Capitalism is the backbone and engine of US and international prosperity, but we at The Climate Capitalist are also well aware of its historical and present excesses. While some portray “ESG” as a left-wing tool to foment “undesirable" social and “greenie” policies, long term investors use ESG tools to identify risks and opportunities to help produce long term investment returns.
Capitalist/corporate excesses are legion and will never go out of fashion. The robber barons John D. Rockefeller and Cornelius Vanderbilt used bare knuckle tactics to monopolize railroads and the oil industry. They made fortunes and treated their employees badly. Competitors were snuffed out and consumers paid more. There are strong parallels with today’s pharma companies.
African Americans and women were LEGALLY discriminated against in employment and other affairs until the Civil Rights Laws of the 1960s. Nevertheless, in the 1990s, Texaco Corporation was sued by its African American employees for employment discrimination. When damning internal audio tapes surfaced, Texaco paid $115 million to settle the claims. The disgraced company was eventually acquired by Chevron.
Tobacco companies told Americans that smoking is good for you and built and bought off studies from research institutions to support their story. Auto companies built dangerous cars that could have been cheaply made safer with seat belts and other changes until Ralph Nader called them out.
Automobile tailpipe and industrial emissions were destroying air quality and human health in all the major US cities, as there were no legal limits on pollution. The dawning realization led to the early 1970s passage of the Clean Air and Water Acts and the establishment of the EPA.
Drug and pharmacy companies were all complicit in the massive increase in fraudulent prescriptions as fentanyl deaths became the leading cause of death for Americans 18 to 45. VW altered the software in its diesel fuel cars to fake passing emission tests. Apple didn’t enable parental controls until pushed. Abuses are now evident from Google, Facebook, and Amazon. Wall Street firms and corporations still pull off extraordinary rip offs despite the enactment of the US securities laws in the early 1930s. FTX is example A at the moment.
Americans who take time off from TV know the realities of climate change. Sadly, as once again documented in “The Petroleum Papers”, a book by Geoff Dembicki, the fossil fuel companies knew the realities decades ago and then executed a successful disinformation campaign. They and other corporate interests make unlimited campaign contributions to buy off politicians who might try and counter them.
US public companies are supposed to be run for the long term benefit of shareholders, not to produce near term profits to boost CEO pay. We submit that companies built to generate long term profits will do more to attract and retain employees and customers that are not just straight/white/males. Similarly, companies working to cut their air pollution emissions will survive and prosper as emission reductions and penalties are eventually imposed. Companies that rely on single use plastic packaging are in for tough sledding.
A major new construct for investing can be taken too far and in dubious directions. Some “ESG” investors truly want to use their version of ESG to impose social and other agendas on corporate America, regardless of the impact on profits. As share owners, they are actually free to vote their shares as they choose. But most investors use a different version of ESG principles to help pick stocks that will generate long term returns.
Red state politicians that legislate what investors can think about, while perhaps politically expedient, are counter to the freedom and liberty principles they otherwise espouse – and counter to producing superior investment returns.