Activists Attack Energy Companies, State-owned Producers Benefit

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A previous post reprinted at the bottom warned that the ESG movement is a threat to the free world, as well as endangering supply of cost-effective energy.  Part of the issue is the way private sector energy companies are being undermined by regulations and ESG priorities, and shaming, which shifts market advantage to national producers like Russia and Saudi Arabia, among others.  Tyler Durden explains in his zerohedge article Fossil Fuels Aren’t Dying, They’re Shifting To National And State Backed Companies.  Excerpts in italics with my bolds.

Despite the activist shareholder battles, calls for ESG changes and just outright negative press about fossil fuels, it looks like rumors of oil’s death have been greatly exaggerated. Fossil fuels aren’t dying – rather, their output is just being shifted to national and state owned companies.

Even as the supermajor oil companies shrink in size and adhere to incessant criticism, fossil-fuel demand holds strong, according to Yahoo Finance. Activists have been the busiest they have been in years…

Recent weeks saw Exxon and Chevron rebuked by their own shareholders over climate concerns, while Shell lost a lawsuit in the Hague over the pace of its shift away from oil and gas. . . .and this has been a tailwind for national oil companies (NOCs) and state owned players who aren’t under the same pressure to play ball with activists. The report notes that “Saudi Aramco and Abu Dhabi National Oil Co. are spending billions to boost their respective output capacities”, as is Qatar Petroleum.

NOC’s share of global oil output is expected to rise to 65%, from about 50% today, by 2050. Companies like Exxon and Chevron are keeping output at lows and curtailing future investment in traditional oil and gas infrastructure.

Patrick Heller, an adviser at the Natural Resource Governance Institute, told Yahoo Finance: “We hear government officials and NOC officials say, ‘We look at the divestment of international oil companies from some projects as an opportunity for us to grow. And I do think that’s potentially really risky.”

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Jason Bordoff, director of the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs, thinks that the shift to government owners could wind up doing just the opposite of what activists are intending on doing.

“A shift in production to major nationally owned companies — such as in Latin America or the Gulf or Russia — carries geopolitical supply risks, while smaller independents have often demonstrated poorer safety and environmental practices,” he said.

Amrita Sen from consultancy Energy Aspects said: “Oil and gas demand is far from peaking and supplies will be needed, but international oil companies will not be allowed to invest in this environment, meaning national oil companies have to step in.”

The Saudis, meanwhile, don’t seem quite as alarmed by the issue of climate change. When The International Energy Agency issued guidance last month to scrap all new oil and gas developments, Saudi Energy Minister Prince Abdulaziz bin Salman responded by stating:

“It (the IEA report) is a sequel of the La La Land movie. Why should I take it seriously? We (Saudi Arabia) are … producing oil and gas at low cost and producing renewables. I urge the world to accept this as a reality: that we’re going to be winners of all of these activities.”

A spokesperson from Gazprom jabbed: “It looks like the West will have to rely more on what it calls ‘hostile regimes’ for its supply”.

“Western oil majors like Shell have dramatically expanded in the last 50 years” as a result of the West trying to cut reliance on Middle Eastern and Russian oil, Reuters notes. Now these producers must balance a growing chorus of criticisms about climate change with continued output.

Nick Stansbury at Legal & General, which manages $1.8 trillion, said: “It is vital that the global oil industry aligns its production to the Paris goals. But that must be done in step with policy, changes to the demand side, and the rebuilding of the world’s energy system. Forcing one company to do so in the courts may (if it is effective at all) only result in higher prices and foregone profits.”

While Saudi Arabia claims to have targets to cut carbon emissions, it isn’t beholden to U.N.-backed targets or activist investors like Western companies are. Gazprom has indicated a shift to natural gas to try and manage its carbon emissions.

Western names account for about 15% of all output globally, while Russia and OPEC make up about 40%. At the same time, global oil consumption has risen to 100 million barrels per day from 65 million barrels per day in 1990.

“The same oil and gas will still be produced. Just with lower ESG standards,” one Middle Eastern oil executive concluded.

Background from Previous Post ESG Movement Threatens Us All

ESG smoke and mirrors

Alex Epstein puts out a stern warning in a twitter thread reprinted below with my headers.

What ESG Really Means

Over the last 5-10 years, “ESG”–standing for Environmental Social Governance–has gone from an acronym that virtually no one knew or cared about, to a cultishly-embraced top priority of financial regulators, markets, and institutions around the world.

The preposterous financial pretense of “ESG investing” is that the promoters of it have so accurately identified universal norms of long-term value creation–Environmental norms, Social norms, and Governance norms–that imposing those norms on every company is justified.

In reality, ESG was a movement cooked up at the UN–not exactly a leading expert in profitable investment–to impose moral and political agendas, largely left-wing ones, on institutions that would not adopt them if left to their own devices.

The number one practical meaning of ESG today is: divest from fossil fuels in every way possible, and associate yourself with “renewable” solar and wind in every way possible. That’s why I call it the “ESG divestment movement.”

Modern ESG’s obsession with unreliable “renewable” solar and wind, reflects its political nature. Any serious concern about CO2 emissions means embracing the only proven, reliable, globally scalable source of non-carbon energy: nuclear. But most ESG does not embrace nuclear.

Divesting from Fossil Fuels is Immoral

Divesting from fossil fuels is immoral because:
1. The world needs much more energy.
2. Fossil fuels are the only way to provide most of that energy for the foreseeable future.
3. Any problems associated with CO2 pale in comparison to problems of energy deprivation.

The world needs much more energy

Low-cost, reliable energy enables billions of people to enjoy the miracle of modern machines that make us productive and prosperous. Yet 800M people have no electricity and 2.6B people are still using wood or dung for heating and cooking.

Fossil fuels are indispensable

Only fossil fuels provide low-cost, reliable, versatile, global-scale energy.
Unreliable solar and wind can’t come close. That’s why fossil fuels continue to grow in the developing world; China and India have 100s of coal plants in development.

CO2 levels matter much less than energy availability.

CO2 emissions have contributed to the warming of the last 170 years, but that warming has been minor and manageable—1 degree C, mostly in cold parts of the world. And life on Earth thrived when CO2 levels were >5X today’s.

Fossil fuels have made climate far safer by powering a highly resilient civilization. That’s why climate disaster deaths—from extreme temps, droughts, wildfires, storms, and floods—have decreased 98% over the last century.

ESG Perpetuates Poverty by Denying Capital for Cost-effective Energy Projects

A moral financial movement would do everything it could to increase capital for all cost-effective energy, including fossil fuels. And including nuclear, which is by far the most promising form of low-carbon energy. Instead, ESG is starving cost-effective energy of capital.

By starving cost-effective energy of capital, the ESG movement is engaging in a fundamental act of mass destruction. Energy is the industry that powers every other industry. By making energy more expensive, ESG makes everything more expensive–hurting the poorest people most.

The most egregious immorality of the ESG movement, led by Larry Fink’s Blackrock, is its effort to destroy vital fossil fuel projects in poor places that desperately need them. This effort is guaranteed to perpetuate poverty.

Example of ESG poverty perpetuation: South Korea canceled new coal plants in South Africa and the Philippines after “Global investors including Blackrock…warned the South Korean utility to drop coal power projects.”

Another example of ESG poverty perpetuation: “International investors are increasingly restricting support to companies involved in extracting or consuming coal, yet nearly 70% of India’s electricity comes from coal plants, and demand for power is set to rise…”

ESG poverty perpetuation is getting worse as activist “investors” with increasing influence on large financial institutions try to stop all fossil fuel projects in poor places.
E.g., HSBC was attacked when it decided to fund 6 new coal power plants in Indonesia and Vietnam.

