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Threat of ESG-Based Corporate Insanity Begins to Recede When Faced With Reality

Threat of ESG-Based Corporate Insanity Begins to Recede When Faced With Reality

Being identified as ESG-compliant may eventually be synonymous with being woke. You can ask Anheuser-Busch how well the woke identification has worked out for them.

The last time we discussed Environmental-Social-Governance (ESG), Biden had just issued the first veto of his presidency, rejecting a Republican-led measure that would overturn a regulation allowing retirement-plan managers to consider ESG-based climate change in their investment decisions.

ESG has always been about grabbing power through the “E” and the “S,” which are more about serving political agendas on climate and social issues demanded by “stakeholders.” Often, the “stakeholders” concerns are in contrast with and in opposition to those of actual shareholders.

It appears that shareholders are actually regaining their power. Exxon Mobil and Chevron’s shareholders recently struck down a long list of “stakeholder” demands for companies to cut greenhouse-gas emissions derived from fossil fuel use and release new climate benchmark reports.

The votes were abysmal for climate activists. All but two of the 20 shareholder proposals for the two companies garnered less than 25% of investors’ vote, according to preliminary results, with some performing much worse than similar proposals put forward last year.

Among the most controversial proposals were those that would have had the companies adopt targets for reducing emissions including those from third-party consumption of their products, such as when drivers burn gasoline in their cars, also known as Scope 3 emissions. Those received only 11% and 10% of the vote among Exxon and Chevron investors, respectively, compared with 27% and 33% for similar proposals last year.

In recent weeks, similar climate proposals failed to win over most shareholders at annual meetings of British oil and gas giants BP and Shell in London.

But there is even more! European insurers are now retreating from eco-activist policies.

European insurers are pulling out of the UN-convened Net-Zero Insurance Alliance over concerns that red states’ antitrust allegations could hurt their businesses. Bloomberg reported Wednesday that the group was holding a meeting to discuss recent departures, a week after 23 Republican attorneys general sent letters to members of the group raising antitrust concerns.

…[It] makes sense that insurers would be spooked in the same vein as Vanguard, which pulled out of the Net Zero Asset Managers initiative last year in the wake of similar threats. They may be worried about jeopardizing their business in the U.S., one lawyer said.

“There’s a new cost to these initiatives that I think people are now starting to factor in and wonder if they are worthwhile,” said Lance Dial, a partner with K&L Gates’ asset management and investment funds practice. “There was a thinking three years ago that this was a great Good Housekeeping seal of approval…. But now there’s a downside that’s become very apparent with the U.S. state actions.”

It is great seeing the fossil fuel companies finally taking the threats to their industry seriously. And while the GOP at the national level has been questionably effective, the state-level attorneys general have spearheaded a significant effort to roll back senseless policies that have been built on climate cult hysteria.

James Freeman, a journalist specializing in economics and assistant editorial page editor at The Wall Street Journal, noted a few months ago that we had achieved peak ESG:

Up until recently, ESG was just growing and growing, meaning it was more and more of a focus. It was a focus of investors of funds like ours. It was a focus of corporate chieftains, some of whom spent a lot of effort virtue signalling, you know, [BlackRock Chairman] Larry Fink, et cetera. Other corporate executives were simply kind of run over…

My belief is that ESG has peaked. That doesn’t mean at all that it’s going to disappear. But I sense a spirit in the investing community of a little bit of courage, where even a year ago there wasn’t courage. There was dancing. There was wiggling, wriggling, trying to deal with this amalgam of stuff because clients were saying that it was important to them. Funds and investment managers were trying to deal with it without disrupting their strategy, their approach, their ability to make money.

As more companies have had to endure the senseless requirements under ESG-based demands, they have concluded that the exercise hurts the bottom line. Additionally, being identified as ESG-compliant may eventually be synonymous with being woke.

You can ask Anheuser-Busch how well the woke identification has worked out for them.

It is clear many companies, investors, and insurers are now recalibrating their decisions based on reality.


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thalesofmiletus | June 5, 2023 at 9:09 am

The reality of higher interest rates and the end of free money. Now, they actually need customer revenue to justify their inflated share prices.

    The Drill SGT in reply to thalesofmiletus. | June 5, 2023 at 12:43 pm

    it’s easy to talk ESG in a bull market. you shareholder don’t notice the depressed increased valuation.

