Transcript
Live from the back end of the front end of an ESG server Farm run by BlackRock stewardship teams, Junior analyst, Karl the guy who graduated last year from Oberlin that was asked to edit their Global principles and had to look up on Investopedia. What governance was, it's a woke Wednesday edition of business pants. Joined again today by no one. Is apparently holiday means time with family and not on Bloomberg. Really reading ESG stories. I'm the one true, Matt mascardi the Lord of bored sabermetrics. And today's flip floppy bag called December 21st. 2022, ESG, punches, back quote of the Year lawyers make. Yes, she even more boring and are cover story. BlackRock says a thing and then says another thing, That's right. Can you believe that black rocks set a thing and then said something else. All right, let's jump into it. First up a quote from Sage because Shan's new Bloomberg story covering, how some people actually, like ESG. The acronym, her article is ESG managers told to punch back hard as PR Pros, react to attacks. Because it turns out cowering is a sucky strategy. According to PR professionals, here's your gut punch quote from Brian Collins. Reacting to the accusation that ESG is woke capitalism. Would you prefer to be asleep, America? Do we really want to remain unconscious of the problems we have to face? We can't be a nation of sleepers, we need to be wide awake. Are you listening, BlackRock? That is a great quote. That's perfect. Of course, when asked for comment Vanguard was actually found under its bed with the cheat over its face and it's finger and its ears. They did Issue. This statement. Read by a small child about running away from NetZero. Here listen. Managers initiative in 2021. Such industry initiative, 10 Advanced constructive dialogue but sometimes they can also result in confusion about the views of individual investment funds. That has been the case in this instance, particularly with God in the applicability of NetZero approaches to the broadly Diversified index funds favored by many Vanguard investors. therefore, after a considerable period of review, We have decided to withdraw from ncam so that we can provide the clarity. Our investors desire about the role of index funds and about how we think about material risks, There is a lot of ESG news in the last week as ESG is moved from data. Set used to make risk, adjusted decisions, and investing to Full Employment. Act for lawyers who create boilerplate language. No one reads. But we probably should all because this guy and a network of billionaires have decided. ESG is the next CRT in America. Here's Ron DeSantis in his own words, hiring lawyers for the next decade, we have embraced freedom We have maintained Law and Order. We have protected the rights of parents. We have respected our taxpayers and we reject Wolcott ideology. We fight the Wok in the legislature. We fight the wall in the schools. We fight the wall in the corporation. We will never ever surrender to the work mob. Florida is where what goes to die. In here other lawyerly headlines. Vanguard exit has lawyers mapping out wall. Street's top ESG risk, here's your opening graph. This is from Alastair Marsh in Bloomberg. At a recent climate Finance meeting attended by Wall Street, Giants, including BlackRock Inc and Goldman Sachs Inc. No one spoke until a lawyer had finished reading out a disclaimer. Stating the group was not a cartel. Dating. The group was not a cartel. Tom come ins a lawyer from Asher sums up. My brain exploding when he said in the article quote for all the talk of Anti-Trust risk the bigger concerned flows. From not acting in ESG, friendly ways, not taking account of climate risk, not adequately preparing for the energy transition, and not having a credible Pathway to Net Zero from a litigation perspective. There has been a lot more activity in focus on claims against institutions for failing to take climate seriously, but don't worry, it's not a cartel. You're totally, you know what I think actually, if you just yell out in a room, I'm not doing illegal activity then you're not doing a legal activity, so that clearly has them covered. But you are utterly forgetting that by not doing a thing. You have so much more legal risk. But not only are they not a cartel, they're also not. Not a cartel. According to this story. Reality Bites is finance. Firms roll back on their climate pledges If all the client is a finance role back on their climate pledges are they a cartel now? Reversing their climate pledges. Lawyers are worried about the commitments and talking to each other. But they're all so worried about not doing the commitments and not talking to each other. Here's a quote from the article at a Reuters, some alliance members and this is one of the Net Zero alliances are worried about legal repercussions. If they rule out financing fossil fuels, So if you don't find a fossil fuels, your cartel out to destroy America. If you do Finance, false fuels is a group, you're not a cartel, Destroying America through climate change lawyers. Congratulations, awesome. Congratulations. And finally, here's the headline. Big oil is behind conspiracy deceive public. First climate. Racketeering lawsuit says That's right. 