From Ether to Gold to Dross

Of all the tales of the spectacular collapse of FTX Crypto Exchange and its cautionary fate, nothing is as amusing as how Sam Bankman-Fried, the slobbish-looking CEO and Democrat Party benefactor who founded the now-bankrupt firm once "valued" at $32 billion, admits he used ESG (Environmental, Social and Governance) fans to manipulate investors into funding his Bahamian-based Ponzi scheme. From the Wall Street Journal:

Hedge funds, venture-capital firms and other professional investors earn billions of dollars of fees for their purported skill in judging the potential of businesses and the integrity of their managers. Yet dozens of the world’s leading investment firms, including Sequoia Capital, Singapore’s state-owned investment company Temasek, the Ontario Teachers’ Pension Plan, SoftBank Group Corp., and hedge funds Third Point and Tiger Global, showered SBF with money. Despite their vaunted investing expertise, these firms all missed the many red flags fluttering high above FTX. And seldom in financial history have red flags been redder than this.

The product was hard to understand, the books of its trading affiliate, Alameda Research, were never audited. The leaders lacked any discernible expertise or moral compass. And yet suckers couldn't wait to give them their money.

Many public entities lost a lot by investing in FTX. The Missouri Employees’ Retirement Fund lost about one million dollars. The private equity firm who had them invest in the company was BlackRock, the biggest fan of ESG investing. The Ontario Teacher’s Pension Fund is writing down ninety-five million in "investments" it made in FTX. (No mention of whom it used to place this wild bet.) In the meantime Bankman-Fried admits ESG was a big part of his promotions:

Mr. Bankman-Fried virtue-signaled by committing to make FTX “carbon neutral” and donating generously to fashionable progressive causes such as a foundation working to provide solar energy in the Amazon River basin. “We’re giving millions each year to launch sustainability related initiatives,” he said in an April Forbes magazine interview with—you can’t make this up—Brazilian super-model Gisele Bündchen.

The reason he did was to keep regulators from looking too closely at his virtue-signaling, booming company. Meanwhile, he was leveraging FTX customer funds to make risky, ill-timed bets. It worked (until it cratered) with ESG rating organizations such as Truvalue ESG scoring it even higher than Exxon Mobil on “leadership and governance.”

Harry Adjmi and Sam Bankman-Fried at the first annual Moonlight Gala benefitting Children With Special Needs.

Bankman-Fried has made the obligatory apology for those who were harmed, but admits that the philanthropic side of his company, and ESG generally, are part of “this dumb game we woke westerners play where we say all the right shibboleths and so everyone likes us.”

How bad was the leadership and governance of FTX? You have to look at the account of John J Ray whom the court has appointed to oversee the liquidation in the bankruptcy case and who reports, "Never in my career have I seen such a complete failure of corporate controls." Read his report to fully appreciate what a ridiculous investment vehicle this was.

As 'ESG' Falters, the Left Seeks to Rebrand

As Clarice Feldman has explained here at The Pipeline, the Wall Street enthusiasm for ESG (environmental, social, and governance) investing is already starting to wane. Which means the greens will go back to the drawing board, and will bring it back again under a new name. ESG is mostly a cover for "climate change" and social-justice activism, and as such its real agenda is to divert private capital to politically-favored causes, such as “green” energy and disguised redistribution schemes benefitting favored client groups like Black Lives Matter.

Investment funds that follow the ESG mantra are suffering from sub-par investment returns, and suddenly fear shareholder lawsuits for failing their fiduciary duty to maximize returns. Moreover, the attempt to enshrine ESG by regulation through the Securities and Exchange Commission (SEC) is running into political opposition on Capitol Hill and appears vulnerable to legal challenge. Suddenly the biggest boosters of ESG investment, and especially de-investing in oil, natural gas, and coal production, are backtracking, with J.P. Morgan CEO Jamie Dimon telling Congress last week that cutting off credit to fossil-fuel production would be “the road to hell” for America. Late in the week the state of Louisiana announced that it was pulling all of its assets invested with BlackRock, one of the prime cheerleaders of ESG.

On the "road to hell."

ESG is likely to persist, however, on account of its unseriousness and malleability. Several traditional domestic oil producers, like heavy fracking user Diamondback Energy, have received high ESG ratings from the third-party gatekeepers of ESG seals of approval through the simple expedient of buying “carbon offsets” and pledging themselves to be fully carbon-neutral . . . someday. Think of it as the environmental version of St. Augustine’s famous intercessory petition, “Lord, make me chaste—but not yet.”

ESG should be regarded as the third iteration of the left’s attempt to co-opt corporate America, which they otherwise hate, under the banner of “corporate social responsibility” (or CSR). CSR attempts to blur the lines between shareholders and “stakeholders,” that is, self-appointed advocates who want businesses to serve some special “social” interest as defined by the advocacy groups. But such “stakeholders” have neither a tangible “stake” in the businesses they mau-mau, nor do they represent anyone but themselves.

