Aside from innovation, BOOM and bust cycles are driven by three factors: Government regulation, market intervention, and the injection of public funds into the market.When governments want to “encourage” investment into one sector or another, they do as BlackRock CEO, Larry Fink, does with the tools available to them.Here’s what Fink, CEO of the world’s biggest asset manager says about ESG policies:
“Behavior is going to have to change and this is one thing we’re asking companies to do. You have to enforce behavior and at BlackRock we enforce behavior.”
What behaviors are BlackRock enforcing?Fink is referencing policies that affect the environment, sustainability, and governance of publicly-traded companies.Because his largest clients are government bodies, he’s made it his fiduciary obligation to put the majority of his hot air into a Mary Poppins-like umbrella act of driving the BOOM and bust cycle higher.Since 2017, Wall Street’s poured over $300 Billion dollars into ESG funds.That is until, the last three years.The Wall Street Journal Reports:
Wall Street’s ESG Craze Is Fading
“Wall Street rushed to embrace sustainable investing just a few years ago. Now it is quietly closing funds or scrubbing their names after disappointing returns that have investors cashing out billions.
The about-face comes after tightened regulatory oversight, higher interest rates that have slammed clean-energy stocks and a backlash that has made environmental, social and corporate-governance investing a political target.”
Last year, investors pulled about $14 Billion dollars out of those labeled ESG funds. But, you know, bankers aren’t stupid. They watch their funds, and they’re paying attention to the changes.Corporations focused entirely on green initiatives are having a ridiculously difficult time with interest rate hikes. Many of them are depending on the forced behavior from governments, regulatory bodies, and even banks to sustain their business.Banks, by the way, loan money to green-washing businesses to obtain the rewards of ESG initiatives…It’s all very artificial.Now companies contained in ESG funds are facing financial difficulty, we see more fund managers comfortable with stretching the definition of what investing in the environmental initiatives cover.Last year, Forbes reported:
Are Defense Stocks Now ESG?
“”Qualifying” oil and gas companies now make up a larger slice of some ESG funds’ holdings. For example, oil giant ExxonMobil has become the 17th biggest holding in BlackRock’s ESG exchange-traded fund, compared to 38th at the end of 2021.”
ESG companies just can’t survive on the premium pricing needed to maintain a profitable income. They need lower rates, and the rest of the government persuasion…Irina Slav at OilPrice.com responds:
ESG Moment of Truth Turns Tables for Big Oil
“…That’s probably for the same reason as the one investors away from ESG funds and into oil and gas: oil and gas are making money. They are making money because the world needs them, including the loudest cheerleaders of the transition, such as the UK and Germany, not to mention China, which is simultaneously the biggest investor in wind and solar and the biggest investor in coal.
The ESG investment movement has had a moment of truth, and things are changing fast. Investors are falling back on the certainty of oil and gas…”
Not only are investors falling back on the certainty of oil and gas, but since the invasion of Ukraine fund managers have been stretching the ESG label even further.Now we’re looking at Defense / Military suppliers taking up larger portions of ESG funds.Bloomberg writes:
Asset Managers Quietly Add ‘ESG’ to Portfolios of Defense Stocks
“In the world’s biggest ESG fund class, portfolio managers are getting more comfortable with holding military assets against a backdrop of mounting political pressure and industry profits.
At the end of the third quarter, 1,238 funds claiming to “promote” environmental, social and good governance goals held stocks in the industry classification code Aerospace & Defense, according to Morningstar Inc. data. That’s roughly 25% more than in March last year, right after Russia invaded Ukraine.”
So as defense corporations continue to contribute more to ESG funds, and the already inflated ESG fund profits slowly decline, it would be prudent to make this inquiry for yourself as an investor:Who’s contributing to the markets more? Governments or Consumers?Certainly, consumers do not choose to buy military equipment, cluster bombs, and surveillance satellites to protect the swing set in the backyard…The everyday Joe like you and I are thinking about the monthly food budget, that light bulb we need to change on the back porch, and how much we’ll need to save for our kid’s university tuition.But the times, they are a changing…And we “need” to prioritize the sustainability of each and every industry… including cluster bombs(made with soy-bean shells?).At least, that is what our rulers say.More By This Author:Next Year’s Housing Crash, In Charts And AnecdotesIs Gold A Manipulated Market?Gratitude Check: Gold Price Resistance Proves Sound Money Works