ESG defunding fossil fuel projects in the poorest parts of the world will mean: more babies die for lack of incubators and other medical equipment, more deaths from lack of water treatment plants and modern sanitation, more deaths from lack of heating and air-conditioning.

Every leading ESG institution should be called out for their genocidal policies toward the poorest parts of the world. They should be shamed for placing their own virtue-signaling above billions of actual human lives. They should lose all moral authority in the realm of energy.

ESG Movement Threatens Free World Security

The ESG movement is also an enormous threat to the security of the free world, because by depriving free countries and poor countries of low-cost, reliable energy, it furthers Communist China’s ambitions to become the world’s superpower using low-cost, reliable fossil fuels.

China has a clear strategy of running its economy on fossil fuels, while encouraging others to run on inferior, unreliable solar and wind — that is made using Chinese fossil fuels, which produce 85% of Chinese energy. China has 247 GW of coal plants (3 TX’s worth) in development.

China dominates the mining and processing of “renewable” materials to a staggering degree. The US does little mining or processing of the needed materials, largely because of “green” regulations. Our dependence on China for “renewables” dwarfs past Mideast oil dependence.

Energy security is national security. When hostile foreign powers can meaningfully cut off our access to energy they can manipulate us politically. Examples: US appeasement of Saudi Arabia and European appeasement of Russia.

Energy security is national security, above all in wartime. War requires continuous high-energy manufacturing and continuous fueling of high-energy mobile machines such as planes and aircraft carriers. Both world wars were won by the side with the most oil, the fuel of mobility.

What does the modern ESG movement do about the danger of an energy-dominant China? Deny reality and serve as “useful idiots.”

Example: Larry Fink’s sole mention of China in his influential letter to CEOs was to praise China’s “historic commitments to achieve net zero emissions”!

Renounce ESG and Commit to Long Term Cost-effective Energy

The ESG divestment movement should be publicly shamed as a virtue-signaling, financially idiotic, and most importantly immoral movement that perpetuates poverty and threatens freedom. All legal pressures to adopt it should be eliminated. ESG should be boycotted wherever possible.

The anti-energy, anti-freedom ESG movement should be replaced with a voluntary *long-term value creation movement*. Creating sustained value for companies’ owners requires a long-term perspective. But a long-term perspective means valuing cost-effective energy, not destroying it

 

ESG Movement Threatens Us All

ESG smoke and mirrors

Alex Epstein puts out a stern warning in a twitter thread reprinted below with my headers.

What ESG Really Means

Over the last 5-10 years, “ESG”–standing for Environmental Social Governance–has gone from an acronym that virtually no one knew or cared about, to a cultishly-embraced top priority of financial regulators, markets, and institutions around the world.

The preposterous financial pretense of “ESG investing” is that the promoters of it have so accurately identified universal norms of long-term value creation–Environmental norms, Social norms, and Governance norms–that imposing those norms on every company is justified.

In reality, ESG was a movement cooked up at the UN–not exactly a leading expert in profitable investment–to impose moral and political agendas, largely left-wing ones, on institutions that would not adopt them if left to their own devices.

The number one practical meaning of ESG today is: divest from fossil fuels in every way possible, and associate yourself with “renewable” solar and wind in every way possible. That’s why I call it the “ESG divestment movement.”

Modern ESG’s obsession with unreliable “renewable” solar and wind, reflects its political nature. Any serious concern about CO2 emissions means embracing the only proven, reliable, globally scalable source of non-carbon energy: nuclear. But most ESG does not embrace nuclear.

Divesting from Fossil Fuels is Immoral

Divesting from fossil fuels is immoral because:
1. The world needs much more energy.
2. Fossil fuels are the only way to provide most of that energy for the foreseeable future.
3. Any problems associated with CO2 pale in comparison to problems of energy deprivation.

The world needs much more energy

Low-cost, reliable energy enables billions of people to enjoy the miracle of modern machines that make us productive and prosperous. Yet 800M people have no electricity and 2.6B people are still using wood or dung for heating and cooking.

Fossil fuels are indispensable

Only fossil fuels provide low-cost, reliable, versatile, global-scale energy.
Unreliable solar and wind can’t come close. That’s why fossil fuels continue to grow in the developing world; China and India have 100s of coal plants in development.

CO2 levels matter much less than energy availability.

CO2 emissions have contributed to the warming of the last 170 years, but that warming has been minor and manageable—1 degree C, mostly in cold parts of the world. And life on Earth thrived when CO2 levels were >5X today’s.

Fossil fuels have made climate far safer by powering a highly resilient civilization. That’s why climate disaster deaths—from extreme temps, droughts, wildfires, storms, and floods—have decreased 98% over the last century.

ESG Perpetuates Poverty by Denying Capital for Cost-effective Energy Projects

A moral financial movement would do everything it could to increase capital for all cost-effective energy, including fossil fuels. And including nuclear, which is by far the most promising form of low-carbon energy. Instead, ESG is starving cost-effective energy of capital.

By starving cost-effective energy of capital, the ESG movement is engaging in a fundamental act of mass destruction. Energy is the industry that powers every other industry. By making energy more expensive, ESG makes everything more expensive–hurting the poorest people most.

The most egregious immorality of the ESG movement, led by Larry Fink’s Blackrock, is its effort to destroy vital fossil fuel projects in poor places that desperately need them. This effort is guaranteed to perpetuate poverty.

Example of ESG poverty perpetuation: South Korea canceled new coal plants in South Africa and the Philippines after “Global investors including Blackrock…warned the South Korean utility to drop coal power projects.”

Another example of ESG poverty perpetuation: “International investors are increasingly restricting support to companies involved in extracting or consuming coal, yet nearly 70% of India’s electricity comes from coal plants, and demand for power is set to rise…”

ESG poverty perpetuation is getting worse as activist “investors” with increasing influence on large financial institutions try to stop all fossil fuel projects in poor places.
E.g., HSBC was attacked when it decided to fund 6 new coal power plants in Indonesia and Vietnam.

ESG defunding fossil fuel projects in the poorest parts of the world will mean: more babies die for lack of incubators and other medical equipment, more deaths from lack of water treatment plants and modern sanitation, more deaths from lack of heating and air-conditioning.

Every leading ESG institution should be called out for their genocidal policies toward the poorest parts of the world. They should be shamed for placing their own virtue-signaling above billions of actual human lives. They should lose all moral authority in the realm of energy.

ESG Movement Threatens Free World Security

The ESG movement is also an enormous threat to the security of the free world, because by depriving free countries and poor countries of low-cost, reliable energy, it furthers Communist China’s ambitions to become the world’s superpower using low-cost, reliable fossil fuels.

China has a clear strategy of running its economy on fossil fuels, while encouraging others to run on inferior, unreliable solar and wind — that is made using Chinese fossil fuels, which produce 85% of Chinese energy. China has 247 GW of coal plants (3 TX’s worth) in development.

China dominates the mining and processing of “renewable” materials to a staggering degree. The US does little mining or processing of the needed materials, largely because of “green” regulations. Our dependence on China for “renewables” dwarfs past Mideast oil dependence.

Energy security is national security. When hostile foreign powers can meaningfully cut off our access to energy they can manipulate us politically. Examples: US appeasement of Saudi Arabia and European appeasement of Russia.

Energy security is national security, above all in wartime. War requires continuous high-energy manufacturing and continuous fueling of high-energy mobile machines such as planes and aircraft carriers. Both world wars were won by the side with the most oil, the fuel of mobility.

What does the modern ESG movement do about the danger of an energy-dominant China? Deny reality and serve as “useful idiots.”

Example: Larry Fink’s sole mention of China in his influential letter to CEOs was to praise China’s “historic commitments to achieve net zero emissions”!

