“The genius of the ESG movement—and we have to recognize how clever this movement actually is—is they are able to find the pressure points. And so they’re able to find who can we go to to essentially get leverage over these companies.”
In this episode, I sit down with Kevin Stocklin, writer and producer of "The Shadow State," an EpochTV documentary that investigates the industry of environmental, social, and corporate governance, also known as ESG.
“If you're a farmer, you pretty much have to dance to their tune. And they have gone out and they've said to their farmers as a result of the ESG movement, ‘This is what we want you to do. This is how we want you to produce. These are the processes that we want you to follow if you're going to sell to us,’” says Mr. Stocklin. “It's the banking industry, it's the asset management industry, and it's the insurance industry. And if you can get these folks on board, you can control everything else.”
How does the ESG mechanism work? Who are the players involved? And is there a way to push back?
“We're starting to see the power that private industry has to control us in a way that, in the West at least, the governments legally can't do,” says Mr. Stocklin.
He explains how ESG is both an industry and an ideology. Put simply, it is a way to use consumer money to impose a progressive agenda on the private sector in America.
“Even though it's our money that's funding the whole thing, they basically are the ones that have the votes, and they're able to put pressure on companies to essentially do what they want them to do,” says Mr. Stocklin.
We have to understand ESG both as an ideology and as an industry.
So, as an ideology, there's this umbrella of progressive issues,
and it's everything from climate change and reducing carbon emissions
to social justice, racial equity, economic equity worldwide, and things like this.
That's the ideology of it.
But it's also an industry. It has tens of trillions of dollars behind it,
and these trillions are used to really arm-twist corporate America
into getting along with the program.
I think the simplest way that people can understand ESG
is that it's a way to use other people's money, effectively our money,
to impose a progressive agenda on the private sector and on the United States.
It's almost hard to imagine how it is that a lot of corporate America
has come to kind of be on board with all sorts of these
what turn out to be ideological agendas.
So trace to me how that happened,
because it certainly wasn't like that 20 years ago.
The big picture of this is really kind of a shift in how Americans save their money,
if I could just take a step back and put it that way.
So there was a time when if you wanted to save for your retirement
or your kid's college or to buy a house,
you might buy shares in AT&T or GE or something like that.
But over the past several decades we've seen the rise of the fund industry,
whether that's mutual funds or ETFs or index funds or pension funds.
And what this means is that there is now an entire industry between us and the company.
So where before we would have been shareholders in AT&T,
now we are no longer shareholders.
We are what's called the end investor.
We don't own shares in AT&T. We own shares in these funds.
The fund managers, whether that's BlackRock or Vanguard or State Street or whoever,
they're the ones who turn around and buy shares in these companies.
They're the shareholders, and they have all of the votes when it comes to voting those shares.
So in addition to that whole industry that's sprung up between us and the companies,
we also have rating agencies, we have all sorts of nonprofit pressure companies,
and they are able to act on these companies,
even though it's our money that's funding the whole thing.
They basically are the ones that have the votes,
and they are able to put pressure on companies to essentially do what they want them to do.
So it's the rise of these sort of middlemen in a way, right?
But obviously massively influenced.
In the case of BlackRock, is it the level of assets of the U.S. economy or something like that under its management?
I can't remember what it is, but it's some astronomical number that's almost unfathomable.
Close to that.
So depending on how the market's doing on any given day,
BlackRock has between $8 and $10 trillion under management.
The three largest index fund managers are BlackRock, Vanguard, and State Street.
In between the three of them, they have close to $20 trillion of assets under management.
That's about equal to U.S. GDP.
And just to give you some stats on this,
so 75% of all the shares in U.S. companies are currently owned by these institutional asset managers
versus private people going out and buying shares directly.
But if you look at those top three asset managers, Vanguard, BlackRock, and State Street,
so for about 90% of the companies in the S&P 500 today, they are the largest shareholders.
One or some combination of those companies are the largest shareholders in those companies,
whether it's Apple or Alphabet or whoever.
So it just gives you a sense of the power that a very small number of these asset managers have over private industry.
Well, and then there's this example of that power where, for example,
the Exxon board was basically reorganized, from what I recall, by these asset managers.
Do you remember this?
Yeah. So it was a very small activist shareholder called Engine One.
And their plan was that they wanted to put environmental activists on the board of Exxon.
As we know, that's an energy company. They produce oil and gas.
And what they were able to do is leverage their relationships with BlackRock,
with State Street, Vanguard, also with some of the activist state pension funds, CalPERS and CalSTRS out in California,
and put together a coalition of shareholders that essentially forced Exxon,
against the wishes of management, to put these three activists on their board.
And their goal was to divert Exxon away from producing oil and gas towards producing so-called renewable energy.
I just want to comment on this. This is a bit of a mind work.
I never imagined myself imagining that Exxon could be coerced into doing anything, a company of that size and stature.
The genius of the ESG movement, and we have to recognize how clever this movement actually is,
is they are able to find the pressure points.
And so they're able to find who can we go to to essentially get leverage over these companies.
And so they found that we can't talk to however many millions or billions of shareholders are out there or consumers or anyone else,
but we can find these short list of asset managers and pension fund managers who actually pull the strings when it comes to shareholder votes.
And so, yeah, they were able to do this with a company as large as Exxon, one of the largest companies in the world.
When we were talking offline, you were showing me how the World Wildlife Fund, for example,
how they think about this in their own words. I thought this was absolutely fascinating. Let's roll that clip.
We actually need collusion around sustainability at every level with every type of institution.
Where do we start? Who do we work with? How do we work on these issues?
This is new ground for us. So we decided we needed to map it out.
There's 6.8 billion consumers, give or take, maybe closer to seven today.
Do we work with all those? Do we work with the 1.4 billion producers of all these different products?
Do we change the way they produce things? Or do we focus on the narrower neck, the pinch point in each of these commodities,
where 300 to 500 companies control 70 to 80 percent of each of those 15 commodities that we care about?
We decided that this is the strategy that we could actually get our arms around.
It's kind of incredible. They're talking about actual pinch points,
figuring out if you can get the right leverage in the right places in the system, for lack of a better term,
you can actually exert an incredible amount of control and not even be that significant ostensibly in the system,
as long as you're playing on the same ideological game, I suppose.
Yeah, so this is another case of someone in a moment of hubris saying the quiet part out loud.
So first of all, he talks about collusion between companies, which is illegal, but he's not worried about that.
But the point is, he's not concerned about the billions of consumers out there, right?
Don't bother with them. Neither does he want to bother with all of the farmers out there who are actually producing beef.
In this case, they were trying to control the beef industry. So we're not concerned about them either.
We're going to go to the very large food manufacturers and food processors.
There's very few of them that control the buying and the selling of agricultural products.
We're going to go to them and we're going to get them on our side.
But it speaks to the underlying beliefs of this movement that the consumers, us as consumers and us as farmers
and us as small-time, family-owned companies, we shouldn't have a voice in any of this.
We should not have a say in any of this. We should do what we're told, essentially, by these key industry insiders.
And so fundamentally, this is one of the most anti-democratic movements that's ever arisen.
Don't forget to subscribe to our Alerts newsletter, and you'll never miss an episode.
