Carbon Change by Dennis McConaghy

Author:Dennis McConaghy
Language: eng
Format: epub
Publisher: Dundurn Press

It is important to note that in neither Fink’s 2020 nor his 2021 CEO letter does he acknowledge that BlackRock’s commitment to decarbonization requires the virtual elimination of the hydrocarbon production sector. Or that under-investment in hydrocarbon production and related infrastructure over previous years, in part due to ESG decarbonization advocacy, contributed to the energy crisis in Europe over the winter of 2021 and 2022, as well exacerbating geopolitical tensions in the region. He certainly not does discuss the net cost or benefit of decarbonization as an issue deserving of continuing debate, nor balance in how corporations attempt to project the ultimate policy response.

In May 2021, three of the world’s major integrated hydrocarbon production entities were impacted by this phenomenon. First, ExxonMobil lost a proxy battle after certain shareholder activists, supported by some key asset managers, including BlackRock, found the company’s approach to energy transition deficient. As a result, ExxonMobil saw three dissident directors appointed to its board. That same week, the International Energy Agency (IEA) warned that investment in new fossil fuel projects must stop immediately, to allow the global energy sector to achieve carbon neutrality by 2050. ExxonMobil did not embrace that directive as its basic corporate strategy before or after the shareholder vote, but the vote’s outcome was still a measure of how certain business elites and climate activists had collaborated to press the imperative to transition basic energy systems, seemingly without consideration for shareholder value or what constitutes optimal climate and energy policy.

On the same day as ExxonMobil’s vote, Chevron’s shareholders passed a resolution to reduce emissions from the end use of its products. Emissions from gasoline, jet fuel, and petrochemical consumption cannot be reduced materially over the short run, and perhaps not at all in some cases, other than by reducing demand. The resolution was patently absurd without a fundamental reinvention of Chevron’s fundamental value proposition, but nevertheless, it gained 61 percent shareholder support. Finally, contemporaneously, Royal Dutch Shell was ordered by a Dutch district court to amend its corporate strategy to slash its emissions harder and faster. Not surprisingly, Shell responded by appealing and relocating its head office to the United Kingdom.

For decades, these entities, along with BP, had dominated the world’s private energy production and processing sectors, funding fundamental research into the nature of climate change risk and possibilities of transitioning to less emissive fuels. The assaults on their basic raison d’être as corporate entities are emblematic of the radical expectations implicit once the goal of decarbonization is endorsed as some moral imperative to mitigate climate change, regardless of the impacts on shareholder value, not to mention global human welfare. But for the self-avowed elites to so glibly embrace decarbonization without acknowledging its net cost or benefit, and adjusting public policy accordingly, can only remind one of George Orwell’s words, “One has to belong to the intelligentsia to believe things like that. No ordinary man could be such a fool.”

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