Renounce ESG and Commit to Long Term Cost-effective Energy

The ESG divestment movement should be publicly shamed as a virtue-signaling, financially idiotic, and most importantly immoral movement that perpetuates poverty and threatens freedom. All legal pressures to adopt it should be eliminated. ESG should be boycotted wherever possible.

The anti-energy, anti-freedom ESG movement should be replaced with a voluntary *long-term value creation movement*. Creating sustained value for companies’ owners requires a long-term perspective. But a long-term perspective means valuing cost-effective energy, not destroying it

 

The True Cost of Imaginary Money

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Lionel Shriver explains in his Spectator article The true cost of make-believe money

Biden commands trillions in the way previous presidents have commanded billions

I like Bill Maher. He’s a rare practicing left-wing comic who’s actually funny. But last week, his routine on cryptocurrency hit eerie harmonics.

That monologue was broadcast in the same week Joe Biden promoted the third of his gargantuan spending programs, bringing his first 100 days’ total discretionary spending proposals to $6 trillion. (Context: total US GDP is $21 trillion.) This lavish largesse would be slathered atop the annual (and growing) nondiscretionary budget of nearly $5 trillion, against $3.5 trillion in tax revenue.

Let’s tweak Maher’s routine, then:

‘I fully understand that our financial system isn’t perfect, but at least, or so I’ve imagined, it’s real. But the American dollar increasingly resembles Easter bunny cartoon cash. I’ve read articles about Modern Monetary Theory. I’ve had it explained to me. I still don’t get it, and neither do you.

‘Dollars are now made up out of thin air and comparable with Monopoly money. We thought we knew that money had to originate from and be generated by something real, somewhere. Modern Monetary Theory says, “No, it doesn’t”… Or as another analyst put it, “Quantitative easing is an open Ponzi scheme”. The Federal Reserve is like having an imaginary best friend who’s also a banker.

‘Our problem here is at root not economic but psychological. People who have been raised in a virtual world are starting to believe they can really live in it. Much of warfare is a video game now; why not base our economy the same way? The conjuring of “borrowed” money from ether, only to have that debt swallowed by a central bank and disappear, is literally a game.

‘Do I need to spell this out? There is something inherently not credible about the Fed creating not just hundreds of billions, but trillions in wealth, with nothing ever actually being accomplished, and no actual product made or service rendered. It’s like Tinkerbell’s light. Its power source is based solely on enough infantilized citizens believing in it.’

Somehow that monologue isn’t as funny in the second version.

While Maher decries the electricity squandered on crypto ‘mining’, at least the color of the Fed’s money is genuinely green. Tap a few keys, and voilà: trillions from pennies on the energy bill. So in the past year, the Fed effortlessly increased the world’s supply of dollars by 26 percent and is on track for a similar surge in 2021.

But is drastic monetary expansion truly without cost?

I’ve made Maher’s Tinkerbell analogy myself, but to explain how traditional currency functions. I noted in an essay accompanying my novel The Mandibles, about America’s 2029 economic apocalypse: ‘Currency is a belief system. It maintains its value the way Tinkerbell is kept aloft by children believing in fairies in Peter Pan.’

In the novel, a fictional economics professor pontificates: ‘Money is emotional. Because all value is subjective, money is worth what people feel it’s worth. They accept it in exchange for goods and services because they have faith in it. Economics is closer to religion than science. Without millions of individual citizens believing in a currency, money is colored paper. Likewise, creditors have to believe that if they extend a loan to the US government they’ll get their money back or they don’t make the loan in the first place.

So confidence isn’t a side issue. It’s the only issue.’

My confidence is going wobbly. Biden commands trillions the way previous presidents have commanded billions, while the public is so dazzled by zeros that they don’t know the difference.

I’ve my quibbles with the particulars. Spending in inconceivable quantity courts waste and fraud. Biden’s American Families Plan casts so many freebies upon the waters as to constitute a de facto universal basic income, and government dependency doesn’t seem characteristic of a good life. Pandemic-relief unemployment supplements (which many Democrats would make permanent) are so generous that small businesses can’t find employees willing to work even for two to three times the minimum wage. Biden is effectively reversing Clinton-era welfare reforms, which moved so many poor Americans from state benefits to self-respecting employment. Financing all these goodies by hiking corporate taxes is popular, but only because few people realize that every-one pays corporate taxes through lower pension-fund returns, job losses from corporate flight, lower wages and higher prices.

But it’s the bigger picture that unnerves me. Zero interest rates have installed an accelerating debt loop. Governments, companies and individuals borrow because money is free. Central banks won’t raise interest rates, lest the cost of servicing all this burgeoning debt bankrupt the debtors. Governments, companies and individuals borrow still more because money is free. The Federal Reserve has already announced it won’t raise interest rates even if inflation climbs, while refusing to cite what level inflation would have to hit before reconsidering. I’ve plotted this story before. It doesn’t end well.

Background on Modern (Magical) Money Theory see MMT: Magical Money Theory

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The National Climate Bank Con

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At a Hearing April 27, 2021: “Legislative Hearing on S.283, National Climate Bank Act”, Benjamin Zycher provided testimony Summarized at AEI: Statement submitted for the record: Subcommittee on Clean Air, Climate, and Nuclear Safety, Committee on Environment and Public Works.

Summary

This Statement Submitted for the Record offers a critical review of legislation proposed in the 117th Congress, 1st Session, as S. 283, The National Climate Bank Act (hereafter NCBA), the subject of a hearing scheduled for April 27, 2021 before the Subcommittee on Clean Air, Climate, and Nuclear Safety of the Committee on Environment and Public Works. A summary of the arguments presented below is as follows:

  • A National Climate Bank cannot increase the capital resources available to the U.S. economy or to the federal government, and the true economic cost of the outlays envisioned to be made by the National Climate Bank would be almost double the notional budget.
  • The “climate” projects envisioned for the National Climate Bank would be highly inefficient regardless of the assumptions made about climate phenomena and the current and prospective effects of greenhouse gas emissions. This is because the envisioned projects would yield future climate impacts either trivial or undetectable. This explains the failure of the proposed legislation to specify a requirement or to offer a projection of reductions in GHG emissions attendant upon the projects to be funded by the National Climate Bank.
  • The “Findings” in the proposed legislation on current climate phenomena are not supported by the evidence.
  • The “Findings” in the proposed legislation on future climate phenomena are based upon Representative Concentration Pathway 8.5, an extreme scenario of future atmospheric concentrations of greenhouse gases virtually impossible.
  • Because the proponents of the National Climate Bank have based their analytic arguments in substantial part upon the findings and policy proposals presented by the Intergovernmental Panel on Climate Change in its Special Report “Global Warming of 1.5°C,” they implicitly are endorsing a gasoline tax of $28 per gallon by 2030.
  • The obvious underlying purpose of the National Climate Bank is a shift of political responsibility for the inevitable financial losses to be incurred from the Congressional proponents of the legislation to the administrators of the National Climate Bank. Such a shift is inconsistent with the basic constitutional structure of American governance, and thus with essential accountability inherent in our political institutions.
  • The actual results of a National Climate Bank would be substantial resource waste, a less-productive capital stock, lower wages, and an increase in the politicization of economic activity.

Read  the full report  Zycher Statement Senate EPW climate bank

Climate Piggy Bank

Unmasking Biden’s Climate Shakedown

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At Spectator, Real Jean Isaac explains How to End Biden’s Fake Climate Apocalypse.  Excerpts in italics with my bolds and images.

If there’s no pushback against the Left, we’ll see a dramatic drop in our standard of living.

With the wave of executive orders and legislation coming from the Biden administration, and the cultural antics of his woke supporters, Biden’s war on fossil fuels has received insufficient attention. Yet energy is the lifeblood of our economy, and making traditional energy sources vastly more expensive is the single most destructive aspect of Biden’s policies. If this country does not successfully mobilize against these policies, the vast majority will experience a dramatic drop in their standard of living.

mrz012921dbp20210129124515Supposedly the assault on fossil fuels — via regulation; cancellation of pipelines; concocting a huge, wholly imaginary “social cost of carbon”; taxes; and solar and wind mandates — is necessary to save the planet from imminent catastrophe produced by man-made global warming.

