In the opening act of his tenure as the Conservative Party of Canada’s new leader, Pierre Poilievre has been busy selling hope and optimism. But given his fondness for a good political scrap, it’s only a matter of time before he drops the gloves and starts throwing punches again. One of the first places he’ll probably do that is the growing pushback against so-called “ESG” investing, a punch-up already happening in the United States.

ESG is short for “environment, social and governance,” and it’s part of an effort by large banks and financial institutions to more effectively manage non-financial risks like climate change and corporate governance. They do this by evaluating companies on a series of performance metrics, from greenhouse gas emissions to labour practices and pay equity, and directing investors towards the ones that do the best. It’s no small effort, either — according to Bloomberg, ESG-oriented investments by big banks and asset managers could total more than $50 trillion by 2025.

But that’s coming under fire from places like Texas, West Virginia and Oklahoma, whose fossil fuel industries have been subject to significant ESG-related scrutiny from banks and other capital providers. In West Virginia, for example, five major banks were barred from doing business with the state because of their pro-ESG policies, while Texas now has a law that bans municipalities from doing business with banks that have ESG policies targeting its fossil fuel companies.

This pushback fundamentally (and almost certainly deliberately) misunderstands the point of ESG investing. Reducing greenhouse gas emissions or increasing the diversity of a company’s senior leadership team isn’t an act of virtue signalling, as some conservatives seem to think. Instead, it’s about reducing exposure to key operational risks and improving the efficiency and effectiveness of the people charged with managing them.

Companies that ignore things like climate change or the importance of diversity aren’t just behind the times — they’re materially harming the long-term interests of their shareholders. As Alison Taylor, a professor at New York University’s Stern Business School, told E&E News, “Anti-ESG investing is not really a thing, unless you’re saying, ‘We’re going to deliberately invest in poorly governed companies.’”

This anti-ESG pushback doesn’t just affect shareholders, either. According to a recent paper from a pair of Wharton finance professors, in the first eight months alone, Texas’s law forbidding municipalities from doing business with certain banks cost taxpayers an additional $303 million to $532 million in interest on municipal bonds due to the decreased competition from said banks. “It’s a really substantial increase in borrowing costs,” co-author Daniel Garrett said.

That sort of price tag is unlikely to deter Texas’s efforts to protect its oil and gas industry from greater climate-related scrutiny. It’s even less likely to deter conservatives here in Canada, who appear ready to embrace the same sort of approach.

Calgary Conservative MP Tom Kmiec is reportedly drafting a private member’s bill that would crack down on so-called “woke capital” — in other words, companies that deign to care about something other than their near-term bottom line. It proposes to amend the Canada Business Corporations Act (CBCA) to “ensure that officers and directors prioritize the interests of shareholders above political agendas that are unrelated to the company’s business purpose.”

Addressing and adapting to climate change is, of course, very much a business purpose. Just ask the major oilsands companies that have all very publicly pledged to reach net-zero greenhouse gas emissions by 2050. But these sorts of facts have no purchase on the feelings of the anti-ESG crowd. As conservative columnist Jamil Jivani wrote, “The proposed changes to the CBCA [Canada Business Corporations Act] promise to loosen the grip that woke liberals have over corporate Canada….Big businesses have been getting away with social activism for far too long. The Canadian backlash against woke corporations has only just begun.”

When Pierre Poilievre is ready to throw punches again, he’ll probably start with the growing pushback against so-called “ESG” investing, writes columnist @maxfawcett. #cdnpoli #ESG

On that, at least, Jivani is correct. Even if Poilievre doesn’t embrace Kmiec’s ham-fisted idea, Danielle Smith — the likely next premier of Alberta — almost certainly will. That will raise an interesting dilemma for these “woke corporations”: do they go along with the ride and avoid angering the sort of politicians who might also cut their taxes and lighten their regulatory load, or do they stand their ground and protect the long-term interests of their shareholders and employees? Who, exactly, do they have a duty to serve: their political friends or their professional responsibilities?

Ironically, these sorts of anti-ESG efforts could end up harming the very companies and industry that politicians like Poilievre and Smith say they want to defend. And there’s another deeper irony at work here: the politicians who make the most noise about freedom are the ones proposing to take it away from Canada’s companies and the people who work for them.

Telling big businesses to keep their mouths shut about climate change is just the latest example of this hypocrisy. As Witold Henisz, the vice-dean and faculty director of Wharton’s ESG Initiative, told E&E News, “It may create some self-censorship. It may create some sense that ‘Well, we don’t want to publicize what we’re doing, because now it’s political to do sophisticated financial analysis. It’s kind of frightening.”

The good news is that none of this silliness will stop global financial behemoths like BlackRock from continuing to identify and manage the risks posed by climate change to the companies they invest in, and it won’t meaningfully slow the energy transition that’s underway. But it could easily cost Alberta, and Canada, if our conservative politicians interfere with their ability to adapt to it. If nothing else, it will expose just how provisional their support for freedom really is.

Keep reading

Hard to believe that anti-ESG politicians are working without the active support and lobbying of industries and corporations with something to lose.
Who is pulling the anti-ESG politicians' strings if not companies with poor ESG records and their financial backers?
In Texas, West Virginia, and Oklahoma, the ESG pushback is coming from fossil fuel industries. What about in Canada?
It's obvious, isn't it?
Just because AB oilsands companies, governments, and the Big Banks pledge net-zero targets does not mean they have any intention of reaching them.

