” in ESG places profits behind the whims of the few in corporate governance. And the harms are real: from Q1 to Q2 of 2022, ESG funds sunk by high double digits. One way or another, corporate leaders are spending their shareholders’ wealth to achieve the political goals of a small group of elites.

Though I agree with nearly all of Gregg’s critiques of ESG, I disagree with his finding that the central telos of business is “to generate a profit for its owners.” This mindset—implying the impossible “values neutrality” mentioned above—is the reason we find ourselves facing ESG today. ESG emerged from a widespread recognition that “profits-first” capitalism is harmful for society.

Business pre-existed money, so money cannot be its proper telos. Many ancient business deals were struck not over money or even quantifiable profits, but over mutual benefits of the type that make business indistinguishable from other elements of social life. You can take the example from the Bible of Abraham purchasing a burial plot for his wife, while the Hittites offered to give it up for free. You can’t talk about telos without observing, as Aristotle did, the origins of a thing. Gregg’s account of telos is too narrow, and it exposes his view to the critique that ESG is a more holistic, well-rounded account of the true purpose of business.

This fuzzy border between business and community life is reflected in our language—we talk about the “construction business community,” etc.—and the daily practice of businesses around the world. Often, companies offer deals like the “friends and family discount” or anonymously donate to clean up a riverbed or sponsor scholarships at a local kindergarten. Actions like these have nothing to do with the business’s bottom line, and everything to do with environmental and social responsibility. Imagining that we can take business “back” to a supposed values-neutral past merely mistakes the values of, say, the 1950s or 1980s for neutrality.

Gregg is correct that publicly-traded companies should be “especially” focused on profits, since they have a particular moral responsibility to provide the promised returns for those who invest in them. Indeed, the law requires “fiduciaries” to act in the best interests of shareholders at all times—something that ESG clearly falls short of doing. But again, this primarily centers around the failures of “S” investing—clean products and responsible corporate governance are not automatically market losers.

But Gregg’s approach to combatting ESG is liberal to a fault. In the section entitled “Goodbye to ESG?”, he writes: “…people should be free to invest as they wish. That includes the liberty to invest in self-described ESG funds or companies that claim to be ESG-compliant. Businesses are also free to create as many ESG investment vehicles as they wish.” Providing market alternatives to ESG investment is certainly important—and bold projects such as Monument Ventures and 2ndVote Advisers are doing just that. But this is not a complete solution. Serious solutions must make room for government intervention. Fideism that “the market will sort it out” is not evidence-based. Andy Puzder, former CEO of CKE restaurants, has called ESG “a socialist plot disguised as the free market.” So why would we trust the free market to defeat it?

Perhaps the middle path between top-down big government approaches and simple faith in the free market is to focus on state, not federal government. Florida Governor Ron DeSantis, for example, has begun the exodus from ESG investment with his ban of ESG calculations by the state’s pension fund. Louisiana has completely divested all state monies from BlackRock over its ESG commitments. On other controversial topics, such as companies that boycott and divest from the nation of Israel, more than 20 states have already coordinated unprecedented divestments. The same could be done on a large scale for ESG.

Civil rights lawsuits can also limit some of the more egregious ESG-driven corporate actions. For example, shareholders at corporations such as Pfizer, Coca-Cola, JP Morgan, McDonalds, and Lowe’s have filed lawsuits seeking to prevent corporate leadership from acting against their best interests. In response, Blackrock seems to be opening the door to more input from investors to avoid blowback over ESG. State legal action can help too: Attorneys General can file civil complaints over discrimination and other existing laws.

ESG proponents are not susceptible to reasoned arguments and will not go away on their own or due to market forces. The staying power of ESG is premised on the fact that businesses are unavoidably socio-cultural institutions and will always be purposed for far more than just profits. The way to defeat the ESG movement is to understand the values its supporters hold, and rather than hoping the market will solve the issue, to use the force of law to ensure that those values are the right ones.