The Deadly Threat of 'ESG'

In recent months there has been growing awareness about the detrimental nature of the environmental, social and governance construct known as ESG. Using the pretense of social diversity and environmental protection allegedly needed to repair damage caused by capitalism, ESG represents an expanding threat to many industries, to the larger corporate culture and increasingly, to America itself.

The ESG construct creates competing frameworks, reporting systems, and scoring systems for environmental and social reporting—but without quantifiable economic measurements or metrics. While presently focused on publicly traded companies, ESG is being used to evaluate private companies and eventually even individuals, thus creating a social credit score not unlike what Communist China uses to oppress its citizens.

While the origins of ESG reach back over two decades, with the initial funding by the World Economic Forum (WEF) of the Carbon Disclosure Project (CDP), the network that grew from that initial effort consists predominantly of governments, non-profit organizations, and large publicly traded companies and their capital and banking partners. Together they have created a validation feedback loop that promotes political and social change using the capital markets—other peoples’ money—to re-direct investment capital toward companies that align with the political and social worldview of ESG activist profiteers.

Guess who?

Though touted as a non-political effort, but sounding conspicuously ideological, the progenitors of ESG assert,“ without the intervention of non-market entities such as the state, international organizations and social forces, capitalism as an economic system simply will not safeguard our planet."

While the legality of re-directing investor capital to achieve political and social outcomes has yet to be adjudicated, there is no question that banking and asset management firms intend to force political change.

In 2017, BlackRock CEO, Larry Fink, said he intended to change the direction of corporate America. “At Blackrock we are forcing behaviors,” he said of the company’s ESG scoring approach. “You have to force behavior, and if you don’t force behavior whether it’s gender or race or any way you want to say the composition of your team, you’re going to be impacted.”

By incentivizing companies with the prospect of higher management and consulting fees, and the ability to direct the capital toward companies in their portfolios that reflect their politicized world view, investor "best interest" is sacrificed. Best interest, a legal obligation, has never been part of the calculus of the ESG gangsters. Knowing that markets and democratic institutions would never offer them a path to their vision of the world, they need other peoples’ capital to force the creation of their dark, unfree world.

While profit-making would still not make ESG social scoring any more acceptable, the current capital re-orientation efforts have been unequivocally disastrous for investors. In June, BlackRock posted a stunning $1.7 trillion loss of investor capital, the largest loss ever for a single firm in a six-month period. Helping BlackRock achieve these disastrous outcomes was Unilever, run by Alan Jope. The consumer-goods giant put its sustainability plan to a shareholder vote where it passed with 99.6 percent shareholder support. Let’s hear it for groupthink!

At the time Jope said he credited BlackRock with leading the support and described the investment firm as "one of the finest commentators on sustainability and what companies should be doing.” Not surprisingly Jope was recently fired. Investors don’t agree with BlackRock’s Fink, Jope or the WEF. Jope’s tenure began in 2019 and he immediately began parroting the WEF’s stakeholder capitalism spiel and espoused the same ESG mandates promoted by BlackRock.

Jope-a-dope.

Through this alignment of overly interested global actors and self-interested financial services actors, the ESG construct has been able to get a footing in the boardrooms of publicly traded companies. But needing to create the perception of upholding fiduciary obligations, "stakeholder capitalism" has become the philosophical underpinning ESG. By expanding and conflating shareholders (investors) with stakeholders (everyone else), the activist class believes it can perpetrate an anti capitalist slight-of-hand: changing a free society into a centrally planned and controlled society.

According to WEF Founder, Klaus Schwab, "stakeholder capitalism" is a system in which private corporations are moral trustees of society and work for the benefit of everyone. Stakeholder capitalism is celebrated by BlackRock to Bank of America and from the WEF to Wall Street. Certainly not groups one thinks of as “working for the benefit of everyone.” Toward their centrally planned end, Bank of America CEO Brian Moynihan said, "to uphold the principles of stakeholder capitalism, companies will need new metrics. For starters, a new measure of 'shared value creation' should include 'environmental, social, and governance' (ESG) goals as a complement to standard financial metrics. Fortunately, an initiative to develop a new standard along these lines is already under way, with support from the 'Big Four' accounting firms and the International Business Council.”

Unconcerned about the rights of investors, and feeling triumphant over publicly traded companies, ESG activists are now more assertively turning their sights toward private equity and even individuals. While many of the largest private equity firms have already willingly begun to report their ESG data, many still do not. According to CDP’s strategy document:

Accelerating the Rate of Change: 2021-2025… businesses, including private companies, need to overhaul their operations and ensure they will remain viable within environmental boundaries. Governments must set the example and provide the regulatory environment that supports and encourages responsible corporate action.

The message is clear: do what you’re told or you will not be permitted to participate in their centrally planned society. From publicly traded companies to private companies, the activists class intends to control everyone, including individuals.

Those efforts are already beginning. Bans on natural gas-powered stoves and heating systems in California and Washington State for new construction are already in place. But even closer to home are the new generation of appliances. Some features are only available through an app the owner must upload on their phone. No app, no access to those feature. More creepy still are pregnancy tests. Traditional indicators like +/- or single versus double bars have announced to women for years of the impending arrival of a crumb cruncher. In the new world of social scoring, however, those tests now offer a “result reader” that is available through an uploaded app on her phone. Slowly changing the behavior of consumers will allow these societal score-keepers to more easily track an individual’s carbon footprint.

