Larry Fink Reveals The Unfixable Corruption Of ESG

Posted: Oct 28, 2021 11:20 AM
Larry Fink Reveals The Unfixable Corruption Of ESG

Source: AP Photo/Mark Lennihan, File

Recent pronouncements by Larry Fink, the CEO of BlackRock, have demonstrated that the ESG push is hopelessly and irretrievably conflicted in ways that conservatives and libertarians must fight.

That’s not what he meant to convey, of course. What he meant to do was to tell us how we should all live our lives. But in doing so, whether inadvertently or with arrogant disregard for any necessary inferences his assertions might contain, he also revealed why he is legally and morally incompetent to fill the private policy-czar role that he has built for himself.

Fink wrote recently in the New York Times that “rich countries must put more taxpayer money to work in driving the net-zero transition abroad,” noting that “[a]chieving the net-zero transition” by 2050 “will require unprecedented levels of investment in technology and infrastructure.”

Well, yes. It surely will – if it can be done at all. Fink fails even to consider, much less seriously to grapple with, the fact that reaching net-zero by 2050 might not be the right goal, or might not even be technologically possible at all. If he were fulfilling his fiduciary duties to his clients and shareholders, those would be the first questions in his mind. Instead he simply relies on the deeply politicized assertion that if we don’t reach the 2050 goal, “the entire world will be overwhelmed by the effects of climate change.” 

While Fink doesn’t bother to explain where he got that assertion, most eco-warriors, real or faux, look to the United Nations’ International Panel on Climate Change (IPCC). The problem for Fink in thus relying, however, is that the IPCC’s most recent reports suggest that in its calculations, climate change has already passed the point of no return in many ways, and will do so entirely without massive carbon reductions long before 2050. Climate realists, on the other hand, think that warming is moderate, largely productive of good benefits (an ever-greening world), and can be addressed as technology affordably permits.

But under either of these scenarios, 2050 – and Fink’s program – are irrelevant. This conclusion is underscored by the fact that the most aggressive carbon-reduction plans are even now failing so spectacularly as to be increasing carbon emissions, while the biggest carbon producers are, whatever they say, actively ramping up their production. Europe’s carbon-reduction plans have failed because even at energy costs 3 times those of much of the United States, and with significantly higher hidden subsidies, they can’t reliably supply their people with energy, requiring them to turn back to higher-carbon sources in inefficient ways.

Then there’s China. While China often makes noises about reducing carbon emissions, in fact it is adding massive carbon output even as it produces more carbon than the rest of the world combined. It asserts a plan to be carbon zero by 2060, but all climate alarmists agree that that will be far too late. Fink specifically identified concern about “emissions from fast-growing emerging markets such as Brazil, India, Indonesia and South Africa,” but his plans don’t make any sense at all unless he’s suggesting that rich countries massively bribe China to eliminate carbon emissions much earlier than it notionally plans.

The Chinese Communist party would love it if we were stupid enough to pay it trillions of dollars to pretend to do something about carbon even while it girds to invade Taiwan, threatens Japan, and become a 1930s-style menace to the world. Or if we – or some of us – are corrupt enough. Just a few weeks before Fink’s Times piece, BlackRock announced a new Chinese ETF and Fink himself encouraged massive private investment in China. These moves occurred even as it became clear that the Chinese population is already shrinking, that its real-estate market – the foundation of its new prosperity – is tottering, and that all of this was ramping up dangerous Chinese aggressiveness.

All of this was so appalling that even George Soros thought it was a bad idea.

As the pols in Washington inevitably put it, I question the timing.

Then consider that BlackRock was the chief force behind the coup at Exxon, where Fink used an activist group to put three climate alarmists on the company’s board. Now the company is considering abandoning massive carbon-energy plays. But as current events illustrate, there realistically isn’t any way that decarbonization will proceed according to the left’s politicized schedules. If Fink and his (attainable) ESG plans were successful, the result would not be that those carbon energies will not be used, but only that Exxon and other public companies will not own them. This will leave private equity – available to Fink and his Davos pals, but not to us individual investors – and governments to harvest those energies and reap the benefits.

If Fink were making decisions according to his fiduciary duty – that is, without regard to his personal policy (or possibly personal financial) preferences, but in sole consideration of the financial best interests of his clients and shareholders – he would have grappled seriously with the possibility that the climate situation is so far down the road that it’s too late to stop it. If that were true, then he would have reached very different conclusions than he did in his Times op/ed. He also would have addressed the desperate and timely question of whether the politicized decarbonization schedule is technologically feasible in a way that won’t render everyone except plutocrats – so, including his investors and shareholders, but not him – radically poorer.

If he were a politician, on the other hand, he would be free to follow his personal policy preferences – if they were ratified by his election and reelection. But then he would face transparency laws and scrutiny and obligations to keep his private holding in blind trusts. As a lefty, he wouldn’t face terribly serious “news” media examination, but it would be something. And as the disaster of fellow insufferable megalomaniac Michael Bloomberg in the 2020 Democratic primaries illustrated, he’d be unlikely to get far with the electorate regardless.

Under the ESG regime Fink is, at present, effectively without constraint. That’s clearly how the Biden Administration and the SEC want it, as they fairly force pension funds and corporations to invest in lefty political projects, but those of us who oppose the ideas of funding China to destroy us while immiserating ourselves at home must chart a different course.

Scott Shepard is a fellow at the National Center for Public Policy Research and Director of its Free Enterprise Project.