Roll back the calendar about 20 years, before the term ESG was coined, and you find the same essential idea marching forward in the business community under the slogan “triple-bottom line” (or BBB). This was the hey-day of “sustainable development,” and it was proposed that in addition to the traditional accounting measures of profit-and-loss, businesses should formally include new accounting measures of “environmental and social performance.” Exactly what these accounting measures might be were never specified with any rigor.

"Sustainable" green heaven for you and for me.

Important voices in corporate America immediately rolled over for this flim-flam. PricewaterhouseCoopers published a “sustainability survey” of 140 major U.S. corporations, arguing that “companies that fail to become sustainable–that ignore the risks associated with ethics, governance and the ‘triple bottom line’ of economic, environmental and social issues–are courting disaster.” The triple bottom line, PwC concluded, “will increasingly be regarded as an important measure of value.”

The CEO of Monsanto at the time, Robert Shapiro, wrote that “We have to broaden our definition of environmental and ecological responsibility to include working toward ‘sustainable development'." This groveling did nothing to reduce the Left’s hatred of Monsanto, or prevent endless lawsuits against Monsanto for the sin of producing Roundup and other useful products.

Perhaps the most egregious corporate suck-up to the CSR/BBB nonsense was Enron which, it is conveniently forgotten today, was the environmental lobby’s favorite energy company right up to the moment it imploded partly because its fraud was based on the hope that it could dominate trading in artificial “markets” for greenhouse gas emissions credits. (Enron was a cheerleader for the Kyoto Protocol that the U.S. Senate had indicated it would never ratify.) In January 2001, a Bear Stearns analyst cited Enron’s planet-friendly orientation in concluding: “We believe that Enron should be compared to leading global companies like GE, Citigroup, Nokia, Microsoft, and Intel, and that its valuation reflects this eminence.” The Bear Stearns note predicted Enron’s stock was going to $90 a share, but in less than 12 months, Enron was bankrupt and its shares worth zero. (And we all know what happened to Bear Stearns.)

There was even a “Dow Jones Sustainability Index” (DJSI) formed in 1999 to track the performance initially of 300 supposed BBB companies, though a close look at its composition found that there was less than met the eye. The DJSI added and deleted companies on their list with surprising frequency, with criteria that confessed to being politicized. Its process of sustainability analysis included reviewing “media, press releases, articles, and stakeholder commentary written about a company over the past two years.” (Emphasis added.)

The DJSI still exists, even though there are now several ESG indices competing with it. Despite its flexible criteria, the DJSI lagged the Dow Jones Industrial Average significantly. Over the last decade it has achieved an annual return of 5.2 percent, while the DJIA has returned 15 percent per year, and the S&P 500 14.8 percent. There is no compelling statistical evidence to validate that “socially responsible” corporations are more profitable or are better investments than companies not on the green bandwagon.

The best commentary on “corporate social responsibility,” no matter how cleverly defined, still comes from Milton Friedman’s observation made sixty years ago in Capitalism and Freedom:

Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their shareholders as possible. This is a fundamentally subversive doctrine. If businessmen do have a social responsibility other than making maximum profits for stockholders, how are they to know what it is? Can self-selected private individuals decide what the social interest is?

You'll own nothing and be happy.

As we can see with this long-term perspective, “sustainable development” and the “triple-bottom line” gave way to “Net-Zero” and ESG, which are just like “sustainable development” in that their imprecision allows for lots of cheating and self-serving definitions by both government and the private sector alike. ESG will likely start to fade from public view, and eventually the left will come up with some new term replete with with its own jargon and imaginary concepts. And as before, craven and gullible business leaders will fall for it, and the cycle will repeat itself.

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.

Main Street v. Wall Street on 'ESG'

In recent weeks there have been giant strides in the effort to challenge the legality of the "Environmental, Social and Governance" (ESG) construct that has become a threatening obsession of the titans of Wall Street. Though ESG remains a unfamiliar acronym for most Americans, Main Street investors whose pension dollars are funding ESG investments are beginning to ask questions.

While constituting competing frameworks, reporting systems, and scoring systems for environmental and social reporting for companies, the ESG construct lacks any quantifiable or worthwhile measurements. Put plainly, it is an entirely subjective scheme, created and funded by political activists. Under the pretense of environmental protection and social diversity, these activists recognized that they had allies in the financial services and banking sectors who could be incentivized to do via the capital markets that which the activists knew they could never achieve using traditional market forces or democratic institutions. In short, voters would never agree to ruin their own economies, livelihoods and futures in the name of political ideology. To be successful, it necessarily needed to be stealthy and unchallenged.

Recognizing this reality, attorneys general Jeff Landry and Todd Rokita of Louisiana and Indiana issued a letter earlier this month warning their states’ pension boards that ESG investing is likely a violation of fiduciary duty and potentially opens their investment staff and investment advisers to liability if they continue allocating funds to ESG-promoting asset managers such as BlackRock.

Fink: BlackRock or black hat?