16 municipalities in Puerto Rico. Are suing oil companies under the RICO statute used to prosecute Mafia Dons. But by the way, our first board saber metrics presentation that we gave to a client actually labeled the mafia Don of a company board. So I just feel like we were on this. We were on the early, we know all about mafia's, here's a quote from the article, the first ever climate change RICO case, alleges that International oil and coal companies, their trade associations in a network of paid think tanks, scientists and other operatives conspired to deceive the public specifically, residents of Puerto Rico about the direct link between their greenhouse gas emitting products and climate change. Lawyers getting Every way you're suing the oil companies as a group as a cartel, you are telling the investor groups that they're not a cartel. So you gotta read that out. And also they are acting like a cartel because they're all going back simultaneously and their climate. But this is so much fun. It must be. It is High Times to be a lawyer. Thank you Ron, santis you have made the Full Employment Act of lawyers possible. But that's not the big news today, here's the big news today. This is our cover story. Huge news at a black rock. Headlines amid ESG backlash. Says. BlackRock to continue asking for climate targets and disclosure despite anti-esg pushback. That's right. Pushing back. The least it's hotly anticipated. Global stewardship principles and it looks like the verdict is in Black. Rock will stay. Whoa, or, or A journalists. Don't read anything anymore. Here, I'm going to do this for you last night, I painstakingly spent, seven minutes, finding the 2022. Global stewardship principles to compare them to the 2023. Global stewardship principles that were just released and I used the same software that teachers used to find out which jerk student. They have is plagiarizing. Here's what it turned up. 78.7% match of language between the two, which sounds good. Except that less than half of the language was identical, word for word, more than 20% was found to have minor changes in 10% was paraphrased and there were a whole new sections added to. So let's review shall we? And these are articles that were out of Pensions and investment had one of them. ESG today, had one of them, but I've seen them in a few places. The first thing you can notice, Is Blackrock scrubbed the word, sustainable. Throughout almost the entire document. There are a couple of places where they say sustainability materials sustainability risks. But otherwise, when they said sustainable value, they replaced it with durable value. So now it's durable, it's not sustainable, which I suppose sustainable value, has this like Wookie feel and or maybe they were just like giving a nod to the triple bottom hard Liners in the ESG Community who feel like black rocks Investments aren't actually sustainable. Either way, the word is largely gone. All So Gone is all mentions of ESG or e&s. Yes, G has been replaced almost entirely by material issues. So Black Rock killed the acronym in their new Global stewardship principles. They killed the acronym. Death to the acronym was always coming and while we can play semantics over those words. Here's my real problem with the headlines. Because they make it sound like BlackRock is going to keep doing what they were doing. They're going to demand more they're going, they're acting on climate. But here is an example of a durable material change. Where they weak Sauced climate? Let's take Net Zero Net Zero just became quote, not the role of BlackRock ready, 2022, BlackRock believes that climate change has become a defining factor in companies. Long-term prospects, we ask every company to help its investors understand how it may, be impacted by climate related, risk and opportunity and how those these factors are considered within their strategy in a manner, consistent with the company's business model and sector, Specifically, we ask companies to articulate how their business model is aligned to a scenario and which global warming is limited to well below two degrees Celsius moving towards global net, zero emissions by 2050. That is what they asked in 2022 in 2023. Now it is, it is our view that climate change has become a key factor in many companies long-term prospects. So now, they don't believe it. It's their is that, I guess that's a little semantics as such. Long-term investors, we are interested in understanding so before they asked companies to help investors understand now, they're interested. Now we're just curious, we're curious how companies may be impacted by material, climate-related, risks, and opportunities just as we seek to understand other business, relevant, risks and opportunities. Oh good for hedging, and how these factors are considered within strategy, and a manner consistent with the company's business model and sector, Here's the, here's the gut punch, specifically. We look for companies to disclose strategies, they have in place that mitigate and are resilient to any material risks to their long-term business model associated with a range of climate related scenarios, including a scenario on which global warming is limited to well below 2 degrees considering Global Ambitions to achieve a limit of 1.5 degrees. It is of course up to each company to Define their own strategy. That is not the role of BlackRock or other investors. I would call that a material difference. They were asking that every company align their business model to global net, zero emissions by 2050. They were specifically, we asked companies to articulate how they're aligned effectively to Net Zero. Now, they are curious, we are interested in understanding and we look for companies to maybe disclose. Whether or not, they're considering climate scenario's at 2 or 1.5%, but of course, each company can Define their own. That's not the role black rock, no mention of Net Zero, they have scrubbed Net Zero entirely out of this document. More than that. Scope 3 is out of scope. Now, we knew this because they didn't want scope 3 from the SEC. They were one of the firms that pushed back against scope 3, but now they're putting it in their