But genuine climate scientists, as we know from those who dare to speak up, are amazed and horrified. Richard Lindzen, long at the top of the field as a former professor of atmospheric sciences at MIT, laments that the situation gets sillier and sillier. He told the recent CPAC conference (his message was read by the Heartland Institute’s James Taylor):

“One problem with conveying our message is the difficulty people have in recognizing the absurdity of the alarmist climate message. They can’t believe that something so absurd could gain such universal acceptance. Consider the following situation. Your physician declares that your complete physical will consist in simply taking your temperature. This would immediately suggest something wrong with your physician. He further claims that if your temperature is 98.7F rather than 98.6F you must be put on life support. Now you know he is certifiably insane. The same situation for climate is considered “settled science.”

So how did an absurd message gain such widespread acceptance? The answer is something people find it hard to wrap their heads around: we aren’t dealing with science at all. We confront an apocalyptic movement, the kind of movement, recurring across time and space, that Richard Landes describes in Heaven on Earth: Varieties of the Millennial Experience. Its scientific veneer makes it credible to a modern audience. If today a charismatic leader cried, “Repent. Sacrifice your goods. The end of the earth is nigh,” at best he might attract a few dozen oddball followers. But when essentially the same message is clothed in the language of science, it sweeps the world.

In Roosters of the Apocalypse I point out the uncomfortable similarities between the global warming apocalypse and the apocalypse that led the Xhosa tribe (in today’s South Africa) in 1856 to destroy their economy, which was based on cattle as ours is on energy. Relying on the vision of a 15-year-old orphan girl, the Xhosa killed an estimated half million of their cattle, ceased planting crops, and destroyed their grain stores. In return the girl promised the Xhosa’s ancestors would drive out the British and bring an even greater abundance of cattle and grain. By the end of 1857 a third to a half of the population — between 30,000 and 50,000 souls — had starved to death.

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Even the age of the “prophetic” girl suggests a modern parallel. Greta Thunberg didn’t start the global warming apocalypse, but she was 15 when she began spending her school days in front of the Swedish Parliament carrying a sign reading “School Strike for Climate,” heralding the international children’s crusade against global warming she would lead a year later.

In some ways the current apocalypse is surprising. Landes reports that to be successful, an apocalypse needs to bring elites on board, and elites tend to be a hard sell, especially when prophecies demand a society self-mutilate. But in this case not only have elites been won over with breathtaking ease, but they have proved more susceptible over time than the man in the street. A recent Gallup poll found only 3 percent of the public citing climate as a key concern.

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If people understand the menace that global warming policies pose to their way of life, there should be a huge pool of followers.

Dissent is drowned out as educational, political, media, cultural, and business elites speak with one voice. Even fossil fuel companies have thrown in the towel. The American Petroleum Institute, the oil industry’s top lobbying group, is set to propose setting a price on carbon emissions. Children are being indoctrinated in global warming doctrine from kindergarten on, in humanities as well as science classes. My granddaughter, in sixth grade in a Manhattan public school, has a class in “Clifi” (Climate Fiction), where the children read stories on the dreadful aftermath of a climate apocalypse. Politicians at the state and local level pass mandates for expensive (and unreliable) renewables to replace fossil fuels at ever earlier dates. Even conservatives are caught up in the fever. At the most recent CPAC a group urged Republicans to “get in front” on the issue and outflank the Democrats.

What can be done to prevent the global warming locomotive from steamrolling over our economy?

Thus far efforts have focused on countering global warming science with better science. The Chicago-based Heartland Institute has organized 13 international conferences since 2008. The media has all but blacked out coverage, so neither the conferences nor the steady stream of climate research the Institute publishes receive any notice. The CO2 Coalition, which emphasizes that CO2, far from being a pollutant, is a nutrient vital for life, is given similar short shrift. For example, although the coalition includes distinguished scientists, Wikipedia defines it as “a climate change alarmist denial advocacy organization,” whose claims “are disputed by the vast majority of climate scientists.”

There are also excellent websites, such as Climate Depot, offering space to scientific research casting doubt on apocalyptic claims. Marc Morano, who runs the site, had the distinction in 2009 of being chosen by news outlet Grist as one of only five “criminals against humanity, against planet Earth itself” and in 2012 of being named “Climate Change Misinformer” of the Year by Media Matters.

Pitting one scientific study against another hasn’t worked. That’s because most climate scientists are on the global warming grant gravy train, the public can’t follow the abstruse language of academic studies of climate, and the apocalypse is only superficially about climate anyway. Under the circumstances, a mass movement against this folly would seem to be the only way to get through to a larger public. If people understand the menace that global warming policies pose to their way of life, there should be a huge pool of followers. Texas might be a good place to start, given its recent unexpected stay in the freezing dark, and the stark failure of its wind turbines. One advantage of such a movement is that it would cross party lines. Democratic-voting union members stand to lose their well-paid jobs in fossil fuel industries, with workers in China cornering much lower-paid jobs in solar and wind (despite pie-in-the-sky promises by President Biden and newly appointed climateer-in-chief John Kerry).

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The new movement could be titled “Lights On.” Participants should have fun. There was never a claim of “settled science” more ripe for ridicule. How about contests for college students rewarding those who can document the largest number of disproven prophecies of global warming doom (for example, the end of snow, no more Arctic glaciers, U.S. coasts under water, all with specified dates now long past)? In Breitbart, John Nolte recently claimed to have found 44 of them. There can be no shortage of candidates for an award of “False Prophet of the Year.” Or “Global Warming Hypocrite of the Year,” for which John Kerry would be an outstanding candidate with his private jet, yachts, multiple mansions, and cars. And what about an award to a prominent media figure for the most absurd claim for global warming causation? One of Lindzen’s favorites is the Syrian civil war.

And how about reviving the chronicle of Climategate, which almost wiped out faith in the apocalypse before the media buried the scandal? In 2009, a hacker downloaded candid emails among top climate scientists in England and the United States that bemoaned recalcitrant data, described the “tricks” (their term) used to coax the data, reported efforts to keep the views of dissenters out of reputable journals and UN reports, and boasted of deletion of data to make it unavailable to other researchers. “If science is on your side, why do you need to make it up?” would make a good bumper sticker or t-shirt slogan.

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There could be a bumper sticker with comedian George Carlin’s line: “The Planet has been through a lot worse than us.” There could be t-shirts that proclaim, “Wind Is for Sailboats.” There should be songs and cartoons (many of these can already be found on the website WattsUpWithThat.com).

The movement can have fun, but it must also be serious: members will only back politicians prepared to fight to maintain our access to cheap, reliable energy. To the extent solar and wind can someday compete on an even playing field, without subsidies and mandates, they are welcome to the energy mix.

For the current apocalypse to come to an end, the notion that man-made global warming poses an existential threat must come to be seen as ridiculous. Otherwise the policies of shutting down our traditional energy supplies to stave off this absurd end of days will themselves become an existential threat.

Gang Green

Beware Woke Financiers Gambling with Your Money

atlantic-casino

Andrew Stuttaford explains how the Biden regime encourages capitalists to spend investors’ wealth on projects favored by progressives for virtue rather than profit. His National Review article is Rule by Regulation. Excerpts in italics with my bolds.

The fondness of the Biden administration for rule by regulation is hardly a secret by now, and, when it comes to telling corporations that they should run themselves according to the precepts of stakeholder capitalism, the regulatory route comes with an added advantage.

