Wall Street’s Energy Discrimination Will Hurt America

A maze of crude oil pipes and valves is pictured during a tour by the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas on June 9, 2016. (Richard Carson/Reuters)

Commentary

President Joe Biden’s nominee for comptroller of the currency, a critical federal official charged with overseeing large banks, declared war on the fossil fuel industry.

“We want them to go bankrupt,” said Saule Omarova.

Omarova isn’t alone in her desire for financial institutions to discriminate against the energy producers that make their existence possible. Progressive activists and Wall Street financiers are teaming up to promote environmental, social, and governance (ESG) investing practices that place political whims on a pedestal—at the expense of our lives and livelihoods.

The Biden administration’s endorsement of this brazen anti-energy movement threatens Americans’ money and future—and could have unsettling ripple effects throughout our economy.

Here’s how it works: Pension funds invest the money of retirees and future retirees. Fund managers should make the smartest investments they can in order to ensure retirees have enough money to live on. But under ESG, they’re not making the smartest investments, they’re making investments that align with their political ideology. If that’s not bad enough, they'll vote with a small but vocal minority of activist shareholders to adopt resolutions or replace board members—often against the best interests of the majority of shareholders.

Take ExxonMobil, for example. An activist hedge fund called Engine No. 1, which owns just 0.02 percent of Exxon’s shares, forced a takeover and replaced three board members with climate alarmists who will advocate for expensive and ineffective greenhouse gas reduction programs instead of working for the good of Exxon and all its shareholders. 

Energy discrimination through ESG investing threatens to withhold capital and discourage investing in companies deemed politically unpalatable by progressives. This, of course, primarily means energy producers—regardless of the fact that America provides fuel for the world using the best pollution control technology available, not to mention fewer greenhouse gas emissions.

Discrimination against the businesses powering America has advanced primarily through activists’ public shaming campaigns and big corporations’ virtue-signaling PR angles, but the elite class wants to force U.S. businesses to march in lockstep on climate change. Pushing ESG from the federal level is an arbitrary and indefensible restriction on free speech and a threat to the men and women depending on their investments and pensions for retirement—that’s the vast majority of us.

Activists claim that ESG funds—those branded as having a better social impact, though there are no universal standards that define ESG—perform better financially than traditional investments. However, studies supporting this claim are riddled with methodological errors, and this trend is simply too new to understand long-term effects.

Selecting investments based on political preferences, no matter how seemingly virtuous, goes against decades of investing wisdom. Diversified investments are almost universally agreed to be the strongest investments long-term, which means that limiting investment opportunities for retirement funds and pensions will also limit the return on investment for retirees.

One well-constructed study reveals this by analyzing higher education investments. Professor Daniel R. Fischel finds (pdf) that the cost of complying with energy discrimination campaigns is significant enough to prevent universities from reaching their investment goals. Higher fees, limited diversification, and compliance costs add up—and likely don’t influence the public’s behavior or opinions.

Worse yet, recent legal analysis suggests ESG investing may actually rise to the level of illegal collusion that violates longstanding consumer protection laws. When all the major players are conspiring to follow the same political practices, to the extent that law-abiding businesses can’t access financial services, the free market is no longer truly free.

But do these principles help stop climate change? The answer is categorically no. According to climate data models used globally, even enacting each and every tenet of the Green New Deal wouldn’t produce any meaningful temperature change. Eliminating all fossil fuels and all man-made carbon dioxide emissions would result in less than two-tenths of a degree temperature difference. So even the biggest and loudest campaigns to force divestment from fossil fuels would have a microscopic impact—if any at all.

The only real effect of this energy discrimination movement would be worse poverty, a higher cost of living for everyone, and—ironically—more pollution. That’s because denying capital or investments to American energy companies won’t eliminate our need for fossil fuels, our only significant source of the affordable, reliable energy we need. It will just transfer energy purchases to overseas producers.

It makes little sense, if the environment is really the progressive wing’s top priority, to give power, influence, and money to countries that pollute with abandon and maintain poor human rights records. Instead, we should continue to produce energy here in the United States, taking advantage of our environmentally conscious and efficient energy industry—while also producing energy cheaply and maintaining our national security and international negotiating power.

Biden campaigned on equity and fighting poverty. Unfortunately, his administration’s fixation on climate alarmism and micromanaging investors will create more poverty by making energy—and everything we buy—more expensive.

The Biden administration should reject discrimination of all forms, including energy discrimination.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.