28 Aug PUBLIC PENSION CORNER #54: Mark Carney Gets Mugged by Reality
NEWS:
I. No ESG in Trump Accounts
The Treasury Department (with the help of others in the administration) has proposed a rule barring the use of ESG investment strategies in “Trump Accounts”:
The rules restricting ESG funds from being included in Trump Accounts come alongside other rules ensuring that investment options in the accounts have low fees to ensure investors keep more of their money.
“Corporate America has rejected ESG ideology, and we will not allow it to be a part of Trump Accounts,” Treasury Secretary Scott Bessent told FOX Business in a statement.
“These accounts exist to build financial security for America’s children, not to advance political activism or ideological agendas,” Bessent added.
II. SEC Confirms Permanent Suspension of No-Action Letters
The Securities and Exchange Commission (SEC) has announced that it is making its erstwhile temporary changes to the shareholder proposal process permanent:
The top U.S. financial regulator on Friday made permanent its decision to cease judging whether companies may exclude shareholder resolutions from votes at annual meetings, leaving investor activists concerned about diminishing influence.
In practice, the change announced by the U.S. Securities and Exchange Commission extends a freeze put in place last November on deciding whether to approve corporate requests to skip votes on shareholder proposals….
The latest move will help the SEC’s Division of Corporation Finance focus resources on a broader review of filings, the agency said in a statement on its website, opens new tab. It said it has created an “extensive body of guidance” about whether shareholder proposals could be excluded or not.
COMMENTARY
By Stephen R. Soukup, President and Publisher, The Political Forum
“Mark Carney Gets Mugged by Reality”
Canadian Prime Minister Mark Carney is easily one of the strangest and most interesting characters ever to grace the global stage. He is the former Governor of the Bank of Canada and the Bank of England. He is a former advisor to the Prime Minister of Great Britain on COVID and related matters and a former advisor to the Prime Minister of Canada on economic matters. He was the chairman of the G20’s Financial Stability Board and a United Nations envoy for climate change finance. He is a proud Prime Minister of Canada who attended an American university, who married an Englishwoman, whose daughters have attended college or lived for extended periods of time in the United States or Scotland, and who got his start in finance working for one of the largest American banks. In 2015, Carney gave the speech that ignited the global ESG movement, and in 2021, he and Michael Bloomberg created the global financial infrastructure intended to push all the world’s banks, insurance companies, and asset managers toward net zero. It is fair to say that no one – not even Bloomberg or Larry Fink or even Klaus Schwab – has done more than Mark Carney to promote the global adoption of anti-fossil fuel financial rhetoric and the architecture designed to eliminate their usage through financial pressure. In many ways, he is the contemporary godfather of sustainability-directed finance.
And yet…
In the less than 18 months since he became the Canadian Prime Minister, Mark Carney has, more or less, become a strong ally of his country’s oil and gas industries. In a note to clients/readers this morning, the good folks at Doomberg (an energy and finance analysis and forecasting publication) called Carney “the best friend the hydrocarbon industry has ever had.” They weren’t serious about this characterization, of course, but nor were they entirely unserious. Much to his erstwhile supporters’ chagrin, Carney has, indeed, become something of a “tool” of the fossil fuel industry. Since becoming Prime Minister, he has:
- Ditched Canada’s consumer carbon tax;
- Suspended the federal oil-and-gas emissions cap and rolled back the clean electricity rules;
- Signed a deal with Alberta’s premier to ease some climate regulations to boost energy investment and now supports a new oil pipeline to the West Coast;
- Ended the national EV mandate;
- Shifted his rhetoric, going from calling climate change an “existential threat” to telling Canadians to expect higher emissions and labelling emissions-reduction plans “too expensive” and “unsustainable;”
- Altered his priorities, now ranking geopolitical chaos as a bigger threat to Canada than climate change.
Over at Doomberg, they are predicting that the biggest shift in Carney’s embrace of fossil fuels is yet to come. In the midst of the current Canadian-American standoff over trade and tariffs, they expect Carney’s “metamorphic transformation” to a fossil fuel supporter to enter “its wildly unnatural final act.” And as a result, they write, “global energy flows are about to shift in ways few thought possible.”
I hate to step all over anyone’s subscriber-only conclusions, but what the folks at Doomberg are expecting is for the trade kerfuffle to create “a pipeline construction boom” in Canada, as the Carney government seeks to shift the nation away from its dependence on American energy markets. Carney will, in short, use the trade dispute, plus his efforts to restore more friendly ties with Alberta, to turn Canada into an energy-producing powerhouse by committing the country more fully to redirecting its oil and gas exports away from the United States and toward Asia and Europe. “Midstream assets, on the other hand, are best modeled as immortal,” Doomberg notes, meaning that the current spat between America and Canada will eventually end, but the repercussions of the decisions made during the spat will endure for a long, long time. Under Mark Carney, of all people, Canada will see its fossil fuel potential fulfilled.
Now, to be clear, I don’t know if Doomberg is right about this. Indeed, even they don’t know that they’re right. They’re making a prediction. They do know what they’re talking about in general, however, which is to say that I think they are probably right, and Canadian energy production and distribution are likely to enter a new, more booming era.
All of that said, for our purposes today, it doesn’t really matter if they’re right about this specific forecast or not. What matters is that the trend on which they based their prediction is right. Mark Carney has gone from being the head of a global anti-fossil fuel cabal to being one of the most significant players in the expansion of hydrocarbon production. This conversion is largely inarguable, and the question that we’re left with is “why did it happen?” Did someone hit him in the head with a hammer to knock some sense into him? Was he knocked off his horse on the road to Damascus by a flash of light and have the scales fall from his eyes?
In truth, it was likely nothing quite as dramatic or profound as either of these. If Mark Carney was hit or knocked over by anything, it was simply reality. Once he became the Prime Minister; once he was privy to the day-to-day machinations of real power executed in his own name; once he realized that the fate of more than 41 million people was, in large part, in his hands; once he came to understand that the real world requires real solutions and not merely millenarian slogans, especially when that real world entails an unsteady minority government, a massive province flirting with separatism, and a trade war with the world’s lone hyperpower, he accepted his fate and corrected his course. Or to put it more bluntly: even the architect of the global climate finance movement that undergirds ESG couldn’t deny reality: at this point, in this geopolitical environment, under these economic circumstances, net-zero is a utopian fantasy that can have real and profoundly serious financial consequences.
And therein lies the lesson for investment and pension professionals as well. Reality bites, as Winona Ryder might tell you, but financial strategies based on the non-recognition of reality (to borrow a phrase from Eric Voegelin) bite even harder.
None of this means that Mark Carney has become a right-wing, oil-loving anti-environmentalist. He’s almost certainly the same person he’s always been, with most of the same ideological predispositions and core beliefs. It’s just that he’s come to acknowledge that those predispositions and beliefs are sometimes incompatible with the duties he’s taken on as a representative of the people. And if the man more responsible than any other single individual for the spread of ESG can subordinate his personal predilections to reality and the duties he owes the people, then anyone can.
