Companies should steer clear of environmental politics and instead focus on their fiduciary responsibility of looking after shareholders, Vivek Ramaswamy, co-founder of anti-ESG fund Strive, said in an interview with GlobalMarkets.
The original “grand bargain” stipulated that corporations should not exercise too much power in the political arena, but current ESG practice allowed them to have influence in a way that could damage the overall economy, he said.
Although US fiduciary law requires ESG-promoting asset managers to be transparent about long term value maximisation, he said ESG-influenced proxy voting and shareholder engagement — which Ramaswamy separated from ESG stock screening — had the potential to damage the wider economy.
“Influencing proxy voting is not greenwashing so much as what I call ‘greensmuggling’,” he said. “What I mean by greensmuggling is when non-ESG funds — made up of investors presumably that did not invest with any ESG-oriented intention — have proxy voting guidelines and shareholder engagement guidelines that nonetheless use ESG factors to determine how the underlying companies themselves behave.”
He said the issue was apparent in states like Texas and Florida, where local legislation prohibits funds from boycotting certain energy companies on ESG grounds.
These states have claimed funds like Blackrock or State Street are divesting from energy, which would prevent them from operating under the new legislation. Blackrock has had more than $1bn of investment pulled in Republican states as a result — but has since claimed to have investments in companies like Exxon and Chevron as a means of appeasing anti-ESG sentiments.
These claims conflate the two issues, Ramaswamy said. “The ESG fund might be divesting but ESG funds are only a tiny portion of the total fund managed by a firm like Blackrock,” he said.
The “real problem” is not that Blackrock is divesting from oil and gas, but that it is “investing in oil and gas firms and changing the purpose of what these firms are supposed to do”.
CARBON CAPTURE
Eager to dispel these myths, Larry Fink, chairman and CEO of Blackrock, told delegates at the Institute of International Finance in Washington DC this week that it was one of the largest gas pipeline funders in the world. “We did a major pipeline from Texas to Mexico, the Saudi Arabia pipeline [and] the Emirati pipeline for gas,” he said. “We're ready to fund pipelines here in the United States.”
“We own $181bn of US energy companies. We do as much with them as anyone. I've always said they are going to be part of the solution. They're going to have technology for decarbonisation.
“We are never going to get to a net zero world ever if we don’t sequester and carbon capture. I'm now being attacked equally by the left and the right. So, I'm doing something right I hope.”