Where did ESG come from? Maybe it’s not surprising that, according to a 2022 report, the environmental, social, and governance (ESG) investing rules that have dominated corporate boardrooms in recent years began as “a half-baked idea among low-level U.N. staffers,” which soon grew into the “green Frankenstein of Wall Street.”

The creators wanted some kind of metric to use for investment portfolios to assess future success. But it has morphed into something beyond its creators’ comprehension—a money-wasting tool used to puppeteer shareholders.

Legislatures around the country have begun to recognize the harm of this warped tool for so-called social justice. In Texas, the passage of Senate Bill 2337 in Texas marks a major victory in the fight against biased ESG advising because it requires that proxy advisors make recommendations based on how a company can generate profit, not based on politics.

Historically speaking, ESG was designed to serve as a set of standards to measure the social and environmental impact of business investments. On the surface, these standards can seem as though they are designed to mitigate the negative effects that corporations could potentially have on society or the environment.

In practice, this is not the case.

A colluding network of activist organizations works with investment managers, institutional investors, and proxy advisory firms to advance ESG policies within publicly traded companies.

One problem is that proxy advisors often push a one-size-fits-all approach. Furthermore, proxy advisory services are dominated by two companies, which have more than 90% of the market share. Rather than being financially responsible, proxy advisors have advocated for what their ESG criteria deemed as “socially aware,” regardless of the potential consequences for their clients. This effect soon became widespread, allowing large ESG firms to interfere with the free market.

But Texas’s SB 2337, which was sent to Gov. Greg Abbott’s desk in June, was passed in order to flip the ESG narrative on its head by refocusing proxy advising on fiscal responsibility rather than political ideology.

The new law requires that all proxy advisors disclose the use of ESG in their advising, thus ensuring that the advisors remain on task and transparent. The bill further limits ESG by empowering companies to take legal action against proxy networks that fail to provide proper financial advice or fail to disclose the use of ESG criteria.

And SB 13, a law passed previously, also limits the scope of ESG. This bill hinders company operations for those who decide to boycott fossil fuels, preventing state pensions from investing in the blacklisted companies. These pieces of legislation work in conjunction with each other to ensure the use of ESG is limited or, at the very least, transparent and not a money-waster for the state.

The real problem with ESG is that it is used in the investment world to force certain behaviors. Proxy-advising firms used ESG criteria to advise company shareholders and investors alike on their corporate dealings, which often do not reflect the will of the shareholders they represent on a large scale.

Advocates for ESG argue that companies that adopt these principles are less risky and more prepared for the long term. They claim that governmental regulations on climate change are one of the many reasons to adopt a carbon-proof investment portfolio that will outlast other companies. ESG proponents miss the bigger picture. During times of increased climate activism, ESG-centered companies do better, but the rest of the time, there is a weak relationship between ESG portfolios and profit. SB 2337 does not prevent ESG from existing. It simply calls attention to the need for transparency in proxy advising, especially when the data about profitability is inconsistent at best.

Political pressure has resulted in these companies trying to signal their adherence, often through overinvesting in approved things like “renewable” energy. Add to this the massive federal tax credits, and the result is predictable—that “green Frankenstein of Wall Street.”

Texas and other states were right to respond with laws limiting the reach of the ESG activists.

After 25 years of ESG, one thing is for certain: ESG has deviated from its original intention. It is now used to manipulate the market and control uninformed shareholders. But in Texas, at least, SB 2337 acts as a light in the dark for affected companies, giving shareholders a glimpse into the decision-making behind the votes they may have unwittingly agreed to cast.