The Landry and Rokita letters follow another letter sent last month from them and seventeen other state AGs to BlackRock CEO Larry Fink. That letter warns the asset management giant that BlackRock’s ESG investment policies appear to involve what they describe as, “rampant violations” of the sole interest rule, a well-established legal principle. The sole interest rule requires investment fiduciaries like BlackRock, to act to maximize financial returns, not to promote social or political objectives.

Yet, it is clear that BlackRock and industry counterparts are doing precisely that. They are attempting to use the ESG pretext of "protecting the environment" to re-orient trillions of dollars of their clients’ capital toward what are unquestionably their own political and social objectives. This effort is borne out in the companies in which they invest and the trends they curate and then fund. As is repeatedly touted in the literature of the most prolific ESG advocates, they believe that because their asset management partners, including BlackRock, manage such a substantial percentage of the total investment market, their ESG world view is above constraint of law, or beyond the reach of the institutions that have traditionally protected investors from dubious investment schemes.

ESG reporting and scoring is a scheme initially launched over two decades ago with the creation and funding of the Carbon Disclosure Project (CDP) by the World Economic Forum (WEF), both of which advocate for political and social objectives. Out of the initial CDP funding effort has grown a network of non-profit entities, foundations, non-governmental organizations (NGOs) and, via the incentive of profit, the largest asset management firms and banks in the world. Together they constitute a validation-feedback loop. Left unconstrained, their political and social objectives will be paid for by investor capital, potentially in defiance of the best interest of their investors.

Marx: definitely a black hat.

So does this history square with Blackrock’s framing of their ESG policies? To answer, one need only start at the top, with BlackRock CEO, Larry Fink and his affiliation with the WEF, the originators of the Great Reset. The WEF, by mission, seeks to shape global, regional, and industry agendas, underpinned by so-called "stakeholder" theory, the mechanism needed to integrate communist principles into economic practice without getting sullied by the bloody history malignant socialism has left in its wake. According to the WEF:

The market mechanisms under capitalism do not provide incentives for preserving the environment. Firms are constantly threatened by market competition to cut costs and optimize profit. The environment thus falls prey to the compulsive market behaviour of the capitalist mode of production. 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.

With Fink as a Trustee Member of the WEF and an Agenda Contributor, one must assume Fink agrees with the objectives of the WEF. Is he an agenda-contributor who represents the views of BlackRock’s clients or, as it appears, is he ensuring that the Forum's agenda gets codified into and funded by the capital markets using BlackRock’s investors’ capital? Is it possible that Fink is doing the bidding of the stakeholder-focused Davoisie, in defiance of the sole interest of BlackRock’s own clients? With a recent $1.7 trillion loss in the first six months of this year in its ESG-indexed funds—the largest amount of money lost by an individual investment firm over that time period—one could certainly argue that he is doing just that. 

In his 2021 Letter to CEOs , for example, Fink regurgitates key WEF concepts. “We have long believed that our clients, as shareholders in your company, will benefit if you can create enduring, sustainable value for all of your stakeholders.” Apparently, shareholders just took second seat to the stakeholders. So much for sole interest. He continues, “In January of last year [2020], I wrote that climate risk is investment risk. I said then that as markets started to price climate risk into the value of securities, it would spark a fundamental reallocation of capital.” But it turns out that capital re-orientation is a stated goal of the WEF-funded CDP too:

 Through its engagement, advocacy and partnerships, CDP helps align corporate and governmental strategies with international goals, supports investors to shift capital to finance the low carbon transition; and changes expectations, ambitions and practices to pave the way to a new, restorative and sustainable society. CDP helps align corporate and governmental strategies with international goals, supports investors to shift capital to finance the low carbon transition; and changes expectations, ambitions and practices to pave the way to a new, restorative and sustainable society.

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The BlackRock/WEF cabal has also made its way into the highest reaches of government as well. Brian Deese serves as the Director of the National Economic Council (NEC). As a non- cabinet level position, it doesn’t require Senate confirmation. The confirmation process would have allowed an opportunity to challenge Deese’s obvious conflict of interest; a former Obama advisor and a passionate advocate of ESG, Deese became global head of sustainable investing at BlackRock in 2017 before joining the Biden administration.

Similarly, in June 2022, Tom Donilon, chairman of the BlackRock Investment Institute, the firm’s global think tank, was appointed by secretary of state Anthony Blinken to co-chair the Foreign Affairs Policy Board. The board advises State on "strategic competition" with Beijing. Coincidently, last September BlackRock was permitted to open a mutual fund in China, making it the first American firm approved to sell financial products there.

With a future fraught with legal questions about ESG, perhaps investors should remind BlackRock of the difference between their sole interest and BlackRock's self-interest.

Stein's Law Meets 'ESG' Investing

The late conservative economist Herb Stein was the author of a law of economics that says “If something cannot go on forever it will stop.” Pessimists looking at China’s Great Leap Forward or the Soviet Union’s Lysenkoism-induced famine remind us that even if that “something” stops it can often cause immeasurable harm until it finally does.

