"Sustainable" Finance vs. Your Prosperity

Wednesday, January 22, 2020

Some time this summer, I recall hearing a discussion about anti-fossil fuel activist investors on a Power Hour episode. A recent post at How to Be Profitable and Moral reminded me to look into this trend some more.

The date of the specific podcast escapes me, but the post I just mentioned and another at the Center for Industrial Progress do a good job of outlining what this is and why it poses a threat to anyone who wants and needs cheap, plentiful, and reliable energy.

As seems obligatory with leftist initiatives, there is an abbreviation to watch for, in part because it helps adherents feel like they're in the know and in part since makes everyone else look or feel like they're missing something: ESG. This stands for "environmental, social, and governance."

I'm sure that when enough people catch on, some new abbreviation or acronym will replace it.

Alex Epstein of the Center for Industrial Progress cuts through the blather you're likely to hear and presents a bulleted list on what this means for the fossil fuel industry:

    Industrial civilization is beautiful in more ways than one. (Image by Cinq1, via Unsplash, license.)
  1. One of the leading strategies of the anti-fossil fuel movement is pressuring investors to divest themselves of fossil fuels for moral and economic reasons.
  2. The greatest success of this "divestiture" movement so far is harming hydrocarbon valuations by popularizing a narrative that projects a radical decline in oil/gas demand: the "transition to renewables" narrative.
  3. According to market surveys this narrative is already causing many investors to negatively revalue oil and gas stocks.
  4. To prevent you from challenging the "transition" narrative, the anti-fossil fuel movement is trying to mandate that you endorse it as part of your ESG reporting obligations -- which call for negatively biased reporting against your industry.
  5. While companies feel compelled to "check the box" on ESG, by doing so in the conventional way they are promoting the "transition" narrative and obligating themselves to reduce future oil/gas development.
  6. Fortunately, the ESG push has a giant vulnerability: its disingenuous claim to be concerned with accurate reporting to investors. This gives you the opportunity to agree with the demand for accurate reporting, but to criticize ESG's bias and to embrace "full-impact" reporting instead.
  7. With full-impact reporting as your foundation you can debunk the biased, sloppy "transition" narrative and replace it with an accurate and positive "expansion" narrative.
This is both a clear explanation of the nature of the threat and a strategy to fight it. Readers of Epstein's The Moral Case for Fossil Fuels will recognize his application of several principles -- such as weighing all evidence -- to fighting this effort at whatever level one can.

And fighting this is important, a fact Jaana Woicheshyn puts well in her opening paragraph at Profitable and Moral:
The goal of "sustainable" finance is to incorporate environmental, social and governance (ESG) considerations ... into investment decisions, as opposed to focusing on financial returns. To many, that may sound benign. But before you draw that conclusion, I urge you to consider what motivates the sustainable finance movement. As -- and if -- it gains traction, it will impact you whether you are investor or not. The impact will not be benign.
Indeed, but don't take my word for it: Read the rest of the post.

-- CAV

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