Question
What do each of you see as the major challenges facing boards beyond the economy? For example: Do you think we will see more pressure from certain state actors on corporate policy a la Florida and Disney? Do you think the large funds (Blackrock, State Street, Vanguard) will continue to pressure companies for certain social change?
Answer
In my book, The Profit Motive: Defending Shareholder Value Maximization, I discuss the question of whether CEOs have become social justice warriors. Some have. Most of the supposedly woke CEOs, however, revert to shareholder primacy when push comes to shove.
As for the big three asset managers—BlackRock, State Street, and Vanguard—all claim to have embraced ESG because they believe that ESG factors are positively correlated with firm performance. But I think it’s mostly greenwashing. Case in point: The coal-fired Hardin Generating Station in Montana had been struggling for years. Late last year, a Nasdaq-listed bitcoin miner called Marathon Digital Holdings Inc. partnered with Hardin’s owner to transform the power plant into a hub for mining bitcoin.
The project is in the process of scaling up, with more than 100 megawatts of power capacity planned. Marathon Digital said that by tapping the Montana coal plant, its break-even costs to produce a bitcoin will fall to $4,600, 38% less than previously.
One of Marathon’s biggest shareholders? BlackRock.
Back in March we learned that Vanguard CEO Tim Buckley was backing his massive fund family away from ESG: “Our research indicates that ESG investing does not have any advantage over broad-based investing,” Mr. Buckley said in a recent interview with the Financial Times. Matching word to deed, his comments came after he had withdrawn his firm from the $59 trillion Net Zero Asset Managers initiative, an organization that is part of the $150 trillion United Nations-affiliated Glasgow Financial Alliance for Net Zero. Both alliances are committed to restricting their investments over time to companies that are compliant with the Paris Agreement’s objective of net-zero greenhouse gas emissions by 2050. Mr. Buckley claims the financial world, swept up in climate-change fervor, can’t make such commitments without reneging on its fiduciary duties.