The duplicity of the fossil-fuel industry knows no end:
"Oil Executives Privately Contradicted Public Statements on Climate, Files Show", (NY Times, Sep 14, 2022)
"Documents obtained by Congressional investigators show that oil industry executives privately downplayed their companies’ own public messages about efforts to reduce GHG emissions and weakened industry-wide commitments to push for climate policies."

Does anybody really believe the oil industry operates differently on this side of the border?

"Some O&G executives in Houston this week said that while they acknowledge the need to tackle climate change, that effort should take a back seat to the more urgent need to increase fossil fuel production and avoid economic disruption.
"'Since the consequences of climate are going to be 30 or 40 years down the road, people are going to focus a lot more on what is happening now. As they should,' said Charif Souki, chairman of Tellurian Inc, a developer of liquefied natural gas projects. 'We can come back to climate.'"
"As War Rages, a Struggle to Balance Energy Crunch and Climate Crisis" (NY Times, March 10, 2022)

In the AB oilsands, Cenovus Energy CEO Alex Pourbaix has made no secret of his opposition to the energy shift:
"Cenovus CEO says future of energy is diversification, not transition" (Canadian Press, June 8, 2022)

Nobel-Prize winning economist Paul Krugman on the fossil fuel industry's "predatory delay":
"Earth, Wind and Liars"
"In the long run, these tactics probably won't stop the transition to renewable energy, and even the villains of this story probably realize that. Their goal is, instead, to slow things down, so they can extract as much profit as possible from their existing investments.
"… Every year that we delay the clean-energy transition will sicken or kill thousands while increasing the risk of climate catastrophe.
"The point is that Trump and company aren't just trying to move us backward on social issues; they're also trying to block technological progress. And the price of their obstructionism will be high."

Fawcett fails to connect the dots.

Fawcett: "The good news is that none of this silliness will stop global financial behemoths like BlackRock from continuing to identify and manage the risks posed by climate change to the companies they invest in, and it won’t meaningfully slow the energy transition that’s underway."

Fawcett may wish to update his analysis:

What’s Worse: Climate Denial or Climate Hypocrisy?
David Wallace-Wells, June 22, 2022
"In early 2020, Larry Fink — the chief executive of BlackRock — did his best to stake his claim as the face of an environmentally responsible business future. 'Climate change has become a defining factor in companies’ long-term prospects,' Fink wrote in his annual letter to C.E.O.s that year. He called global warming the most serious threat to the financial system in his 40 years of experience and promised a drastic response from his firm: making sustainability 'integral to portfolio construction and risk management'; ditching investments that contribute to the problem; and pursuing not just sustainability but transparency, too, so we all could see what impacts the company was having.
"… But in his annual letter this January, just two years later, Fink struck a radically different tone, rejecting 'woke' capitalism and elevating the principle that investors should center only on profits. In the spring, the firm announced it would support fewer shareholder resolutions on climate change, 'as we do not consider them to be consistent with our clients’ long-term financial interests.' Just months before, BlackRock closed a $15.5 billion investment in Saudi pipelines.
"What should we call an about-face like this? The word that comes most easily to mind is 'hypocrisy' — or perhaps 'greenwashing,' the insult that activists like to lob at companies that use eco-friendly rhetoric to launder their reputations. But this basic phenomenon, in which powerful people make climate pledges that turn out to wildly outrace their genuine commitments, has now become so pervasive that it begins to look less like venality by any one person or institution and more like a new political grammar. The era of climate denial has been replaced with one plagued by climate promises that no one seems prepared to keep."

It absolutely IS "venality."
Good to point out the fact that oil companies don't behave differently north of the border. (I DID read about one though here in the Nat. Observer, "DONG," Danish Oil and Natural Gas, that has actually pivoted to wind farms.)
And the whole "by 2050" target is a complete giveaway, we're obviously all screwed long before that unless we adopt that suggested "war footing" but Max's article is outlining the coming war among the moneyed "powers that be." Which also reminds me of the theory that an alarming proportion of CEO's are bona fide psychopaths.
Meanwhile, the phrase "climate catastrophe" is starting to become terrifyingly imaginable.

I loved the clip I saw on the news where, when Steven Guilbeault is asked about being "woke," he replied with obvious sincerity that he didn't even know what that was.

I loved the clip I saw on the news where, when Steven Guilbeault is asked about being "woke," he replied with obvious sincerity that he didn't even know what that was.

Of course, ESG isn't what most people think it is

There is this to be said in response to Little PP's urination on the "woke" "ESG community".

ESG is a barely conscious and thinly prepared response to what is a profoundly risky future. Infinitely preferable to the "Comatose Conservative Party" approach to risks where in we deny any thing that conflicts with quarterly profits as "Woke Nonsense"
We are approaching the critical deadline wherein the first world gets to capitalize the costs of transition to a zero carbon future to allow our world to simply have a future. ESG is nothing but a small item for the PR department to paper over the critical issues.

For those of us invested in capital markets, and our governments that in theory are the regulators of the economic sphere, we need "Full Consciousness" and preparation to liquidate all the capital investments in Fossil Fuels to be deployed across the board to eliminate ALL GHG from our economy and biosphere.