I want to start today with a brief discussion of one of Canada’s own woke capitalists, the Goldman Sachs alumnus, former governor of the Bank of Canada, and former governor of the Bank of England, Mark Carney.

In any room of normal people in Canada, the UK, or the United States, Carney would stand out as a woke capital and climate change radical.  He is a United Nations special envoy for climate action and finance.  He was Boris Johnson’s finance advisor for the just-completed COP26 climate change conference in Glasgow.  He was among the first economists and finance experts to insist that markets have a significant, if not decisive, role to play in battling climate change.  In 2015 and 2016, Carney took on the role of the first and most prominent “missionary” for the creation of the narrative that central banks should play a meaningful role in the management of the climate.  In a January 24, 2020 piece titled “A New Road to Serfdom,” my friend Rusty Guinn, founding partner and CEO of Epsilon Theory, described Carney’s September 2016 speech in Berlin as “a masterpiece of narrative construction, explicitly conflating climate change with terms of art in the world of financial risk management.”  At the time, Carney was, as Guinn put it, “a missionary – or perhaps a prophet – alone in the wilderness, shouting that something must be done to address the risks of climate change through monetary policy.”

In short, Mark Carney is the one man, perhaps more than any other, who made climate change and the attendant curbing of fossil fuel usage a major consideration for banks, bankers, asset managers, and other financial players.  He is, in some ways, the godfather of what I and others call “woke capital,” a radical if ever there was one.

Yet in the circles in which he travels – COP26, for example – Mark Carney is considered a moderate, a reactionary even.  GFANZ – the Glasgow Financial Alliance for Net Zero – of which Carney is the chairman, is being called one of the most prominent and most disappointing failures of the summit, in large part because Carney et al. wouldn’t commit to eliminating fossil fuels totally and immediately.  Carney agrees that fossil fuels need to be eliminated and that “alternatives” are not just better for the planet but, ultimately, better for consumers as well.  Nevertheless, he’s not all that keen on societal suicide, and so he sees fossil fuels as a necessary evil for the time being.

And among the government officials, media, and other key players in Glasgow and national capitals worldwide, that makes him a part of the problem, not the solution.

I’d like you to watch this very brief video clip.  The woman shown here, saying that “we want” coal, oil, and gas companies to go bankrupt so we can tackle climate change, is Saule Omarova.  That she’s a law professor at Cornell University is disquieting.  That she is also President Joe Biden’s nominee to be the comptroller of the currency is even more disquieting but hardly surprising.  SHE is typical of the type of person who is directing and will be directing administrative climate change policy going forward.  SHE is the problem – YOUR problem.  SHE is clearly driven by ideology first and foremost.  SHE is the threat, long term.  SHE thinks that the “radical” Mark Carney is a joke.  SHE intends to put you out of business.  And there are literally tens of thousands like her in various governments throughout the Western world.

Now, to be honest, neither Omarova nor the countless others like her have the power to bankrupt you, to put oil and gas companies out of business.  Even if she is confirmed as comptroller – which becomes less and less likely every time she opens her mouth – she will not have that power.  Fortunately, the nations of the West – the only nations that have decided that climate change can be addressed only through irrationality and hysteria – are still, at least nominally, democratic, and they must, therefore, defer, to some extent or another, to the will of the people.

Unfortunately, at least 150 years of history have shown that agents of the state, when stymied by democracy and constitutional governance, are ready and willing to undermine that constitutionality and undermine the will of the people by empowering non-democratic actors to accomplish the tasks that are “too important” to leave to the masses.  This sentiment – a combination of arrogance and contempt for the people – is the foundation of Western “public administration.”  It is also the animating force behind ESG – environmental, social, and governance investing – an activist investment strategy that seeks to impose external, non-pecuniary values on businesses, their managers, and their boards, in direct contravention of the will of the people in general and, often, in direct contravention of the best interests of shareholders.

To help demonstrate how this happens and how quickly it happens, I’d like to provide an example from my book.  This example may not affect your business operations directly at the moment, but it shows how focused the woke ideologues are on compelling business to do their dirty work and how effective they are on doing so.