principles. Where they were actually looking for Greenhouse. Here's the quote a we look to companies to set short medium and long-term science-based targets were available for their sector for greenhouse gas, reductions Now it's we look to companies to disclose short medium and long-term targets ideally science-based. Now, it's ideally science-based. And they added it this, where these are available for their sector for scope one and two, greenhouse gas emissions. They have eliminated scope 3. In fact, here's another example where they scrub Net Zero from it, they say companies have an opportunity to use and contribute to alternative energy sources, which will be essential to reaching Net Zero. Now, it will be essential to decarbonizing the global economy over time. And where they asked companies before. Now, they are curious. Again, we encourage companies to disclose We don't ask companies to disclose. And then they follow it with this at this stage and this is 2023 now 2022. We're all about the all the greenhouse. All the greenhouse gases, 2023 at this stage, we've used scope three emissions differently from Scopes 1 and 2. Given methodological complexity regulatory uncertainty concerns about double counting of Direct Control by companies. While we welcome any disclosures and commitments companies choose to make regarding scope. Three emissions. We recognize these are provided on a good faith basis as methodology develops. I'm going to call that a backtrack. I'm going to call that last year. You were cool with all of it this year. You're saying specifically we encourage. And, you know, we'll look at it again, if it's out there but you know, it's hard, it's hard. Yeah, it's fucking hard. You know, the world's going to catch on fire scope 3 is the largest source. Of emissions, double counting aside, we're under counting at this point. And they have scrubbed it out and maybe this is a final lesson and blackrocks word choice. Because I want you to listen to these two different words. And tell me the difference between them. All right, first up the difference between the word expect and encourage in 2022. We expect companies to implement to the extent appropriate, monitoring processes to identify, and mitigate potential adverse impacts. Dot, dot dot. How about 2023, we encourage companies to implement, to the extent appropriate, monitoring processes to identify identify, and mitigate potential adverse impacts. I would call that a material change because we need to, they said, We as a Baseline Company should be doing this, right? And now in 2023 they're just kind of bro hugging companies and hoping that they may be do it, but it's not really their place. It's not really our place to have an expectation of the companies we invest in And here's another change. tell me if you think these two are different, should An interested to understand. Quote, this approach should be overseen by the board, which, is well, positioned to ensure the approach is taken and informed by an aligned with the company strategy and purpose. Or We are also interested to understand the role of the board, which is well positioned to ensure that the approach is taking an informed. So, which sounds a little stronger should be overseen by the board. As in that is the board's fiduciary duty. Their duty is to take all of these programs, all of these issues, and they are to oversee them, as stewards of black rocks, capital and black rocks, clients capital. Should. Or BlackRock is now just interested to understand the role of the board. It may not be your fiduciary duty to do that. We will not hold you accountable. If you don't do that, we're vaguely interested in understanding your view of your role in doing that, so that it just can inform our decision-making, General Lee. So now BlackRock has no Actual accountability. That's what they've removed from the principles. They said we don't want to be held accountable for anything. We have no expectations. We are not the ones making any decisions here and they gave themselves This legal back door, which is it's not us. We swear we're in 2022, they had no voting choice, right? That wasn't a part of it in 2023. They added this language. BlackRock votes on proxy issues when our clients authorized us to do so and then explained that they now offer voting choice. They have effectively said. We don't vote our proxy, unless a client, says to vote it. It isn't us. It's them. Black locks language, Jiu Jitsu. I would expect what I don't expect is journalists making BlackRock sound as if they changed nothing. When in fact, there are some pretty serious material changes to the two sets of principles. Could you guys read The Source material? I'm not a journalist. I mean idiot on a podcast. They are backtracking everywhere, they are not going to divest. They are not going to ask, they're going to encourage. They are not going to go after scope, three, they're saying it specifically where they didn't say it last year, we knew that but they're now putting it into their principles. They no longer expect companies to do the thing. They encourage them to do the thing. They no longer think that the board should be doing this, they are interested to understand the role of the board in doing this BlackRock doesn't vote proxy issues. They only vote proxy issues when clients want them to That's all very different. And that's all we got. That's how we're going to end this year. Will be back tomorrow with more business pants. It'll be our year in review story of the year goodly, is the year as holy is to the year, we'll do it all. It'll be our last show in 2022. When we come back in 2023, we'll have Damian back, we'll do predictions and until then goodbye.