The California Public Employee’s Retirement System (CALPERS) which controls $444 billion in assets for the benefit of two million state public employees, retirees, and families is certainly putting Stein’s law to the test. For twelve years it has been using those assets contrary to sound fiduciary principles, choosing instead to purchase stocks based on the notion of companies’ ESG (social, environmental and governance ) practices. In 2010, it committed $500 million to such investments.

Oops.

Heather Gilbert in the Wall Street Journal reports the sad state of this new virtue signaling investment policy:

The nation’s largest pension fund got a scathing performance review Monday when its new investment chief highlighted the retirement system’s underperforming returns and estimated it missed out on $11 billion in gains during a “lost decade” for private equity.

The unusually candid presentation to board members of the California Public Employees’ Retirement System, known as Calpers, showed returns lagging behind other large pensions in almost every asset class during the past 10 years, with private equity trailing the most, 1.3 percentage points. ... We underperformed every one of our peers on the upside, all with the promise that when we got to the downside we would be better protected than other funds,” Terry Brennand, director of budget, revenue and pensions for the Service Employees International Union’s branches in California, said during the public comment portion of Monday’s investment committee meeting. Instead, “we continued to underperform our peers.”

As a matter of fact, more than just its private equity portfolio underperformed other large pension funds. Calpers ESG portfolio underperformed other large pension funds in stocks and income. But its officers seem to see no connection between these policies and the fund’s poor performance.

As the Journal’s James Freeman reports, last year Calpers asked one of the most successful firms, Berkshire Hathaway, to provide “more disclosures on climate-related risks and opportunities” and withheld its votes to re-elect members of Berkshire’s audit and governance committees because it was unhappy with their climate risk disclosures.

One can certainly argue that Berkshire’s performance in recent years could have been better, but does anyone think Calpers officials have a better understanding of investment risk than Warren Buffett? Calpers’ disappointing decade is another reminder that taking care of retirees’ investments requires profits, not politics.

Corporate returns are likely to be far worse this year. How long can Calpers continue playing politics with public employees’ money? Alas, Herb Stein is not around to take a guess, but ours is: indefinitely, until it can't.

From Hearings to Hogwash

With gas prices now broadly lower than a few months ago, and believing it is tactically valuable with mid-terms just over fifty days out, Democrats have resumed their attacks against the oil and gas industry. Apparently believing that Americans are thirsting for the unimaginative narrative that oil and gas industry greed is responsible for creating higher gas prices and concomitant economic malaise, they are heading for a mighty miscalculation. They prefer to ignore the plainly failed Biden policies that are creating the current market conditions responsible for record inflation and higher prices for everything from gasoline to Gatorade, and instead toreturn to tactics that offer symbolism over substance.

We've just witnessed two days of hearings by two separate committees eager to get back to the boring bloviations by politicians and academics. Together, the Committee on Oversight and Reform and the House Natural Resources Subcommittee on Oversight and Investigations offered feigned outrage about oil and gas producers, and misstated facts and re-framed realities. The strategy of each committee was slightly different, but the tactics and overarching objective remained the same. Use whatever means necessary to hamper, intimidate, denigrate, and dismantle the most important sector of the U.S. economy—energy—to destroy the economy and force a change of behavior by the American people that would never be possible if the Democrats' political ideas were taking the country in a positive direction.

Acknowledged by leaders of both parties prior to January 2020 as the most important driver of economic vitality, inexpensive and abundant energy has now become a whipping boy for Leftists. Extracted using low-impact techniques, innovative processes, advanced technological engineering and a well-paid workforce, the American oil and gas industry delivers the safest and most cleanly produced oil and gas in the history of the world. But from the start, Biden has issued a steady stream of executive orders intended to hamstring the industry, limit supply so as to drive prices up, and give broad regulatory authority to agencies to investigate and in some cases arbitrarily punish those who ignore his demands to produce energy from "renewable" energy sources. All in complete denial of reality: that alternative energy sources such as  wind and solar are neither reliable, nor capable of meeting the energy needs of this country. 

America held hostage: Congress suspected.

Since Biden entered office, there has been an orchestrated effort by the president’s advocates, agency leadership, and committees on the Hill to denigrate, and if necessary, delegitimize opposing political views, industries, and economic activity. Agencies have been granted unprecedented investigatory powers through executive orders at the Security and Exchange Commission, the Energy Department, and Department of Justice through their "environmental justice"  initiatives, while congressional committees issue a blizzard of subpoenas. Legal energy-related businesses and even truth itself have come under the scrutiny of hostile officials who forget they work for American taxpayers.

During this week’s hearings by the Committee on Oversight and Reform, chairwoman Carolyn Maloney (D-NY) asserted that oil companies should somehow not be in the business of oil and gas production. Instead, they should direct their oil and gas revenue toward alternative power generation activities… which do not create sufficient revenue to keep the companies viable. By her lights, Exxon should be using investor capital to not maximize revenue from its core business activity. All while ignoring legal obligations Exxon has to investors and while ignoring the role the administration has had in obliterating America’s energy production capabilities through deliberately destructive policy prescriptions. 