Many legal challenges loom against ESG advocates and the firms that do their bidding. As in previous conflicts throughout history, victory isn't won simply by the efforts of businesses, but rather by individuals willing to defend the lines of liberty and personal autonomy.

Banks Line Up to Join ‘ESG’ Mob

In the last year, the cost of energy has increased significantly. Gasoline, diesel, and domestic electricity and natural gas prices are now past the point that many people can bear. The problem affects businesses too, including manufacturing and agriculture, with consequences for the wider economy, jobs and the cost of living. It has led to a new word, “greenflation.” Greenflation is harming those who, literally, can least afford it.

However, instead of discerning what is behind these problems, what caused them, what role the federal government had and what it can do to ease the problem, the government is simply blaming others and pressing on. Treasury Secretary Janet Yellen is not only in denial but serially insists that the problem is that the administration just hasn’t proceeded on the “climate” front fast enough.

This is governmental malpractice. But the perpetrators are not without accomplices. The investor class, and big banks foremost among them, share equal responsibility. One of the chief culprits is a pernicious and destructive concept called Environmental, Social, and Governance investing.

Yellen: in "climate" denial.

A 2016 email suggests that modern “ESG” began as anti-energy campaigning against financial institutions in 1999 focusing on hydropower, then morphed into anti-coal advocacy then soon expanded to opposing all abundant energy sources.

Bank of America seems to have been captured first, vowing to not finance hydrocarbon energy (beginning with coal). Freedom of Information Act litigation showed the bank's enthusiasm for the "climate" agenda. A senior bank official, Jim Mahoney, hired former Clinton hands as consultants to get the bank close to then-Secretary of State John Kerry with offers to sponsor as much of the 2015 Paris climate talks as it could.

Yes, financial institutions sponsoring treaty negotiations. More recently, FOIA litigation produced still more craven correspondence, this time to Yellen from, among others, Wells Fargo. In a March 2021 email to a senior Treasury official, former Clinton Treasury official turned Wells lobbyist Elisabeth A. Bresee laid out the bank’s “climate” plan:

I'm reaching out to share an exciting climate change announcement. Wells Fargo just announced that we're setting a goal of net-zero greenhouse gas emissions, including in its financed emissions, by 2050. Wells Fargo believes that climate change is one of the most urgent environmental and social issues of our time and, as one of the largest financial institutions, we are committed to taking action, including aligning our activities to support the goals of the Paris Agreement.

In recent years, we've made tremendous progress in meeting and exceeding sustainability goals in our operations, working with NGOs and other stakeholders on climate-finance strategies, enhancing our transparency and disclosure, and partnering to advance clean technology innovation, community resiliency, and green jobs. We've also put in place a strong foundation and processes for managing climate risk across the enterprise and accelerating sustainable finance in our lines of business, including providing financing for utility-scale renewables and clean technologies, underwriting sustainability bonds. and innovating in ESG-linked lending.

Our path forward includes five focus areas:

The email closed by checking every box in the woke liturgy, about being—

committed to fostering an inclusive recovery from Covid-19 and to building a more inclusive and sustainable future for all.… includ[ing] supporting greater racial equity across our business and philanthropic giving and addressing evolving issues like climate change,” with a nod to the bank’s “clients and stakeholders.

This week, the bank announced it was demanding Paris-like emission cuts from companies it lends to.

This inherently conflicted, inane equivalence between and even preference for “stakeholders” (pressure groups and political interests) over shareholders and clients is, according to the Wall Street Journal, "using the ethical-custom concept to impose a progressive agenda on American businesses. It will have negative implications for investor returns.” 

Yet the costs of this public-private tag-team are far greater. For example, in late 2021 some U.S. traditional energy producers, particularly coal and related industries (e.g., rail), were unable to affordably access capital markets to purchase (or, in some cases, re-purchase) equipment to ramp up production and transport in the face of a looming energy crisis (which continues today), leading to serious energy security concerns. The companies were informed by lenders that loaning money to, e.g., coal, gave the banks an “ESG problem.” 

Wall Street, we have an ESG problem.

This resulted not from regulation but pressure campaigns including from a Biden administration that has made clear it has targeted hydrocarbon energy interests for extinction and that assisting them would not be well-received in Washington. 

Such a policy directly threatens U.S. national security. The broader consequence of greenflation has pushed prices and the cost of living upwards, and destabilized manufacturing sectors in the U.S., U.K. and Europe. It has been a major contributor to European dependence on Russian energy, undermining the West’s geopolitical position and global security. 

It has made firms worldwide increasingly dependent on China’s so-very-not-ESG manufacturing and materials. What this agenda demands of targeted industries is strongly contrary to America’s interests but is precisely as countries who wish us ill would have things.

Financial institutions draw from the same talent pool from which the Biden administration staffs itself, with the same woke priorities. This misguided partnership poses a grave danger to the U.S.