To be sure, many companies, particularly larger ones, are already falling into line without any pressure from the state, because it suits the interests of managers (shareholders can be such a demanding bunch) and/or because they have been pushed to do so by a handful of large investment managers who can see the opportunity that “socially responsible” investing (SRI), an investment philosophy intertwined with stakeholder capitalism, represents for them, if not for their clients.

Other managements, however, would prefer to continue to run their businesses for the benefit of the shareholders (a stance, incidentally, that is rather more sophisticated than the usual Gekko caricature). Forcing such businesspeople to change their ways through legislation might be tricky, even in the current political environment. While SRI will continue to spread through the private sector, many in Washington, D.C., would like this “progress” to move forward at a faster clip. If that is to happen, regulation will have to play a central role. Key regulators seem only too happy to oblige. The last few months have seen a “greening” of the Fed that shows little sign of slowing down.

From the Financial Times last month:

After years of silence on the topic, the Fed has started to put climate issues centre stage. Shortly after Biden won the election, the central bank highlighted climate change as a threat to financial stability and moved to join the Network for Greening the Financial System, a consortium of central banks dedicated to supporting the goals of the Paris climate accord.

Now with Trump out of office and the Biden administration pushing hard to make up lost ground in the climate fight, Fed officials are speaking out more explicitly about climate risk and how they intend to take action.

“Financial institutions that do not put in place frameworks to measure, monitor, and manage climate-related risks could face outsized losses on climate-sensitive assets caused by environmental shifts, by a disorderly transition to a low-carbon economy, or by a combination of both,” said Federal Reserve governor Lael Brainard, at the Institute of International Finance’s inaugural climate finance summit yesterday.

Brainard is wrong, but in two different ways. The idea that climate change represents a material risk to the financial system at any time in the reasonably near future is laughable. I will turn, as I so often do, to the talk given by economist John Cochrane to a conference organized by the European Central Bank (ECB) last fall:

Let me point out the unclothed emperor: climate change does not pose any financial risk at the one-, five-, or even ten-year horizon at which one can conceivably assess the risk to bank assets. Repeating the contrary in speeches does not make it so.

Risk means variance, unforeseen events. We know exactly where the climate is going in the next five to ten years. Hurricanes and floods, though influenced by climate change, are well modeled for the next five to ten years. Advanced economies and financial systems are remarkably impervious to weather. Relative market demand for fossil vs. alternative energy is as easy or hard to forecast as anything else in the economy. Exxon bonds are factually safer, financially, than Tesla bonds, and easier to value. The main risk to fossil fuel companies is that regulators will destroy them, as the ECB proposes to do, a risk regulators themselves control. And political risk is a standard part of bond valuation.

That banks are risky because of exposure to carbon-emitting companies; that carbon-emitting company debt is financially risky because of unexpected changes in climate, in ways that conventional risk measures do not capture; that banks need to be regulated away from that exposure because of risk to the financial system—all this is nonsense. (And even if it were not nonsense, regulating bank liabilities away from short term debt and towards more equity would be a more effective solution to the financial problem.) [More on Cochrane’s thinking in linked post at end.]

The real aim of the emerging central-bank game is two-fold. Firstly, to increase the cost of capital for climate sinners by “discouraging” banks from lending to them and secondly, by mandating disclosure of such risks (and you can be sure that claims that they are minimal will not be acceptable) as a means to give climate warriors information that they can then use as a cudgel against financial institutions lending to the wrong sort of clients.

Such a disclosure regime would be designed to help activists, not shareholders. It would have nothing to do with “risk.”

The biggest risk to those climate sinners (specifically the fossil-fuel companies) may well come from the steps that regulators may take against them, a fact with more than a hint of a circular argument about it.

To the extent that they apply to all companies, the underlying aim will be to use disclosure not for the purposes of investor protection, but, one way or another, to ensure that every public company is browbeaten into ideological conformity.

Beyond that, it is easy to see that mandated disclosure of what companies are doing might well become, in time, the basis for setting standards for what they should be doing. And the more that the ability to impose that requirement is within the power of regulators alone (as opposed to having to involve legislators), the greater the likelihood that this will take place.

Then there’s Brainard’s reference to the risk posed by a “disorderly” transition to a low-carbon economy, whatever she means by that. If there is to be a transition to a low-carbon economy it would best be achieved in (so to speak) a “disorderly” fashion, without the command-and-control measures that much of the establishment now appear to favor, measures that are almost guaranteed to prove immensely destructive. Those who think otherwise should take a look at California or Germany’s disastrous Energiewende. The contribution of government should consist of some support for basic research, the odd legislative nudge, and the big bucks should go toward infrastructure programs to toughen our resilience to “weather,” whatever the climate may do: sea defenses for low-lying cities, winterizing the Texas grid, and so on. Much of the spending in that last category would likely pay for itself within a relatively short time.

All in all, this does not look like good news for those shareholders who prefer to focus on profitability, return on capital and other such ancient metrics.

And it won’t be too great for the economy either.

Resources:  John Cochrane’s Central Banking Presentation at post Bankers Should Mind Their Own Business, not the Climate

esg-smoke-and-mirrors

See also:  Financiers Failed Us: Focused on Fake Crisis


Bankers Should Mind Their Own Business, not the Climate

John H. Cochrane writes at the Hoover Institution Central Banks and Climate: A Case of Mission Creep.  Excerpts in italics with my bolds.

The following is adapted from John H. Cochrane’s remarks at the European Central Bank’s Conference on Monetary Policy: Bridging Science and Practice. His full presentation about the challenges facing central banks is here.

Central banks are rushing headlong into climate policy. This is a mistake. It will destroy central banks’ independence, their ability to fulfill their main missions to control inflation and stem financial crises, and people’s faith in their impartiality and technical competence. And it won’t help the climate.

In making this argument, I do not claim that climate change is fake or unimportant. None of the following comments reflect any argument with scientific fact. (I favor a uniform carbon tax in return for essentially no regulation, but this essay is not about carbon policy.)

The question is whether the European Central Bank (ECB), other central banks, or international institutions such as the International Monetary Fund, the Bank for International Settlements, and the Organization for Economic Co-operation and Development should appoint themselves to take on climate policy—or other important social, environmental, or political causes—without a clear mandate to do so from politically accountable leaders.

The Western world faces a crisis of trust in our institutions, a crisis fed by a not-inaccurate perception that the elites who run such institutions don’t know what they are doing, are politicized, and are going beyond the authority granted by accountable representatives.

Trust and independence must be earned by evident competence and institutional restraint. Yet central banks, not obviously competent to target inflation with interest rates; floundering to stop financial crisis by means other than wanton bailouts; and still not addressing obvious risks lying ahead; now want to be trusted to determine and implement their own climate change policy? (And next, likely, taking on inequality and social justice?)

We don’t want the agency that delivers drinking water to make a list of socially and environmentally favored businesses and start turning off the water to disfavored companies. Nor should central banks. They should provide liquidity, period.

But a popular movement wants all institutions of society to jump into the social and political goals of the moment, regardless of boring legalities. Those constraints, of course, are essential for a functioning democratic society, for functioning independent technocratic institutions, and incidentally for making durable progress on those same important social and political goals.

It’s Not About Risk

The European Central Bank and other institutions are not just embarking on climate policy in general. They are embarking on the enforcement of one particular set of climate policies—policies to force banks and private companies to defund fossil fuel industries, even while alternatives are not available at scale, and to provide subsidized funding to an ill-defined set of “green” projects.

Let me quote from ECB executive board member Isabel Schnabel’s recent speech. I don’t mean to pick on her, but she expresses the climate agenda very well, and her speech bears the ECB imprimatur. She recommends that

“[f]irst, as prudential supervisor, we have an obligation to protect the safety and soundness of the banking sector. This includes making sure that banks properly assess the risks from carbon-intensive exposures. . .”