Meanwhile, the House Natural Resources Subcommittee on Oversight and Investigations was continuing with its ongoing investigation of public relations firms’ role in "spreading climate change denial.” According to reports, chairman Raúl Grijalva (D-AZ) and subcommittee chair Katie Porter (D-CA) have been seeking documents from several private companies detailing their work for oil and gas producers and industry trade associations. These are legal companies being told they need to turn over their client documents to the government for partisan political reasons. This is intended to have a chilling effect on professional-services providers who work in the oil and gas industry, and is a tactic intended to promote fear and to coerce participation in inane hearings like these. To their credit, the companies declined the request to participate in the charade.

Don't forget unicorn farts.

While the committees are using their tactics of coercion, so too is the administration. The director of the National Economic Council, Brian Deese, is a former BlackRock executive who enthusiastically embraces the dubious environmental, social and governance (ESG) construct which intendeds to re-orient investor capital toward what are described as “global goals” that include the funding of businesses and industries that align with BlackRock’s economic interest and political worldview, even if in defiance of the best interest of their clients. Like committees’ subpoena threats against private citizens running their private companies, the ESG concept is similarly intended to change corporate behavior. If the corporations have the acceptable ESG score, determined by their political adversaries, they get the capital they need to run their companies, If not, as is happening with the oil and gas industry, the companies have difficulty accessing the capital these ESG advocates control.

As the energy industry goes, so goes American capitalism. You've been warned.

The Malign Genesis of ESG—Part 2

With BlackRock’s recent acknowledgement that it lost $1.7 trillion of investors’ capital in the first six months of 2022, the truth about the Environmental, Social, and Governance (ESG) construct—the inherent cultural Marxism of the name really tells you everything you need to know—has been splayed open, revealing what could only be described as a contrived correlation between investment risk and environmental risk.

Rather than criteria intended to mitigate investment risk, as has been repeatedly asserted by BlackRock CEO, Larry Fink, the ESG construct is actually an effort to develop a financial system that re-orients capital flows toward political and social ends which include government regulation, communal property rights, and social scoring. It is an organized effort to wrest control of private property from the hands of owners and transfer it to a global nomenklatura under the guise of "protecting" the environment and repairing the "damage" done by capitalism. 

As described here yesterday, these activists use layered non-profit organizations, foundations, and non-governmental organizations (NGO's), to undermine business culture, interfere with free markets, and circumvent democratic institutions. Using reliably self-interested and feckless financial and banking sector partners, companies like BlackRock and State Street Capital have abandoned their fiduciary obligations in exchange for higher management and consulting fees and greater leverage to direct capital toward investments that buttress their worldview.

Gimme, gimme, gimme.

As self-ascribed arbiters of permissible corporate and social values, these ostensibly independent financial sector experts act more like cultish evangelizers than disinterested asset managers. They seek to codify political views into boardrooms and across industries using other peoples’ capital—leveraging it to change behavior and directing it toward investments that align with their values. In  more enlightened decades such a scheme may have been considered coercion or collusion. But in the 2020s, financial leaders fancy it sophisticated enlightenment.

The first and most critical threshold these central planners established was to expand and conflate shareholders (investors) with stakeholders (non-owners, communities and entities outside the company). They began by expanding the understanding of shareholders to include these “stakeholders” that necessarily underpin stakeholder capitalism. It is a system, according to World Economic Forum founder Klaus Schwab, in which private corporations are (imaginary) trustees of society and work for the benefit of everyone. Codifying this concept has been successful inasmuch as stakeholder capitalism has been integrated into the MBA programs of every major business school in the U.S. and around the world starting nearly three decades ago. Those students are the C-Suite leaders of today. They have become the reflexive mouthpieces of the ESG/Industrial Complex, promulgating a construct the genesis of which they are ignorant—and the impact of which they do not understand.

Once non-owners, communities, and supply chains are given standing through stakeholder capitalism, the follow-on concept of “natural capital” can more easily be integrated into the corporate psyche. As articulated in the Carbon Disclosure Project’s (CDP) most recent report, “Accelerating the Rate of Change: 2021-2025,” these stakeholder advocates assert that the most pressing objective to ensure the culmination of decades of work is to codify the concept of natural capital as having parity with financial capital.

Under the ESG construct, "natural capital" refers to the entire planet's stocks of water, land, air, and renewable and non-renewable resources such as plant and animal species, forests, and minerals. Already protected by the current statutory and regulatory framework that includes the National Environmental Policy Act (NEPA), the Endangered Species Act, and the Clean Air Act—among the tens of thousands of pages of administrative rules and regulations enacted under the authority of these and other statutes—"natural capital" is intended to be the agent of change, not the point of the change. This newly sought parity represents a radical and game-changing extension of commonly understood financial capital. Successfully equating "natural capital" with financial capital would entrench stakeholder capitalism into corporate boardrooms and irreparably harm the country and economy.

"Parity" would provide the necessary portal through which these ESG-activist entities could fully gain control of corporations. After achieving complete control over business, they seek to dictate how a company monetizes its properties, the manufacturing processes from which it derives revenue, and to whom the company sells its product or service. If natural capital is given parity to financial capital, there is no longer any private property. Under the stakeholder-inspired understanding of capitalism whereby property can be controlled by everyone, it is owned by no one.