In 2016, some of the biggest names in American finance – J.P. Morgan’s Jamie Dimon, BlackRock’s Larry Fink, Vanguard’s Bill McNabb, State Street’s Ronald O’Hanley, and Berkshire Hathaway’s Warren Buffett, to name just a few – all got together to create and sign a document called “Common Sense Governance Principles.”  Among other things, these principles urged corporations to embrace diversity as a source of strength and innovation.  Interestingly, however, they defined diversity as follows:

Directors should have complementary and diverse skill sets, backgrounds and experiences. Diversity along multiple dimensions, including diversity of thought, is critical to a high-functioning board. Director candidates should be drawn from a rigorously diverse pool. . . .While no one size fits all—boards need to be large enough to allow for a variety of perspectives.

What’s important here is that this definition of diversity is both practical and workable.  It emphasizes perspectives and viewpoints, and calls “diversity of thought” “critical.”  It also allows for corporations to define diversity for themselves in order to meet their unique and specific needs.

It is also worth noting that this definition of diversity is well-aligned with the definition promulgated by the Securities and Exchange Commission in 2009:

We recognize that companies may define diversity in various ways, reflecting different perspectives. For instance, some companies may conceptualize diversity expansively to include differences of viewpoint, professional experi­ence, education, skill and other individual qualities and attributes that contribute to board heterogeneity, while others may focus on diversity concepts such as race, gender and national origin. We believe that for purposes of this disclosure requirement, companies should be allowed to define diversity in ways that they consider appropriate.

As it turns out, however, the year after the financial Masters of the Universe signed their governance treaty, Eric Holder, President Barack Obama’s first Attorney General, embarked on an effort to alter forever the way diversity would be defined for corporate purposes.  Holder was hired by Uber to investigate charges from a female former employee that sexual harassment and sex­ism were rampant at the company.  Although most of the recommendations he made were fairly mundane, to the point of banality, Holder did recommend that the company focus “on the presence of diverse employees based on religion, race, age, sexual orientation, gender, and culture.”

Holder’s position and his definition of diversity contradicted both the Common Sense Principles written and the SEC’s official position, in that it eliminated perspective and viewpoint diversity from the discussion entirely.  This was no accident.

The year before he signed on to rework Uber’s diversity plans, Holder had been hired by Airbnb to help it revamp its antidiscrimination policies. Three years after that, he was hired by the American Institute of Architects to help them fight racism and systemic bias in their awards presentations. Also in 2019, Holder gave the keynote address at the National Diversity Council’s “top 50 general counsel dinner.” In short Eric Holder became the go-to guy on corporate diversity. The former Attorney General, who left office under fire for refusing to prosecute anyone on Wall Street for fraud related to the 2008 Great Financial Crisis and who had resumed his private practice of defending many of the firms he had gone easy on while in office, reinvented himself as a “diversity guru,” by focusing exclusively on superficial and skin-deep characteristics and ignoring the sorts of diversity that had been shown to have an actual impact on corporate performance.  Viewpoint and political diversity were not merely irrelevant to Holder, they were distractions from his ultimate “antiracist” goal.  And so he shelved them.  Permanently.

Not long afterward, in 2019, Larry Fink, the man who signed the Common Sense Principles just three years earlier, told his firm’s 14,000 employees that “he is instituting potentially the most aggressive diversity program in corporate America, ensuring that ‘a bunch of white men’ will no longer be running the world’s largest money management firm.”

That same year, Justin Danhof, now-the Executive Vice President of the National Center for Public Policy Research, put a handful of very large corporations to the test, seeing how they felt about the Common Sense Principles that were no older than a toddler and had been agreed upon by the best and the brightest in American finance.  Danhof introduced a “True Diversity” shareholder proposal to be voted on by the shareholders of Amazon, Salesforce, Twitter, Facebook, and Apple. “We believe,” the proposal stated, that “a diverse board is a good indicator of sound corporate governance and a well-functioning board. Diversity in board composition is best achieved through highly qualified candidates with a wide range of skills, experi­ence, beliefs, and board independence from management.”

Apparently, that was too much for many corporations and shareholder activists to stomach.  When he presented his proposal at Amazon’s 2019 shareholder meeting, Danhof was, in his own words, “booed and heckled” throughout his presentation. Afterward, he continues, “a representative from Arjuna Capital suggested that I was there to ‘protect white males.’ Then, after the meeting, a representative from the Nathan Cummings Foundation tracked me down to suggest I should get going so I wouldn’t be late for my ‘next Klan meeting or book burning.’”

