ESG, Ending In Tears

Just As I Predicted

Oh my gosh, Americans are pulling money from ESG-focused investments. Europeans which suffer from a little more groupthink than Americans, are not yet but give it time. These investments are known as “Environmental, Social, and Governance”. It’s in the news now because of the gas bags in Dubai talking about climate. I would have gone but my private jet is in the shop. Blackrock, the leader of the ESG movement is now talking about making money for clients instead of saving whatever. Larry Fink, the left-wing CEO of Blackrock has promised to change corporate America. He is now describing it as an incredible money-making opportunity instead of preying on people’s guilt to invest. He’s still wrong. Short Larry Fink.

Here are links to several posts I have written about ESG investing.

Don’t feel like reading them? I can sum it up. ESG is bullshit. It’s anti-capitalistic so it won’t work. If you want to know exactly what a corporation is supposed to do, read this.

If your financial advisor wants to put you in ESG investments, fire them.

I love this quote. It’s not the investment strategy that is a total and abject failure. It’s they are trying to do too much. Because, you know, if they just focused on one aspect of ESG they might be successful. From the Financial Times article I linked to above:

Part of the problem is that ESG funds often try to address too many factors at once, says Brad Lander, who runs New York City’s $248bn in pension funds, leading to “a loss of clarity and strategic attention to what any of it means”.

That’s $248 billion that is not getting the best return it can. It also proves that people who matriculated and graduated from the University of Chicago can be stupid too. I hope NYC pensioners are happy. Vivek Ramaswamy will not be elected to political office in this cycle. But, he did the world a service by starting an ETF that was anti-ESG.

It gets better. Remember, Wall Street isn’t run by a bunch of right-wing capitalists. They are left-wing and will tie themselves up in knots to stay on that side. Wall Street has always been about erecting toll booths for access. They want control. This is a very different ethos than the commodity markets in Chicago and the culture difference is easily seen when you speak to the different people from it. Just think about how Larry Fink speaks versus someone like Don Wilson.

For what it is worth, Fink is far more progressive than Wilson is conservative.

That’s not to say Chicago commodity traders are all right-wingers. They aren’t. As a matter of fact, many of the most successful traders I know are left-wingers. But the pits and rules surrounding them were far more open and competitive than the trading posts of NYC.

At the Free Press today, there is an article about an avowed communist from the Cox Communications family. The Cox family is decidedly left of center, and maybe even left of left now. This heir is crazy but I love this quote which illustrates my point.

“I don’t want to pay taxes to Uncle Sam,” Fergie tells me. “Objectively, somebody like me should pay almost all of their money in taxes, but if I can legally evade giving that to the U.S. war machine, I will.”

Of course, we know that communist countries don’t spend any money at all on their militaries. Idiots these people are. But, demand curves slope down, and if given a choice between paying taxes or not paying taxes, anyone of any ideological stripe will find an excuse not to pay them.

Anecdotally, I have a lot of left-wing friends that have relocated to red states. They enjoy the fruits of the red states while espousing their left-wing fallacies. The commie in the Free Press article is no different since he relocated to New Hampshire because of 0% taxes and lax gun laws.

The same goes for return on investment. Capitalism wins because it is deeply embedded and hard-wired into the human conscience. No one seeks poor returns. Even if you meet with your advisor and they say, “Well, we could have done better but you should feel good because we invested in green energy.” The person will walk away from that meeting with a small sense of dissonance in their psyche. When they go have high tea with their friend at their club who didn’t do the green thing but made a lot more return, they will try and argue their point. If the friend says, “You might be right. We need to do good. But, I need the money.” They will go back and retool their investment strategy.

Since Blackrock and other left-wing fund managers control so much stock, they were going to vote their shares according to the ESG values they espoused. In response, many investors that posted money with the left-wing aggregators have clawed back their rights to vote their shares.

That leads us to this gem. You know, because we investors don’t focus on the Long Term this person had to go and name her fund in such a way we’d realize what sort of “good” she was doing in the world. Leftists are so obtuse. I prefer the directness of the brazen capitalist myself.

“There was an outsized belief in the influence of investors, so I am not sure [proxy voting] makes as much of a difference as people think,” says Sarah Williamson, chief executive of Focusing Capital on the Long Term, a non-profit group. “There has been a little bit of a greater recognition that unless [the shareholder proposal] is directly attributable to the return and the mandate, that it’s the client’s choice.”

Tell that to Bob Iger at Disney now that activist investor Nelson Peltz is coming for the company. I bet old Bob is counting votes and working the phones as we speak. Voting does matter and the fact that Blackrock and their menagerie of do-gooders on Wall Street aren’t voting the shares is a great development for the GDP of America.

In 19 states across the country, ESG laws were proposed. They did not pass. 18 states have adopted ESG-focused investment strategies and bind their money managers to them. When a state treasurer wants to divest their funds from operators like BlackRock, the reason they don’t is because of the penalties they will have to pay to get out. In other words, it’s about money, not purpose.

I will extrapolate this concept to venture and private equity funds that have been raised over the past several years. It’s trendy, and the money was easy to raise. The allocators of money to funds are mostly all elite Ivy-educated people of the left. The pitches found willing ears.

If I had to go to a bookie in Vegas, I’d bet against seeing any meaningful return on those funds. But, at least the managers of those funds will have made a good buck off the management fee and got to lead a good lifestyle traipsing around the world on planes to meet with entrepreneurs and businesses. The test will be if they can raise a third fund. They might be able to raise a second.

We on the capitalistic side will win this war for a large variety of reasons.

• One is that capitalists build for the long term, not the short term as the press and left-wing believe. We believe in creative destruction which constantly improves on innovations.

• Two is that climate change is basically bunk.

  Robert Bryce
  and
  Bjorn Lomborg
  have great substacks on this. Spare me the biased and not peer-reviewed studies Al Gore and the windbags like to cite.

• Three is demand curves slope down.

• Fourth is capitalism, as Adam Smith elucidated, is hard-wired into our human DNA. We know we get gains from trade and specialization.

• Fifth is we are resourceful. Julian Simon recognized this and so should you.

There are two problems:

The first is the soft right-wingers need to get over their guilt complex of working hard and doing well and unapologetically advocate for capitalism. Grow a spine. The unfettered and unencumbered free enterprise system works and does more to lifts up standards of living and create opportunity than any government program. You do not win wars by ceding anything to your enemy, and we are in a war.

The second is many on the left refuse to look at any data, philosophy, science, or economics. They are on one track, with one purpose in life. They will rationalize any behavior that goes against their beliefs. They are unpersuadable. People like Fergie are truly evil people and have no regard for human life, only their own.

What do you do with them?