Let me point out the unclothed emperor: climate change does not pose any financial risk at the one-, five-, or even ten-year horizon at which one can conceivably assess the risk to bank assets. Repeating the contrary in speeches does not make it so.

Risk means variance, unforeseen events. We know exactly where the climate is going in the next five to ten years. Hurricanes and floods, though influenced by climate change, are well modeled for the next five to ten years. Advanced economies and financial systems are remarkably impervious to weather. Relative market demand for fossil vs. alternative energy is as easy or hard to forecast as anything else in the economy. Exxon bonds are factually safer, financially, than Tesla bonds, and easier to value.

The main risk to fossil fuel companies is that regulators will destroy them, as the ECB proposes to do, a risk regulators themselves control. And political risk is a standard part of bond valuation.

That banks are risky because of exposure to carbon-emitting companies; that carbon-emitting company debt is financially risky because of unexpected changes in climate, in ways that conventional risk measures do not capture; that banks need to be regulated away from that exposure because of risk to the financial system—all this is nonsense. (And even if it were not nonsense, regulating bank liabilities away from short term debt and towards more equity would be a more effective solution to the financial problem.)

Next, we contemplate a pervasive regime essentially of shame, boycott, divest, and sanction

“[to] link the eligibility of securities . . . as collateral in our refinancing operations to the disclosure regime of the issuing firms.”

We know where “disclosure” leads. Now all companies that issue debt will be pressured to cut off disparaged investments and make whatever “green” investments the ECB is blessing.

Last, the ECB is urged to print money directly to fund green projects:

“We should also consider reassessing the benchmark allocation of our private asset purchase programs. In the presence of market failures . . . the market by itself is not achieving efficient outcomes.”

Now you may say, “Climate is a crisis. Central banks must pitch in and help the cause. They should just tell banks to stop lending to the evil fossil fuel companies, and print money and hand it out to worthy green projects.”

But central banks are not allowed to do this, and for very good reasons.

A central bank in a democracy is not an all-purpose do-good agency, with authority to subsidize what it decides to be worthy, defund what it dislikes, and force banks and companies to do the same. A central bank, whose leaders do not regularly face voters, lives by an iron contract: freedom and independence so long as it stays within its limited and mandated powers.

The ECB in particular lives by a particularly delineated and limited mandate. For very good reasons, the ECB was not set up to decide which industries or regions need subsidizing and which should be scaled back, to direct bank investment across Europe, to set the price of bonds, or to print money to subsidize direct lending. These are intensely political acts. In a democracy, only elected representatives can take or commission such intensely political activities. If I take out the words “green,” the EU member states, and EU voters, would properly react with shock and outrage at this proposal. If the ECB bought different countries’ bonds at different prices and in different quantities to reward those making greater progress on “green” policy implementation, there would likely be an outcry.

That’s why this movement goes through the convolutions of pretending that defunding fossil fuels and subsidizing green projects—however desirable—has something to do with systemic risk, which it patently does not.

That’s why one must pretend to diagnose “market failures” to justify buying bonds at too high prices. By what objective measure are green bonds “mispriced” and markets “failing”? Why only green bonds? The ECB does not scan all asset markets for “mispriced” securities to buy and sell after determining the “right” prices.

Who Gets the Green Light?

At face value, “carbon emitting” does not mean just fossil fuel companies but cement manufacturers, aluminum producers, construction, agriculture, transport, and everything else. Will the carbon risk and defunding project really extend that far, in any sort of honest quantitative way? Or is “carbon emitting” just code for hounding the politically unpopular fossil fuel companies?

In the disclosure and bond buying project, who will decide what is a green project? Already, cost-benefit analysis—euros spent per ton of carbon, per degrees of temperature reduced, per euros of GDP increased—is lacking. By what process will the ECB avoid past follies such as switchgrass biofuel, corn ethanol, and high-speed trains to nowhere? How will it allow politically unpopular projects such as nuclear power, carbon capture, natural gas via fracking, residential zoning reform, and geoengineering ventures—which all, undeniably, scientifically, lower carbon and global temperatures—as well as adaptation projects that undeniably, scientifically, lower the impact on GDP? Well, clearly it won’t.

The ECB is embarking on one specific kind of green policy, popular at the cocktail parties at Davos, but having little to do with cost-benefit analysis or science of climate policy.

In sum, where is the analysis for this program? I challenge the ECB to calculate how many degrees this bond buying plan would lower global temperatures, and how much it would raise GDP by the year 2100, in any transparent, verifiable, and credible way. Never mind the costs for now: where are the benefits?

And how would the ECB resist political pressure to subsidize all sorts of boondoggles? If the central bank does not have and disclose neutral technical competence at making this sort of calculation, the project will be perceived as simply made-up numbers to advance a political cause. All of the central bank’s activities will then be tainted by association.

This will end badly. Not because these policies are wrong, but because they are intensely political, and they make a mockery of the central bank’s limited mandates.

If this continues, the next ECB presidential appointment will be all about climate policy: who gets the subsidized green lending, who is defunded, what the next set of causes is to be, and not interest rates and financial stability. Board appointments will become champions for each country’s desired subsidies. Countries and industries that lose out will object. This is exactly the sort of institutional aggrandizement that prompted Brexit.

If the ECB crosses this second Rubicon—buying sovereign and corporate debt was the first—be ready for more. The IMF is already pushing redistribution. The US Federal Reserve, though it has so far stayed away from climate policy, is rushing into “inclusive” employment and racial justice. There are many problems in the world. Once you start trying to shape climate policy, and so obviously break all the rules to do it, how can you resist the clamor to defund, disclose, and subsidize the rest? How will you resist demands to take up regional development, prop up dying industries, subsidize politicians’ pet projects, and all the other sins that the ECB is explicitly enjoined from committing?

A central bank that so blatantly breaks its mandates must lose its independence, its authority, and people’s trust in its objectivity and technical competence to fight inflation and deflation, regulate banks, and stop financial crises.

A Narrow Role, and Essential

Working for a central bank is a bit boring. One may feel a longing to do something that feels more important, that helps the world in its big causes. One may feel longing for the approval of the Davos smart set. Why does Greta Thunberg get all the attention? But a central bank is not the Gates Foundation, which can spend its money any way it likes. This is taxpayers’ money, and regulations use force to transfer wealth between very unwilling people. A central bank is a government agency, and central bankers are public servants, just like the people who run the DMV.

Central banks must be competent, trusted, narrow, independent, and boring. A good strategy review will refocus central banks on their core narrow mission and let the other institutions of society address big political causes. Boring as that may be.

See also:  Financiers Failed Us: Focused on Fake Crisis

 

 

Oil Demand No End in Sight

Your next car? NURPHOTO VIA GETTY IMAGES

Michael Lynch writes at Forbes  Peak Oil Demand! Again?  Excerpts in italics with my bolds.

Amid stubbornly low prices and lackluster demand we’re now seeing, on cue, a new round of predictions that oil demand has already or is about to peak (including even scenarios published by BP). These cannot be dismissed out of hand — as the peak oil supply arguments could, inasmuch as they were either based on bad math or represented assumptions that the industry couldn’t continue overcoming its age-old problems like depletion. (See my book The Peak Oil Scare if you want the full treatment.)

Now, the news is highlighting various predictions that the pandemic will accelerate the point at which global oil demand peaks, which is certainly much more sexy than business as usual. When groups like Greenpeace or the Sierra Club predict or advocate for peak oil demand, it doesn’t make much news: dog bites man. But, as the newspeople say, when man bites dog it is news. Thus, when oil company execs seem to believe peak oil demand is near, you get headlines like, “BP Says the Era of Oil Demand-Growth is Over,” The Guardian newspaper proclaiming that “Even the Oil Giants Can Now Foresee the End of the Oil Age,” and Reuters in July: “End game for oil? OPEC prepares for an age of dwindling demand.”