Bend over, comrade. It's for the common good.

At scale, this scheme will impact individual corporations and entire industry sectors, including American oil and gas. Abundant and inexpensive energy is central to a thriving capitalist economy. The U.S. oil and gas industry consistently delivers low-impact, inexpensive, and abundant energy. With a commitment to efficient, rapid, and environmentally superior extraction technology, the industry has improved the well-being of people and communities around the world. ESG unequivocally threatens its future. 

Because America is the only country in the world in which oil and gas mineral rights are privately owned, the U.S. oil and gas sector is not only a symbolic Marxist-socialist enemy but also a highly strategic target of the ESG/Industrial Complex. The significance of this fact cannot be overstated. By seeking to gain control of the energy sector through the ESG moral bludgeon, government regulation and divestment become not merely political initiatives in an ideological struggle but rather a critical battle for the survival of the entire industry, and by extension the entire U.S. domestic economy. It is therefore imperative that the response to reject and unwind the ESG movement be led by those from the oil and gas industry, joined by the agricultural, mining and construction sectors, all of whom have foreknowledge about the comping economic and political impact of ESG and the requisite resources and expertise to exploit its weaknesses and mount an effective counterattack.

According to the non-profit CDP, formerly known as the Carbon Disclosure Project, the ESG/Great Reset cabal wants "governments to introduce ambitious legislation that drives market changes. We create space for this by running a reporting mechanism that incentivizes good behavior, catalyzes the creation of new standards and prepares the market for the change to come.” In case you're wondering on which side they're on, here's their mission statement:

CDP runs the global environmental disclosure system. Each year CDP supports thousands of companies, cities, states and regions to measure and manage their risks and opportunities on climate change, water security and deforestation. We do so at the request of their investors, purchasers and city stakeholders. Over the last two decades we have created a system that has resulted in unparalleled engagement on environmental issues worldwide.

In sum, ESG is a front in an ideological war with real political, economic, and social consequences. It is a front in a non-kinetic war, which instead of guns, bombs and missiles employs the weapon of ESG to control speech, dictate how one can use his property, re-direct capital flows, and expand the role of government. Their objective is to control every aspect of the economy and business and to reorder national governments and human society.

The generals on their side don’t come from the military. Rather, they come from government, central banks, and the financial sectors. Meanwhile, the domestic oil and gas industry must defend the side of liberty in all its forms. It should not merely rebuff these attackers and render the ESG/Industrial Complex impotent, It must continue to strive for excellence in its development and delivery of energy. Meanwhile, the American people must stand shoulder to shoulder with them and help lay the foundation on which future generations will flourish.

The Malign Genesis of ESG - Part I

In the weeks since the S&P 500 announced Tesla’s removal from its ESG Index while inviting Exxon to join, but leaving Chevron out, the incongruous nature of the environmental, social and governance (ESG) construct has never been more obvious. It reveals what some might consider proof of the fraud that ESG represents. But what exactly is ESG? Where did it come from? Understanding its genesis and purpose of ESG will clarify what it actually is, not what many purport it to be. 

Beginning in 2000, the World Economic Forum (WEF) embarked on an initiative that over two decades later can only be described as a Trojan-horse attack on free markets, private property, and democratic institutions. Founded in 1971 by German engineer and economist Klaus Schwab, the WEF describes its mission in part as, "improving the state of the world by engaging business, political, academic, and other leaders of society to shape global, regional, and industry agendas." Agenda-shaping it seems can be transformational, for good or bad, and quite lucrative.

Well-funded and well-organized, what has grown from that initial effort over two decades ago, is a sophisticated network of NGOs, foundations, and nonprofit entities working to achieve unprecedented ideologically inspired political, social, and financial change inside America and throughout the world, using the ESG construct.

Little green piggies everywhere you look.

With the promise of profit, this network engaged key asset management and banking partners, including giants like BlackRock, Vanguard, and Bank of America. Together these activist profiteers, best described as the ESG/Industrial Complex, are engaged in an extraordinary effort to fundamentally undermine and replace free markets while circumventing democratic institutions of governance and lawmaking. Seeking to force companies into behavior based on political ideology—often in defiance of the best interest of their investors—the ESG Industrial Complex represents a nefarious source of boardroom bullying and attacks on industries with which they politically disagree but whose assets they seek to control.

Using the pretense of social diversity and environmental protection needed to repair damage caused by capitalism, this network established the ESG construct. It represents a geometrically increasing impediment to many industries and the larger corporate culture. Though nebulous and ill-understood by both Wall Street and Main Street alike, it constitutes competing frameworks, reporting systems, and scoring systems for environmental and social reporting—but it lacks continuity and a quantifiable measurement. A meta-analysis of more than 1000 studies on ESG performance found that, “studies use different scores for different companies by different data providers.” These self-ascribed arbiters of politically appropriate values, behavior, and outcomes intend to identify, scrutinize, and then using ESG scores, punish public and private companies—and eventually individuals—who do not agree to live by the network’s validation feedback loop.

