For decades the Wall Street Journal, a voice for capitalism, was also a prominent voice denying global warming. It eventually acknowledged warming but questioned whether humans caused it. Now, it concedes human impact but belittles efforts to do anything about it.
In his Streetwise column, “Why the Sustainable Investment Craze is Flawed,” part of a series on sustainable investing, columnist James Mackintosh takes a critical view of do-gooder ESG investing (Environmental Social and Governance) as a tool to combat climate change. The series explores the explosion of ESG investing and why Mr. Macintosh thinks “it is mostly—but not completely—a waste of time.” After he outlines its shortcomings, he drops a truth bomb:
My big concern about ESG investing is that it distracts everyone from the work that really needs to be done. Rather than vainly try to direct the flow of money to the right causes, it is simpler and far more effective to tax or regulate the things we as a society agree are bad and subsidize the things we think are good. The wonder of capitalism is that the money will then flow by itself.
This is a central tenet of The Climate Capitalist – that with certain adjustments capitalism will be the fundamental force of positive change. Mackintosh’s piece is a sign the WSJ is taking its head out of the tar sands to argue for a Clean Energy Transition that needs carbon taxes, clean energy incentives and much maligned REGULATIONS.
Mackintosh is right that ESG by itself will not play the leading role. It’s still in a Wild West phase where there is debate over what the correct ESG factors ought to be, and how to measure and implement them in an ESG public equity portfolio. Emissions have become an important ESG factor as a way to get public companies to cut emissions from their businesses. But how to figure emissions into an “ESG” portfolio varies widely across different ESG investment managers.
Mackintosh points out that ESG encourages investors to divest dirty energy companies in favor of clean energy companies. But then shareholders lose voting leverage to push the dirty companies to ‘go clean.’ ESG also encourages companies to shed dirty energy assets, but these assets/emissions just end up out of sight in someone else’s hands. OPEC, Russia and other sovereign oil companies are the biggest fossil fuel producers, but ESG isn’t going to change their behavior. Having questioned the utility of ESG to cut corporate emissions,Mackintosh fails to address the impact of the net zero pledges made by 20% + of the largest public companies around the world.
The Clean Energy Transition (CET) will be turbulent and there will be winners and, sadly, losers. We waited too long and now need to move far faster than what’s always efficient and thoughtful. CET projects won’t always work. Some CET companies with new technologies will over promise and not deliver. Energy costs will rise in many places. Jobs will be lost.
The Wall Street Journal needs to help its readers – the old guard and the new – navigate financial decisions in a rapidly changing global economy, where global investment in clean energy innovation has reached record highs. Otherwise, it risks losing market share to cutting-edge reporting at The Economist, Bloomberg and Financial Times.