Anyone who is familiar with the oil industry knows that a peak in oil production has been predicted many times throughout the decades, never to come true (or deter future predictions of same). But few realize that the end of the industry has been repeatedly predicted as well, including both the demise of an old-fashioned business model, but also replacement of petroleum by newer, better technologies or fuels.

Until the 1970s, few saw an end to the oil business. The automobile boom created a seemingly insatiable demand for oil, one which has only slowed when prices rose and/or economic growth stalled, neither of which has ever proved permanent.

Yet there have been three particular apocalyptic threads put forward for the oil industry: the industry would spiral into decline, demand would peak, and/or a new fuel or technology would displace petroleum.

The oil industry’s business model was challenged as far back as 1977, when Mobil XOM +1.3% CEO Rawleigh Warner tried to diversify out of the oil business for fear that those who didn’t would “go the way of the buggy-whip makers.” Similarly, Mike Bowlin, ARCO’s CEO, declared in 1999 “We’ve embarked on the beginning of the last days of oil.” Enron’s Jeff Skilling (whatever happened to him?) said he “had little use for anything that smacked of a traditional energy company — calling companies like Exxon Mobil ‘dinosaurs’”

Vanishing demand has been another common motif for prognosticators, especially when high prices caused demand to slump. Exxon CEO Rex Tillerson (whatever happened to him?) thought in 2009, when gasoline prices were $4/gallon, that gasoline demand had peaked in 2007. (The figure below shows how that worked out.)

Gasoline demand peaks then recovers U.S. Gasoline Demand (tb/d) THE AUTHOR FROM EIA DATA.

Sheikh Yamani, the former Saudi Oil Minister, warned in 2000 that in thirty years there would be “no buyers” for oil, because fuel cell technology would be commercial by the end of that decade. (From 2000, oil demand increased by 20 mb/d before the pandemic.) The fabled Economist magazine agreed with Yamani in 2003, “Finally, advances in technology are beginning to offer a way for economies, especially those of the developed world, to diversify their supplies of energy and reduce their demand for petroleum…Hydrogen fuel cells and other ways of storing and distributing energy are no longer a distant dream but a foreseeable reality.”

They might have been echoing William Ford, CEO of Ford Motor Company F +0.6%, who said in 2000, “Fuel cells could be the predominant automotive power source in 25 years.” Twenty years later, they are insignificant.

Amory Lovins, whose has probably received more awards than Tom Hanks, has long argued that extremely efficient (and expensive) cars would reduce gasoline demand substantially, including in his (and co-authors) Winning the Oil Endgame, which argued that a combination of efficiency and celluslosic ethanol could replace our imports from the Persian Gulf (then about 2.5 mb/d). (They’ve been replaced, but by shale oil, and demand was unchanged since their prediction.)

He was hardly alone, with Richard Lugar and James Woolsey in a 1999 Foreign Affairs article calling cellulosic ethanol “The New Petroleum.” Perhaps they relied on a 1996 Atlantic article by Charles Curtis and Joseph Room (“Mideast Oil Forever”) which argued that cellulosic ethanol should see its cost fall to about $1/gallon (adjusted for inflation). (In 2017, the National Renewable Energy Laboratory put the cost at $5/gallon.)

One of my persistent themes has been that too much writing is not based on rigorous analysis but superficial ideas, a few anecdotes and footnotes, supposedly supporting Herculean changes.

(See Tom Nichols The Death of Expertise.) Peak oil demand is the flavor of the month and people are rushing to publish predictions, prescriptions, guidelines, and fantastical views of a fantastical future. But petroleum remains by far the fuel of choice in transportation and the pandemic seems unlikely to change that. Sexy should be left for HBO and not energy analysis.

There are many reasons the demand for fossil fuels is strong and growing.  

Footnote:  Shareholder activism against Big Oil is based on a cascade of unlikely suppositions including declining demand and stranded assets.  See: Behind the Alarmist Scene

 

 

ESG Investing Fails Both Activists and Pensioners

Robert Armstrong wrote at the Financial Times The Dubious Appeal Of ESG Investing Is For Dupes Only.  Excerpts in italics with my bolds.

Environmental, social and governance investing is ascendant. Its mirror image, stakeholder capitalism, is now the standard mantra on boards and in executive suites. This is not cause for celebration.

Both rest on weak conceptual foundations and should be viewed suspiciously by investors who seek adequate returns, and by citizens who want real rather than cosmetic change.

The business and financial establishments endorse the new consensus. BlackRock, the world’s largest asset manager, released an open letter warning companies that it would “be increasingly disposed” to vote against boards moving too slowly on sustainability. The World Economic Forum in Davos says that companies exist to create value not just for shareholders but “employees, customers, suppliers, local communities and society”. A letter from the Business Roundtable, signed by prominent chief executives, promised to “commit to deliver value to all” stakeholders.

Investors have responded. In the first half of 2020, net inflows into ESG funds hit $21bn, according to Morningstar, almost matching last year’s record total.

But behind ESG and stakeholderism lies a dangerous idea: that shareholders’ economic interests and the social good always harmonise over the long run.

It is true that when companies subordinate everything to maximisation of shareholder value, it backfires. When IBM, a company that long prioritised technological excellence, shifted its focus in 2012 to a target of hitting $20 in earnings per share a few years later, it was the beginning of the end for both IBM’s industry leadership and its rising share price. General Electric has never recovered from its decision to chase “easy” profits by turning into a finance company in the 1990s. The list goes on.  So ESG supporters are right that companies cannot always maximise long-term profit by aiming to do so.

They have to shoot instead to deliver excellent products, which creates profit as a side effect.

In many cases, excellence creates good stakeholder outcomes too, from investment in employees to lower carbon emissions. But this does not mean shareholder returns and the social good can always align. And there is one important way in which the two must come apart.

Part of the justification for ESG investing is that divesting from certain industries (fossil fuels or tobacco, say) creates economic pressure for change, in the way that boycotting a company’s products might. Divestment increases a company’s cost of capital: when fewer investors line up to buy its shares or bonds, it must sell them for less. This makes it more expensive for it to invest in socially destructive projects.

The necessary corollary? ESG-friendly companies’ cost of capital goes down, as dollars are channelled their way instead. Their shares and bonds become more expensive, meaning lower returns. If ESG investors’ returns are not lower, their choices have not affected corporate incentives.

Given that this is so, many ESG advocates take a different tack. They argue that the point is not to change corporate incentives but to invest in companies that will thrive financially precisely because they take ESG seriously.

There may be a distant and ideal future when this will be achieved. But even the best corporate leaders cannot look out to the end of days. They make choices about what they can foresee with a degree of confidence. At that range, it is obvious that shareholders’ and stakeholders’ interests can conflict. If they did not, there would be far fewer lay-offs announced and far fewer oil wells drilled. If stakeholder capitalism means anything, it is that corporate leaders must sometimes make choices that benefit stakeholders at the cost of shareholders.

The financial mandarins’ manifestos ignore such trade-offs, and say nothing about how they might be managed. They merely repeat that, in BlackRock’s phrase, social purpose “is the engine of long-term profitability”.

If corporate leaders are silent it is because they know how they will choose when such conflicts arise. They are paid in stock, and if monetary incentives are not enough, there are legal ones. Most US companies are incorporated in states where the law requires them to put shareholders first. Promises of virtue do not change this. As Aneesh Raghunandan and Shivaram Rajgopal of Columbia Business School point out, corporate signatories to the Business Roundtable letter have worse ESG records than industry peers.