Objectives articulated by one of the data collection members of the ESG network include:

Though not yet widely adopted in much of corporate America, ESG has been aggressively embraced by most publicly traded companies and the financial and banking sectors. Ninety-eight percent of America’s top financial companies now disclose ESG scores, and 82 percent include the information in their financial reports as of the end of 2020. Acting as ESG advisors, these banking and asset-management firms have been able to realize premiums for management and advisory fees. For these firms, ESG represents a lucrative revenue-generating spigot and a clever mechanism by which to gain control of capital and at scale, private property. It offers them a mechanism by which to redirect and control capital and property in ways that align with their political worldview.

After decades of coordination and collaboration, the network not only has well-defined initiatives and objectives, but also defined timelines to what they call a “transitioned world.” Success for ESG necessarily harms entire swathes of society in a free market, democratic system. It is a model intended for government to manage the means of production by “transitioning” the world toward increased regulatory control, social scoring, and communal property rights using the pretense of carbon emission neutrality—a model underpinned by socialist and communist principles, including a communal stake in for-profit companies and the development of a new financial system that directs capital flows to never-defined “global goals.”

Schwab: A finger in every pie.

In its most recent report, “Accelerating the Rate of Change: 2021-2025”, the Carbon Disclosure Project, (CDP), one of the WEF-financed entities foundational to the development of the ESG construct, asserts: “all 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. Both businesses and governments alike must align their actions with equitable outcomes that alleviate unequal burdens created by climate change.”

These ESG collaborators are overt in articulating their intentions and objectives. In Part 2 tomorrow, I will reveal the keystone of the ESG construct and propose what must be done to render the movement impotent. I will consider stakeholder capitalism and the role economic capital holds in the fight ahead. I will explain why the domestic oil and gas sector is such a significant target by the ESG/Industrial Complex, and how controlling energy production is a necessary threshold for these activists to succeed. Finally, I will consider what Americans can do to stop this attack on our country and neutralize this threat to our way of life.

Money Talks, Woke 'Batgirl' Environmentalism Walks

"Cut the crap." That's what the money men have started to say to the Leftist ninnies who have gotten used to telling them what to do. It's getting fun to watch.

The best example is the ruthless work being done by David Zaslav, CEO of Warner Bros. Discovery. Upon taking the reins of the newly created entity -- a product of the merger of the two corporations -- Zaslav wasted no time pulling the plug on the company's $300 million CNN+ streaming service just three weeks after it had launched! Everyone could see that CNN+ was off to a rocky start, but the quick hook was clearly meant as a company-wide warning to anyone who thought he/she/it wasn't expendable.

Since then, Zaslav has made it known that he wants CNN to get back to its hard news roots, rather than indulging in the fanatical progressive bilge that has characterized its programing for many years. The other day he fired one of the faces of the network, Brian Stelter, and cancelled his show Reliable Sources, known mainly for reliably repeating the Democratic Party's every talking point.

Stelter: so long, Tater.

Zaslav also sent shockwaves through the entertainment industry when he cancelled the release of Batgirl, a multimillion dollar superhero flick (of course), because it was way overbudget and test audiences were hating it. Zaslav's options were to either write a blank check for rewrites and reshoots or else just to put the whole project down as a tax write-off, guaranteeing it would never see the light of day. He chose the latter. And that despite Hollywood's shrieking that it was a "bad look" to cancel a superhero movie with a minority woman lead. But that was the point -- for Zaslav, the race-swapping, female empowerment angle meant nothing. He only cared about whether it would make money, and the answer was no.

Similarly, JPMorgan Chase CEO Jamie Dimon made waves recently when he spoke in defense of investing in oil and, especially, natural gas. Speaking to a gathering of journalists and investors Dimon asked rhetorically, “Why can’t we get it through our thick skulls" that American oil and gas production can help us hit emission reduction targets, and thus ultimately is good for the environment. Continued Dimon, "because of high oil and gas prices, the world is turning back on their coal plants. It is dirtier.”

Of course, environmentalist policies and anti-fossil fuel ESG investing trends are a big reason for those high prices. And, as Joan Sammon has discussed here at The Pipeline, Dimon's own company has been one the biggest proponents of the ESG fraud. Still, in this instance, he's absolutely right -- our present energy crisis, which can be blamed as much on our ruling class's fanatical devotion to so-called renewable energy as on Russia's war in Ukraine, has left countries throughout the world searching desperately for reliable alternate energy sources, and the one they've landed on is coal, the consumption of which is projected to return to 2013 levels by the end of the year. Transitioning from coal to natural gas, made possible by the fracking revolution, has led to America leading the world in emissions reductions since the turn of the century. The transition from natural gas to wind and solar has, in practice, meant the triumphant return of coal.

Look what's back.

Environmentalists quickly responded to Dimon's statement by claiming he cared more about his company's investments than the environment. But the obvious response is -- why can't it be both? Dimon knows that his company has been transitioning away from the resource sector mainly to appease the activist class, which is bad for both his bottom line and emission reduction targets. When the economy is booming, he can afford to indulge them. But in the face of an impending recession, he has to start speaking some hard truths, even if it pisses off some culture warriors.