I could go on and on…and on for some time in this same vein.  But I imagine you get the point.  In a world with no set definitions of what is or is not proper and ethical, those definitions are manipulable and malleable, changing to meet activists’ ever-changing demands.  Five years ago, “diversity of thought” was critical to effective corporate governance.  Today, the Nasdaq stock exchange will – with the SEC’s tacit approval – delist your company if you don’t have at least one woman AND one underrepresented racial or sexual minority on your board, regardless of their competence and irrespective of their impact on the firm.  Eric Holder has triumphed, and “common sense” diversity is now considered fascist.

That, I’m afraid, is the bad news.  The Revolution, as Jacques Mallet du Pan noted, always eats its own.  The extremists in the government and in various NGOs and other activist organizations will work their proverbial fingers to the bone to force their radical positions into the mainstream and to overthrow what is considered normal today (but was considered radical in its own right just a few months or years ago).

Fortunately, for most of you, that’s not the end of the story.  There is, we’ll admit, good news – for traditional energy producers, at least.  Ironically, that good news comes courtesy of two of the most authoritarian and brutal regimes on the face of the planet: the People’s Republic of China and the Royal House of Saud.

Last week, China rained on Boris Johnson and Prince Charles’s Glasgow parade by refusing to agree to reduce its reliance on coal power and refusing to revise its emissions reductions proposal.  In so doing, it exposed the overwhelming failure of COP26 – namely that none of the agreements mean a damn thing if the world’s largest carbon emitter doesn’t play along.  China is out.  China will continue to produce and use coal.  China doesn’t give a damn about Prince Charles’s Aston Martin that runs on wine and cheese.  All of which means that fossil fuels are not going anywhere – atv least not yet.

More surprisingly, we suppose, three weeks ago, the Kingdom of Saudi Arabia hosted the world’s financial glitterati in Riyadh to discuss investment in its new and improved “green” future economy.  While there, and presumably at the encouragement of the regime, Larry Fink, himself the king of “sustainability,” declared that anyone who seeks fossil fuel elimination in the near term is out of his damn mind.  Indeed, Fink called for MORE investment in fossil fuels, insisting that “short term policy related environmentalism, in terms of restricting the supply of hydrocarbons” – that is to say, fossil fuel divestment and production restrictions – “has created energy inflation.”

It is worth noting here that despite his sustainability gambit, Fink and his company are still the number one shareholder of PetroChina, the listed arm of the Chinese National Petroleum Company, formerly the largest company in the world.  They are also, according to the Guardianamong the top three shareholders in every oil ‘supermajor’ bar France’s Total, and…among the top 10 shareholders in seven of the 10 biggest coal producers.”

In the short-term, at least, Larry Fink doesn’t want fossil fuel production and usage to go anywhere – anywhere but up, that is.  Giving him the benefit of the doubt, I’d say that this is because he senses the potential severity of the present energy crisis and worries about the economic impact of energy inflation.  Giving Fink the benefit of reality, however, I’d say that this is because he stands to make a mint.  While he talks a good game on sustainability, he nevertheless remains invested in and thus reliant upon fossil fuels.  And he’s hardly alone.

The best part of all of this is that it doesn’t really matter whether Fink is being magnanimous and statesman-like or selfish and greedy.  The end result is the same – fossil fuels have been granted a respite, a grace period of sorts, by the capital market giants.  And while the relentless attacks on the industry will undoubtedly continue rhetorically, the cold, hard financial reality will prove more important.

But only for the time being.

Not being an expert on fossil fuel production or energy production more generally, I can’t tell you how you should spend this “grace period,” what you should do to extend it or make it permanent.  I can, however, tell you that right now, the grace period is temporary. They will come for you eventually.  Saule Omarova’s present-day radicalism is tomorrow’s conventional wisdom.  You can count on that.  They will, in time, seek to bankrupt you.  End of story.

I can also tell you that they will try to use the capital markets to do so.  Woke capital is part and parcel of the Progressive movement as it was founded 150 years ago.  If democracy will not allow for certain policies to be implemented, then democracy must be circumvented.  And the capital markets are the circumvention method of choice at present.

Be grateful for your reprieve.  Be aware that it is temporary.  And know that people like Mark Carney will not make the rules that ultimately determine your fate.  He may have been the first missionary in the creation of the finance and climate change narrative, but his ideas are already considered passe and irredeemable by the radicals.  Worse still, in the future, he is likely to be considered a revanchist tool of the old guard.  That’s the way revolutions work.  And we are, inarguably, in the midst of one of the most significant revolutions since 1917, if not 1789.

Plan accordingly.


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