    In a bear market, folks notice depressed stocks and ask why?

    Content in reply to thalesofmiletus. | June 6, 2023 at 2:32 pm

    It’s obvious from a lot of the comments here that some of you guys don’t get it. It’s pretty slithery so that’s no real surprise or anything to be ashamed of. The point is this: these companies cannot operate without continuous carry loans, operating loans. They can’t get these loans, at least a decent terms, without sucking off Larry and the other ESG finks.

    That’s why Anheuser inbev keeps banging its head against the bricks. It has no other choice. I’m not quite sure what the consequences would be, but it’s pretty damn clear they’d be pretty dire.

    Until that changes specifically, all this “we are winning” is just so much tripe. Meanwhile we are devaluing classic American brands. I’m not saying we shouldn’t do it, but the scumbags are winning either way we go until we grab them by the throats and force them to bank according to fiduciary duty.

    This doesn’t end without massive fiduciary duty lawsuits. I’ve been saying that for 3 years. You guys are the lawyers; tell me why it isn’t happening. From what I can tell there’s an awful lot of money to be made for the shareholders and an awful lot of pain to be inflicted on the piece of crap stakeholders quote unquote.

    Furthermore imagine using FD to get Discovery on Google. Or Facebook. It would make the Twitter files look like a fart in the wind.

The institutional left when faced with reality does back down, especially when $$ are involved. ESG, DEI and WOKE need to be considered allies as well as the political captive- the DNC. Unfortunately the left will begin to ramp up violence as they see their plans come undone. Need more and faster.

Faced, or facing, surely.

“The votes were abysmal for climate activists.”

Climate activists and socialists love the very same thing —they delight in spending other people’s money.

2smartforlibs | June 5, 2023 at 9:55 am

You can only have a pipe dream when you can afford it.

PrincetonAl | June 5, 2023 at 10:18 am

Winning a few battles is not synonymous with winning the war.

None of the attitudes of those in charge or working for major corporations have changed.

Banks still track separate purchases of guns. Operation ChokePoint is still legal and able to operate. There are pressure points outside the US that can be applied to companies. B2C sales may offer some change in big companies, but B2B and B2G sales on a global level can still be forced into a supplier code or conduct by the purchaser – especially outside the US

The progressive left will simply fine tune or change tactics, surprised that anti progressive forces have notched a rare win.

It’s heartening to have a win and see some changes – but this fight has barely begun.

ExxonMobil Doesn’t Believe the World’s Quest for Net Zero Emissions by 2050 Is Achievable

Exxon has concluded: “It is highly unlikely that society would accept the degradation in global standard of living required to permanently achieve a scenario” to limit emissions. Thus, the company doesn’t believe the path to net-zero emissions is achievable. It thinks limiting fossil fuel production to below demand to force a change would drive up energy prices.

swedishchef | June 5, 2023 at 10:31 am

I voted (against) for the 1st time ever. I’m not a big shareholder, but whereas previously I couldn’t be bothered, I realize that now I have to register my opinion. To keep silent and hope that someone else carries the ball, or that “they” come to their senses, is no longer an option after the last 3-4 years (with Covid, “get Trump”,…). I think there are lots more like me. Is it fair to say I’m “woke”?…

    TrickyRicky in reply to swedishchef. | June 5, 2023 at 11:01 am

    I urge everyone, no matter how small your holdings, to vote every proxy that shows up in your email. I generally abstain on Board of Directors votes, unless there’s someone I recognize and detest, such as Jeh Johnson or Al Gore up for election. But I do carefully scrutinize the BS proposals offered up by “activists” and vote against them.

      Content in reply to TrickyRicky. | June 6, 2023 at 2:40 pm

      If you want to know the best thing you can do with your shares, listen to the earnings report from a couple months ago on Disney. Specifically the call in section. It’s possibly the greatest thing I’ve heard all year.

      What happened was this: a bunch of fairly large shareholders sandbagged eiger by giving the screeners fake questions …obsequious ones. Then they asked him about the special district and get Woke go broke and let me tell you the results were very telling, and the tactic was very effective.

      Many people don’t know this but our actual first victory is Disney. Very likely anyway. They’re in extremely bad shape. With any luck they will not get Hulu and they will have to sell their IPs. Cross your fingers …that will be extremely salutary.

