I like that my ESG feed has a lot of UK content on it. It accentuates the ping pong of attitudes towards ESG as you cross the Atlantic. The stories I saw today were even more scrambled. There seems to be a punch clown effect going on around Blackrock. Within six headllines, the huge investment firm received a one-two from opposing sides of the ESG cage match.
Punch 1: The environmental NGO Reclaim Finance slammed Blackrock et al for including oil company stocks in their sustainability portfolios. This report got picked up by the Financial News of London with the juicy title "Passive Finance's Dirty Secrets." The two-punch came from the state of Texas to the tune of $8.5B US when the chair of Texas State Board of Education, Aaron Kinsey, slammed Blackrock over its support for ESG investment practices. Can't win for trying.
I'm not really crying for the world-leading, mega trillion dollar Blackrock, but money and politics do make for a brutal boxing match. All this tumult is just another day in the life of ESG.
The Reuters piece made this cryptic statement: "ESG Letters sent by PSF to BlackRock, dated March 19 and seen by Reuters, requested termination of contracts to manage investments in international equities and one specific fund" - can't wait to find out what fund that might have been.
Of course, many international markets are ahead of us on ESG regulations. Perhaps Kinsey caught a glimpse of that regulatory freight train heading his way. I say "Kinsey," in a Seven-of-Nine kind of way. By Kinsey, I mean him, the governor, the other SFO (state financial officers) club members and the cadre of strategists running the anti-ESG think tank. Kinsey hinted at the Blackrock move in early March posting on Real Clear Bias a bit of a boiler plate invective about "evil" ESG – unfortunately, no mention of a specific fund deserving his ire. Behind the screed, you can see why the state of Texas might be concerned about losing oil money. Underneath the theatrical "they want to kill us..." Kinsey paints a kind of Alaska conundrum, in which oil companies bolster the economy. On one hand, it's arguable that regulations demanding radical shifts in industries should come with subsidies. But on the other, it always surprises me how this line of protest assumes (and even boasts) that "the people" suffer from a paucity of natural ability, innovation, and resilience.
Take away the smoke and mirrors, and ESG is really about transparency. I've followed ESG long enough to know that it's an accounting system, so dull in its weeds one has to commend friends-of-fossil-fuels (FOFF) for giving it life. How many units of waste? How many tons of carbon emission? But when I think of ESG investing, I lump all that accounting in my head under a concept that roughly translates to "good stewards make good investments." From this perspective ESG is fairly benign. The demand for ESG accounting isn't even as judgemental as "clean up your act" at this point. It's about "Show us your numbers." So we're squabbling about transparency. About public access to information. Are you a bottling company pulling water from a river that's going dry? As an investor, I want to know.
Pre-2030, the SEC and others seem to be giving companies a pass to get their houses in order, saying, in effect, "if you're numbers aren't good, you don't have to do anything about them." (Much.) (Yet.) (Wicked grin.) The parentheticals are what corporate accountants and CEOs see jumping out from under the bed. What draconian regulations will climate champions heap on us, they wonder, if they see our real numbers? (And yes, this corporate nightmare includes not just laws but "fees.") A tax on carbon? They shudder to think. And they fight against it too.
Anti-ESG lobbyists and their carbon-emitting friends know you can't regulate what you can't see. They aren't fighting because it might be expensive or difficult to keep comprehensive ESG data. At the risk of echoing the London FN, they're fighting to keep that data a secret among friends. It's a bit like a dinosaur principle from the "good-ole-boy" school of behavior: I'll hide your back and you hide mine.
Today's ESG news scroll showed a rumble that is getting "fierce"– a word that came up in many headlines.
Fierceness is how you know something in the ESG data match is hitting a nerve.
Comments
Wait - so a doctor proposing a finance bill is complaining about a financial regulator proposing a climate rule? "I'm so confused."