If most Americans noticed at all the election of at least two climate-focused dissidents to ExxonMobil’s board, they certainly missed the significance. But they may soon notice as ExxonMobil and other companies knuckle under to climate activists, leading to higher energy prices for American consumers.
Note the little victory dance by three massive asset managers – BlackRock, Vanguard and State Street – in the Wall Street Journal. Their votes elected dilettante climate activists, who own approximately 0.02% of the oil giant’s shares, because “Exxon’s yearslong refusal to make board directors available for frank conversations irked investors.”
Yeah, right. Big Finance pulled the rug out from under Big Oil for one simple reason: To feather its own ample nest, using your money.
If you own a 401k, you’re among millions of investors holding more than $5 trillion in exchange traded funds (ETFs) – bundles of stocks, often in the same sector or index, sold as single shares.
While you invest in ETFs, asset managers own the underlying shares – and get to cast them in proxy votes.
Which makes these three firms enormously influential: the CORPNET research group has found that together, the Big Three would be the largest single shareholder in almost 90% of S&P 500 firms.
So when BlackRock CEO Larry Fink writes a Warren Buffet-style annual letter to bosses of public corporations, they sit up and take notice. At first, his rather anodyne topic was good governance and short-term focus by management and boards.
But more recently, the finance guru got woke on investing for “profit and purpose” – code for so-called environmental-social-governance, or ESG investments (more here in a moment) – and then on how “climate risk” was creating a “fundamental reshaping of finance.”
Fink’s warning: his $8.76-trillion-assets-under-management gorilla “will be increasingly disposed to vote against management and board directors … not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them,” a completely subjective standard.
No kidding, says Exxon’s brass.
It would be hard enough for the erstwhile Standard Oil of New Jersey with Joe Biden giving in to the hard-left, Sanders-Ocasio Cortez wing on “green” cronyism. Now, with their biggest investors ganging up on them too, the pressure on Exxon management to shoot their own business in the head will be unbearable.
What the virtue-signalers aren’t cluing us in on is the classic question: cui bono – who benefits – and at whose expense?
The answer, of course: they do – using your money.
- Welcome, California blackouts. The proxy win empowered by your ETF holdings, along with the relentless leftist assault on fossil fuels, will eventually force Exxon into a ridiculous “carbon neutrality” pledge. Such a move could accelerate a massive reduction in production in favor of renewables and the Californication of national energy policy, thereby bringing all of America its Third-World energy poverty and blackouts.
- Look out for economic carnage. The vote and associated carbon neutrality push will destroy economic value and jobs. Exxon and other energy stocks are widely held by investors. The recent boost in global oil prices has temporarily buoyed the energy leader’s stock. But that can’t last when government policies and starvation of investment capital (see below) force the company to leave trillions of dollars of assets in the ground.
Then there’s the destruction that would hit the US economy as a whole when the most efficient form of energy production and consumption, bar none, is eliminated just as America has achieved energy security. We got a tiny taste of it with the shutdown of the Colonial Pipeline and a massive dose of it in the 1970s.
And don’t forget the 1.5 million workers employed in oil and gas whom candidate Biden promised would not lose their jobs. Can our economy really afford to deep-six millions of high-paying union slots for the empty promise of possible green jobs – especially when most renewable equipment comes from China, the world’s largest polluter?
- The real scandal – a monster conflict of interest. So why would asset managers help wreak all this havoc on their own stakeholders? To nudge investors toward their own ESG ETFs and investment funds. Where competition has driven management fees for regular ETFs to near zero, the Journal notes that “socially responsible” ETFs boast 43% higher fees. In particular, BlackRock pulled $68 billion into its sustainable products last year, representing more than 60% annual growth.
Asset managers cite ESG funds’ strong recent performance, claiming climate “risks” and “repricing” of fossil-fuel assets make them superior investments. But those phenomena are at least in part of the firms’ own making, as they destroy the value of fossil fuel reserves and production – a number of asset managers now outright refuse to invest in coal, for example, and thereby bid up the value of climate-sensitive assets. This self-dealing outright violates managers’ fiduciary duty to shareholders holding fossil-fuel interests and other asset classes that depend on the sector, not to mention workers in pension funds they manage or advise.
It’s time conservatives in Congress, now laser-focused on the evils of Big Tech, spoke up about this out-and-out abuse of the power your money grants the big asset managers to leverage “wokeness” and rake in profits – while shafting all of us in multiple ways.
— Written by the I&I Editorial Board