Go after that ratfink at Blackrock who dictates “behavior.”

    thad_the_man in reply to Dimsdale. | June 5, 2023 at 11:35 am

    Go after Blackrock. We should learn from 23008, break up any company that is “too big to fail”.

As a Chevron shareholder I was quite happy to vote against all that nonsense. Did it this year for several other companies and I also took a look at the bio’s of the Board voting down anyone that mention DEI, ESG or other crud.

As others have correctly noted in good times it’s easy to shave off a small amount of profit to ‘save the squirrels’ so to speak. In a more competitive and harsh climate those nice to haves get tossed over the side.

Vote your shares. Definitely don’t allow a fund manager to vote them in your place. IMO, actions by shareholders to push back coupled with public willingness to make themselves heard via boycott are beginning to make corporate chieftains take pause. The goal should be to make it more painful to embrace woke weirdo ideology than not.

henrybowman | June 5, 2023 at 2:50 pm

“Price wars won’t happen. People will gladly pay more money to NOT buy

And yet, oddly, they are happening. Other breweries are responding to AB’s panicked cratering of retail price by reducing their own.

DW, who could teach graduate courses in shopping (she has been known to come back from a grocery run with MORE money than she left with) informs me that on her last trip, in case quantities, a bottle of beer was actually selling for LESS than a bottle of water — and not only the Bud Lite. She hasn’t seen that much of a market deformation since eggs were selling for 80¢/dozen.

    Basic Econ 101. Fixed costs and variable costs. Unless Bud does something dramatic long-term, their fixed costs are unchanged regardless of how many bottles they sell. If they just turn off the tap, every fixed cost dollar is pure loss. So slashing prices into the red may actually net them less of a rolling disaster than stopping if you calculate it (i.e. shutdown=10b in loss, massive price cutting =5b in loss, using random numbers for example) They’ve got the deep pockets to ride this one out (hopefully) until memory fades and a new ad agency comes forth with a new ad series. Perhaps the Bud Knight II.

      CommoChief in reply to georgfelis. | June 5, 2023 at 4:38 pm

      Maybe but that’s not all of the problems. The distributors/sales folks are getting hammered with loss of income off previously reliable bud light. The length of time this has gone on may end up costing bud light not only prominent shelf space in retail locations but reduced shelf space going forward. Retailers will reallocate the shelf space to get product out the door and that probably means less shelf space for bud light and more for Coors, Modelo and Yuengling.

henrybowman | June 5, 2023 at 8:31 pm

You are optimistic.
I suspect reports of ESG receding at this time are greatly exaggerated.

    Content in reply to henrybowman. | June 6, 2023 at 2:42 pm

    You are correct this is nothing but a tactical retreat. They have probably changed the rating somewhat behind the scenes in order to account for the businesses so they can continue to suck the Fink and finks off.

Capitalist-Dad | June 6, 2023 at 9:13 am

Serving “stakeholders” instead of “shareholders” has been a feature in corporation Annual Reports for decades as an excuse for lazy, incompetent, and spineless managers not to maximize return to investors. The only difference now is ESG formalizes the shareholders as second class citizens instead of making them intuit it from the virtue signaling buzzwords of the past.

The real danger of climate change is giving government to power to control every aspect of our lives will result in a progressive fascist tyranny. Better to accept whatever the consequences of climate change than the certainty of tyranny. Especially when we see that Democrats have no respect for our constitution, laws and way of life. Fighting climate change would allow them to fundamentally change our country into a tyranny like the USSR and just as evil.

ESG ratings are supposed to guide investors, and their money, toward ethical enterprises. But Big Tobacco has lapped Tesla in the ESG ratings race more than once: Sustainalytics, a widely used ESG ratings tool, gives Tesla a worse score than Altria, one of the largest tobacco producers in the world. And the London Stock Exchange gives British American Tobacco an ESG score of 94—the third highest of any company on the exchange’s top share index—while Tesla earns a middling 65.

How could cigarettes, which kill over eight million people each year, be deemed a more ethical investment than electric cars? It may have something to do with the tobacco industry’s embrace of corporate progressivism.

How Tobacco Companies Are Crushing ESG Ratings

Companies like Altria have gone out of their way to emphasize the diversity of their corporate boards and the breadth of their social justice initiatives, from funding minority businesses to promoting transgender women in sports. But Tesla, whose executives are overwhelmingly white men, has resisted that bandwagon, going so far as to fire its top LGBT diversity officer last year.