An anti-shareholder movement – often mislabeled as “anti-ESG” – is silencing the voice of everyday investors in the U.S., including the 50% of private sector workers who participate in 401(k) retirement plans.

Anti-shareholder activists are using government power to bully investors who promote responsible behavior at the companies they own. Judges, regulators, and legislators are overriding investors who believe in the commonsense notion that companies cannot ignore their relationship to society and the environment. Examples of this bullying include:

A letter from 18 state attorneys general threatening asset managers and banks for considering climate and diversity issues when voting proxies on behalf of clients.

A report from the House Judiciary Committee asserting that there is a collusive “climate cartel” of investors, evidenced by shareholders exercising their basic right to vote for directors at Exxon.

A lawsuit Exxon brought against its own shareholders, which stopped them from proposing a climate vote.

This movement is rewriting financial market rules to accomplish political objectives, including those of the fossil fuel industry and a well-coordinated campaign against corporate efforts to remove barriers faced by marginalized groups. These revisions threaten the role markets play in the U.S. economy by prohibiting investors from stewarding their capital away from behavior that harms the economy, companies, and investor portfolios.

The anti-shareholder movement relies on a pretext: that companies “make more money” (to quote a recent court decision) if they ignore their social and environmental impact. But, this ignores two fundamental financial realities:

Social and environmental issues impact a company’s long-term value.

Investor portfolios bear the macroeconomic costs of degrading the environment and threatening human well-being.

This anti-shareholder stance disregards data showing that corporate behavior threatens systems that undergird the economy that companies and investors rely upon. For example, racial disparities are projected to cost the U.S. economy $5 trillion over five years. In addition, a recent study shows the global economy faces a 50% global GDP loss as early as 2070 if we don’t address climate change. Another study shows climate inaction causing a 30% loss to the compound return on a typical diversified portfolio over the next 40 years. These data demonstrate why diversified investors need to protect themselves from companies that exacerbate the risks of a warming climate, racial inequities, and other systemic issues.

But, policies that muzzle shareholders are replacing the voice of capital with a regime of corporate executives free to satisfy their own myopic interests at their shareholders’ expense, subject only to politicians and judges, who can channel investors’ capital to satisfy whomever the political winds favor. This will not end well – for either financial markets or the global society that relies on those markets.

Markets are not an end but a tool for organizing our productive resources, and they will fail if they can’t account for macroeconomic impact. That is why investors must be able to reject business practices that threaten the society in which they’re embedded, whether or not those practices are profitable. Policies can be designed to protect social and environmental systems, but financial power will forever undermine policy if the markets don’t account for the full costs of business practices.

Let’s make sure they do. Let’s stand together as investors to use every tool we have to stop the anti-shareholder bullies. Our capital markets, along with the economy they and the human beings they serve, are at stake.

This excerpt is from Silencing Shareholders. Read the full version here.