Tech Billionaire Backs New Firm Against ESG Investing
Tech billionaire Peter Thiel (co-founder of PayPal and Facebook’s first outside investor) is backing a new asset management firm called Strive, started by author Vivek Ramaswamy with the goal of getting companies to “stop making business decisions” linked to social progress and “instead focus on short-term stock gains.” On ESG investing, an approach using environmental, social, and governance factors to evaluate a corporation's sustainability and material risks for investors, Ramaswamy claims that it’s detrimental to share prices and ultimately decreases profit.
According to Ramaswamy, “Many of the underlying companies are performing more poorly because these large shareholders are telling these companies what to do. [Exxon] would be a more successful company today if it were drilling for more oil.”
CNBC: Vivek Ramaswamy breaks down ESG alternative fund 'Strive' backed by Thiel, Ackman, May 10, 2022.
Hillsdale: Woke Capitalism Against America | Vivek Ramaswamy, May 20, 2021.
Why This Matters
Despite Ramaswamy’s claims, ESG investing is responsible to shareholders, not politics. Companies like Exxon say that their growing “low-carbon solutions” business is a response to economic opportunity, not partisan pressure. Still, while Exxon is building its low-carbon business unit, it is also boosting spending plans for new drilling by 45% this year alone. And, eliminating ESG investing will also put investors’ money at greater risk.
As companies are being required by governments in the US and EU to provide greater disclosures and more detailed climate plans, they will become subject to both regulations and prosecution. About $4 trillion in fossil fuel assets will become worthless by 2050 based on current climate policies, according to the latest IPCC report, which could significantly impact the global economy and cause a massive financial crisis.
BBC: UN scientists say it's 'now or never' to limit global warming, April 4, 2022.
Democracy Now: Bill McKibben | Latest IPCC Climate Report Underscores "Fossil Fuel Is at the Root of Our Problems," April 7, 2022.
Climate Change Is Political
Ramaswamy’s company Strive claims to want to eliminate political ideology from investments and business decisions. But in refusing to acknowledge the private sector’s role in climate change, he’s both providing his own form of political activism and demonstrating climate ignorance. Many of Ramaswamy’s main points are taken directly from the rhetoric of Republican politicians in fossil-fuel states who seek to ban ESG investing and ignore climate change consequences. The same politicians who use public pension funds to exclude or punish companies they don’t agree with on issues from the Middle East to LGBTQ protections. In other words, politicians like ESG investing -- when it fits their ideology.
The majority of Americans believe in climate change and that the government is not doing enough to address it. Still, differing political ideologies have stalled efforts to create more climate transparency and sustainable practices in business. Just 100 companies are responsible for 71% of global carbon emissions. That they have yet to change direction is what’s led to alternative efforts through shareholder decisions, citizen activism, and religious appeals.
IPCC: Video message by UN Secretary General at the WGIII AR6 press conference, April 4, 2022.
The Economist: See what three degrees of global warming looks like, October 7, 2021.