Calling for a “post-ESG” voice that focuses instead on excellence

0

For Vivek Ramaswamy, co-founder and executive chairman of Strive Asset Management, investors’ focus on ESG – environment, social and governance – drowns out the voices of real investors – ordinary people whose capital is invested with asset management companies that are pushing ESG initiatives.

Participating in the Oilfield Strong monthly webinar presented by OTA Environmental Solutions, he discussed three of the biggest companies: BlackRock, State Street and Vanguard – which together manage more than $21 trillion in assets, on par with the US gross domestic product. .


These funds received investment capital from ordinary citizens who trusted them to make smart stock picks for them. Instead, he said, the leaders of these companies have “become self-proclaimed enlightened determinants of how to structure society. More alarmingly, they are using the money of ordinary citizens, many of whom do not agree with the agenda put forward in the conference rooms.

Ramaswamy compared him to a group of oil and gas company executives holding a Zoom meeting to agree production cuts to raise gasoline prices, which he says violates not only antitrust laws, but also the pricing laws.

“This is such a convoluted set of problems that people need to understand something to provide a basis,” commented Grant Swartzwelder, president of OTA Solutions, who moderated the webinar.

To effectively comply with what ESG advocates want, he said companies should eliminate the use – or at least the growth – of fossil fuels, “which seems retrograde and oppressive.”

The U.S. energy industry has been the sector hardest hit by ESG requirements, Ramaswamy said, because they don’t apply equally to energy sectors around the world but in the United States. “Even in Europe, many of these initiatives are dictated by law. But in the United States, they are not dictated by law but by pressure from shareholders. If the United States has not ratified the Paris climate accords, it is not Chevron’s job to ratify them instead. What we see happening is not in the halls of Congress but in the halls of business.

Growing demand for energy as the global economy emerges from the pandemic — and the expected continued demand for fossil fuels — has created a generational opportunity for the nation’s energy companies to fill the void by producing more energy, a- he declared. That’s why his company launched its first energy index fund – DRLL – to compete with companies like BlackRock.

“It brings a new voice – I call it a post-ESG voice – to focus on delivering great products and services to customers and delivering shareholder returns rather than ESG,” Ramaswamy said. . “The key is that our message to the US energy industry is to drill, fracture, whatever you need to do to be as successful as you can be, financially successful in the long run without worrying about ESG issues. Even when it comes to hiring and remuneration, they should be based on professional qualifications and not on other factors such as gender, race or sexual orientation.

Many ESG initiatives do not serve a company’s shareholders or its fiduciary obligations, he said. Indeed, he pointed out that there could be conflicts of interest. For example, Exxon may cancel a project in the US due to ESG concerns that will instead be built in China by PetroChina, which is far less environmentally clean than US operators. Well, he pointed out, the major Exxon shareholders who own 6% of Exxon also own 6% of PetroChina.

Having recently acquired Chevron stock, Ramaswamy sent a letter to the company’s CEO detailing some of those concerns. In particular, he expressed concerns about Scope 3 emissions caps imposed by Chevron shareholders.

“First, Scope 3 emissions calculations double, triple and even quadruple the same unit of emissions,” he wrote to Chevron. “Let’s say a gallon of gasoline is used to deliver a pizza. That’s 8,800 grams of carbon dioxide emitted. That 8,800 grams not only counts toward Chevon’s Scope 3 emissions, but also into the Scope 3 emissions from Domino’s, which made the pizza, Uber, which delivered the pizza, Ford, which made the car rented by the Uber driver, and Facebook, which ordered it for a meeting of employees.

It’s like McDonald’s agreeing to be responsible for the body weight of anyone who eats a Big Mac, he added.

Swartzwelder wondered, “Who gets the Scope 3 emissions from the pizza? The delivery service, the fuel, or the pizza? It seems very amorphous and difficult to improve.

Said Ramaswamy, “I hope our voice is not just a recitation of slogans learned in the 1980s, but an assessment of what it means to be an oil company, a gas company, an energy company and what it means pursuing excellence as a company energy and a means to open dialogue without speaking out of both sides of the mouth – touting sustainability efforts while talking about shareholder return.

There is no one-size-fits-all solution, he said, and part of the problem with ESG is that it tries to be one-size-fits-all, Ramaswamy said. Every business should ask itself what makes it most successful in selling its products and services, what makes it the most financially successful in the long wrong – not because it solves all the world’s problems, but solves some of the world’s problems. Other actors – other companies, governments, non-profit organizations – can solve other problems that they are able to solve.

At least, he concluded, an open debate should take place in the boards of directors and in society.

Swartzwelder concluded, “At the end of the day, aren’t we just trying to improve the environment? Does the addition of all these random calculations lead us to good practices or specific improvements? I don’t see how.

Share.

Comments are closed.