Keep it up boys, its good for the crybabies to be told "no" every once in awhile.

Another Bad Day at Black Rock

Imagine if you had billions of dollars of other peoples’ money at your disposal to invest and instead of investing it prudently to provide the maximum safest returns you can find, you decide to blow it to advance your own “environmental, social and governance”(ESG) objectives. Imagine that this virtue-signaling power trip at the expense of those to whom you owe a high degree of care, cost clients $1.7 trillion dollars in over a six-month period. Well, you don’t actually have to consider this a hypothetical, that is the story of BlackRock as I noted last month.

The question in my mind for the two years I have been warning about the loss to beneficiaries of such mismanagement is whether there will be any consequences for such conduct, and it looks as though there will be. Big time.

Among the more traditional ways of recouping such losses as pensioner lawsuits against investment managers of pension funds (and a lot of the money BlackRock handles for others is pension fund money), it looks like state boycotts and antitrust lawsuits may also be in the making. In January Texas Lt. Governor Dan Patrick asked the state’s comptroller to place BlackRock “at the top of the list of financial companies that boycott the Texas oil and gas industry.” Doing so under Texas senate Bill 13 would deprive companies like Blackrock from substantial accounts. The state could no longer contract with or invest in any companies so listed.

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Just yesterday, BlackRock Chairman and CEO, Larry Fink, issued his annual 2022 letter to CEOs indicating that BlackRock’s goal is to transition to a “net zero” world, including decarbonizing the energy sector. Needless to say, it is highly inconsistent to claim support for Texas’ oil and gas energy industry while leading a “net zero” policy effort that will destroy the oil and gas industry and destabilize the economy worldwide.

According to SB 13, a company is considered to be boycotting an energy company if it limits relations with an entity involved in the fossil fuel-based energy sector if the entity “does not commit or pledge to meet environmental standards beyond applicable federal and state law[.]” Committing to a “net zero” carbon strategy is beyond applicable environmental standards in federal and state law. Therefore, BlackRock is boycotting energy companies by basing investment decisions on whether a company pledges to meet BlackRock’s “net zero” goals.

Recently the state of West Virginia announced it would no longer do business with companies that boycott the fossil fuel industry—which includes BlackRock. The ban will “cost the firms $18 billion a year” according to West Virginia’s treasury office. That business loss is now potentially in the trillion-dollar range as 19 state attorneys general point to Fink’s record and assert the company he heads is “an explicit leader in the such to ‘retire fossil fuels’”. The letter to BlackRock Chairman Fink reads like a legal pleading with very extensive factual and legal citations. It begins:

Based on the facts currently available to us, BlackRock appears to use the hard-earned money of our states’ citizens to circumvent the best possible return on investment, as well as their vote. BlackRock’s past public commitments indicate that it has used citizens’ assets to pressure companies to comply with international agreements such as the Paris Agreement that force the phase-out of fossil fuels, increase energy prices, drive inflation, and weaken the national security of the United States. These agreements have never been ratified by the United States Senate. The Senators elected by the citizens of this country determine which international agreements have the force of law, not BlackRock. We have several additional concerns that fall under our jurisdictional authority as attorneys general.

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Those "additional concerns" should also be concerning to BlackRock. On the question of “neutrality” on energy, the AGs put paid to the company's claim, noting its many actions to wipe out the fossil fuel industry. “Rather than being a spectator betting on the game, BlackRock appears to have put on a quarterback jersey and actively taken the field. It mocks the company’s claim that it wishes to “dialogue” on energy issues, and accuses Blackrock of violating its fiduciary duty as the investment manager for state pension funds, as well as the company's poor energy projection record and its priorities. “Given these facts, it strains credulity to believe that a sole focus on financial returns would lead an asset manager to manage all assets for the achievement of net zero by 2050 and make climate issues the number one portfolio company engagement factor.”

More than arguing a breach of fiduciary obligations, the signers indicate the company's actions violate federal antitrust law.

 BlackRock’s actions appear to intentionally restrain and harm the competitiveness of the energy markets. Disturbingly, a survey last year from the Federal Reserve Bank of Dallas asked: “Which of the following is the primary reason that publicly traded oil producers are restraining growth despite high oil prices?” Sixty percent of respondents referenced a form of “investor pressure.” These antitrust concerns are especially acute because BlackRock and other asset managers affirmatively tout their market dominance. BlackRock is the world’s largest investment management company, with $10 trillion in assets, “more than the gross domestic product of every country in the world, except for the US and China.

The letter seeks a response by the 22nd of this month. The tenor of this well-documented letter and its extensive citations of fact and law lead me to believe, BlackRock will be forced to defend multiple lawsuits unless it takes significant steps to abandon both its ESG investment strategies and its extensive activities to force net-zero emissions at the expense of those whose money they manage.

Coming next week: The Genesis of ESG, by Joan Sammon.