Log in

On environmental investing, Main Street speaks and Wall Street responds


When you’re responsible for other people’s money, mixing it with morality is a mistake. Not that climate change is a moral issue per se, but many of those who believe do so with a fervor that can be described as religious.
Wall Street learned this the hard way. Public policy groups that studied the issue concluded firms that did not prioritize environmental, social, and governance concerns when making investment decisions and casting proxy votes at shareholders’ meetings produced better results for their clients than those that did.
That got the attention of small investors, who realized their capital was being used to force American businesses to go green rather than produce a maximum return on their investment. Predictably, they complained.
Sensibly, some of the biggest firms in the business reversed course. Blackrock, the world’s largest, announced it was backing away from its previous commitment to so-called ESG considerations and would, for example, quit Climate Action 100+ because the group expressed its desire to have all its members commit to using all client assets under management to reduce emissions and support decarbonization.
Other firms, including JPMorgan Chase and State Street, have taken similar steps, cutting the bloom of the bouquet that was once corporate America’s commitment to climate capitalism.
Climate change alarmists who advocate eliminating fossil fuels from the global energy mix make an effective if erroneous case that the changeover, something they hope governments worldwide will eventually mandate, could make investors smart enough to get in on the ground floor very, very rich.
It’s a persuasive argument that led more than one Wall Street tycoon to enlist the resources at their disposal in the battle against climate change, believing it would become a profit center. Environmental investing would drive wealth-creating developments in the marketplace. Carbon credits would be traded. It would be green meeting green, and a splendid time was guaranteed for all.
They failed to consider, or chose to overlook, that for every Telsa, there were probably a dozen or more Solyndras waiting in the wings, soaking up private investment, propped up by the government, and destined to fail.

When they did, U.S. taxpayers would be on the hook. Instead of making money through wise investments, they’d lose money as government bailouts caused federal spending to rise, growth to slow, and interest rates to possibly rise.
When your business is making money, you should focus on it. It’s what people expect you to do. Larry Fink, the CEO of Blackrock, once an aggressive promoter of ESG as an investment strategy, deserves credit for seeming to have come around.
“Everything we do is on behalf of our clients, and everything we do is with the purpose of financial returns. There is not one thing we have ever done, whether it’s ESG or any other issue, that is not in the pursuit of financial return,” Fink said back in October. “That is our fiduciary responsibility, and we live that every day.”
The climate change alarmists can run around like Henny Penny all they like, screaming “the sky is falling” to anyone they encounter. So far, their most dire predictions have failed to come true.
The North Pole hasn’t melted. The sea levels haven’t risen. If people want to worry about those things when investing their own money or voting their shares at an annual meeting, they’re free to do so. They’re even free to try to persuade others to follow suit. But when someone is managing other people’s money, their first responsibility is to maximize their return on their clients’ investments and not to anyone or anything else.
Using one’s skills and understanding of how markets work to help retirees live comfortably is virtuous. Pursuing objectives that some elites deem virtuous that expose others to possible impoverishment is a sin. When it comes down to it, when Main Street talked, Wall Street listened, and we’re better off for it.

Copyright 2024 Peter Roff distributed by Cagle Cartoons newspaper syndicate.