Is the answer, then, a top-to-bottom change in executive pay packages, and indeed corporate law? No. Rewriting the internal rules of corporate capitalism would put at risk a system that has served us well in its remit: to create wealth. At the same time, do we want more of the power and responsibility for solving our most pressing problems, from inequality to climate change, to be pressed into the hands of corporations, which will still be run and owned by the richest among us? No again.

Shareholder capitalism is an excellent way to manage our corporate economy and we should stick with it.

We also have a very good, if presently neglected, set of tools to ensure that everyone shares in the fruits of economic progress. They are democratic action and the rule of law, which allow us to, for example, set minimum wages, tax carbon emissions and change campaign finance laws. Let’s use the right tools for the right purposes.

Anti-fossil fuel activists storm the bastion of Exxon Mobil, here seen without their shareholder disguises.

Stop Pension Funds Gambling on Energy Fads

Haley Zaremba writes at oilprice Will Trump’s Proposed ESG Regulation Help Big Oil? Excerpts in italics with my bolds.

The ESG Push to Gamble Pension Funds on Climate Concerns

Instead of joining the financial revolution geared toward environmental, social, and governance (ESG) that many experts believe is coming down the pike (with or without the cooperation of the United States) the Trump administration has actively fought against this likely inevitability. A new proposed regulation from the United States Department of Labor would explicitly bar the department from taking ESG into consideration in decision making concerning U.S. employer-provided pension funds. Ostensibly, this move is because the government doesn’t believe that the nation’s pension fund managers are doing a good job, but many critics see this as a blatant attempt to redirect investment dollars towards fossil fuels, which are increasingly falling out of favor with investors.

[Note: The author’s bias shows, favoring subsidized wind and solar enterprises over oil and gas companies that provide reliable energy powering modern civilization, reliable returns and tax revenues.]

This week Bloomberg Green reported that in this new proposed ruling, “the language reaffirms the standard interpretation of fiduciary guidelines that only financial risks and returns can be considered in the management of U.S. employer-provided pension funds; ‘non-pecuniary goals,’ for example relating to political or public policy, should not guide pension investments.” As Bloomberg Green points out in the report, “The timing is ironic, coming as the fossil fuel industry begins to confront existential questions about its near-term future. It would almost be amusing if it wasn’t for the fear, uncertainty, and doubt the proposal leaves in its wake.”

For Balance, Consider How Risky are Wind and Solar Investments

Paul Driessen writes at CFACT Reporting renewable energy risks.  Excerpts in italics with my bolds.

The whole thrust of the ESG campaign is to burden oil, gas and coal companies with additional reporting and scrutiny regarding hypothetical global warming impacts and to downgrade their worth in investors’ eyes.  Driessen correctly points to the risk of renewable energy projects collapsing when public support and tax dollars are withdrawn, as is already happening in some European countries.

If efficient energy companies must disclose climate-related financial risks, so should renewables.

Replacing coal, gas and nuclear electricity, internal combustion vehicles, gas for home heating, and coal and gas for factories – and using batteries as backup power for seven windless, sunless days – would require some 8.5 billion megawatts. Generating that much electricity would require some 75 billion solar panels … or 4.2 million 1.8-MW onshore wind turbines … or 320,000 10-MW offshore wind turbines … or a combination of those technologies … some 3.5 billion 100-kWh batteries … hundreds of new transmission lines – and mining and manufacturing on scales far beyond anything the world has ever seen.

That is not clean, green, renewable energy. It is ecologically destructive and completely unsustainable – financially, ecologically and politically. That means any company, community, bank, investor or pension fund venturing into “renewable energy” technologies would be taking enormous risks.

Once citizens, voters and investors begin to grasp:

  • (a) the quicksand foundations under alarmist climate models and forecasts;
  • (b) the fact that African, Asian and even some European countries will only increase their fossil fuel use for decades to come;
  • (c) the hundreds of millions of acres of US scenic and wildlife habitat lands that would be covered by turbines, panels, batteries, biofuel crops and forests clear cut to fuel “climate-friendly” biofuel power plants; and
  • (d) the bird, bat and other animal species that would disappear under this onslaught – they will rebel. Renewable energy markets will implode.

Growing outrage over child labor, near-slave labor, and minimal to nonexistent worker health and safety, pollution control and environmental reclamation regulations in foreign countries where materials are mined and “renewable” energy technologies manufactured will intensify the backlash and collapse. As the shift to GND energy systems brings increasing reliance on Chinese mining and manufacturing, sends electricity rates skyrocketing, kills millions of American jobs and causes US living standards to plummet, any remaining support for wind, solar and other “renewable” technologies will evaporate.

Pension funds and publicly owned companies should therefore be compelled to disclose the risks to their operations, supply chains, “renewable energy portfolio” mandates, subsidies, feed-in tariffs, profits, employees, valuation and very existence from embarking on or investing in renewable energy technologies or facilities. They should be compelled to fully analyze and report on every aspect of these risks.

The White House, Treasury Department, Securities and Exchange Commission, Federal Reserve, Committee on Financial Stability, Pension Benefit Guaranty Corporation and other relevant agencies should immediately require that publicly owned companies, corporate retirement plans and public pension funds evaluate and disclose at least the following fundamental aspects of “renewable” operations:

* How many wind turbines, solar panels, batteries, biofuel plants and miles of transmission lines will be required under various GND plans? Where? Whose scenic and wildlife areas will be impacted?

* How will rural and coastal communities react to being made energy colonies for major cities?

* How much concrete, steel, aluminum, copper, cobalt, lithium, rare earth elements and other material will be needed for every project and cumulatively – and where exactly will they come from?

* How many tons of overburden and ore will be removed and processed for every ton of metals and minerals required? How many injuries and deaths will occur in the mines, processing plants and factories?

* What per-project and cumulative fossil fuel use, CO2 and pollution emissions, land use impacts, water demands, family and community dislocations, and other impacts will result?

* What wages will be paid? How much child labor will be involved? What labor, workplace safety, pollution control and other laws, regulations, standards and practices will apply in each country?

* What human cancer and other disease incidents and deaths are likely? How many wildlife habitats will be destroyed? How many birds, bats and other wildlife displaced, killed or driven to extinction?

* For ethanol and biodiesel, how much acreage, water, fertilizer, pesticide and fossil fuel will be required? For power plant biofuel, how many acres of forest will be cut, and how long they will take to regrow?

* What “responsible sourcing” laws apply for all these materials, and how much will they raise costs?

* How will home, business, hospital, defense, factory, grid and other systems be protected against hacking and power disruptions caused by agents of overseas wind, solar and other manufacturers?

* What costs and materials are required to convert existing home and commercial heating systems to all-electricity, upgrade electrical grids and systems for rapid electric vehicle charging, and address the intermittent, unpredictable, weather-dependent realities of Green New Deal energy sources?

* What price increases per kWh per annum will families, businesses, offices, farms, factories, hospitals, schools and other consumers face, as state and national electrical systems are converted to GND sources?

* How many power interruptions will occur every year, how will they hurt families, factories and other users – and what will be the cumulative economic and productivity damage from those power outages?

* To what extent will policies, laws, regulations, court decisions, and citizen opposition, protests, legal actions and sabotage delay or block wind, solar, biofuel, battery, mining and transmission projects?

* How many solar panels, wind turbine blades, batteries and other components (numbers, tons and cubic feet) will have to be disposed of every year? How much landfill space and incineration will be required?

* How accurately are climate model predictions of temperatures, sea levels, tornadoes, hurricanes, floods, droughts and extreme weather events that are being used to justify renewable energy programs?

These issues (and many others) underscore the extremely high risks associated with Green New Deal energy programs – and why it is essential for lenders, investment companies, pension funds, manufacturers, utility companies and other industries to analyze, disclose and report renewable energy risks, with significant penalties for failing to do so or falsifying any pertinent information.

See Also Cutting Through the Fog of Renewable Power Costs