Attorney General Landry throws seismic punch at ESG insanity

Woke asset managers like BlackRock and Vanguard have been forcing publicly held companies like Chevron and Exxon to embrace insane ESG (environmental, social and governance investment policies) that are harmful to investors—policies that Warren Buffett has called “asinine”, and corporate Boards were rendered helpless—that is until Louisiana Attorney General Jeff Landry issued a stern warning to his state pension board that ESG investing is likely a violation of their Fiduciary Duties. Furthermore, his Louisiana Opinion has seismic implications to all of Wall Street as it suggests that state pension-fund board members, public pension plan trustees, investment staff and registered investment advisors may be personally liable if they continue allocating funds to ESG.
Mr. Landry’s opinion was tailored to Louisiana law, but as was disclosed in an WSJ article “ESG Can’t Square With Fiduciary Duty”, by Professor Jed Rubenfeld and former U.S. AG William P. Barr, he invoked principles that are part of the common and statutory laws of most states—like the Uniform Prudent Investor Act which states that “no form of so-called ‘social investing’ is consistent with the duty of loyalty if the investment activity entails sacrificing the interest of trust beneficiaries—in favor of the interests of others pursuing the particular social cause.”
Perhaps the biggest bombshell in Mr. Landry’s Opinion was his allegation that BlackRock had undisclosed conflicts of interest when they promoted ESG criteria against U.S. companies but not Chinese companies—citing in particular BlackRock’s 2021 use of proxy voting rights as Exxon’s second-largest shareholder to force Exxon to cut production by dropping oil fields that were “poised to be acquired by Petro-China”, and that BlackRock is “one of Petro-China’s largest investors.” Mr. Rubenfeld/Barr confirmed this huge conflict of interest as BlackRock owned approximately 7.5% of Petro-China. Has China bought off everybody?
Exxon is not alone in this ESG attack; also consider the plight of Chevron’s Board which was forced to consider reducing “Scope 3 emissions”, which is defined by the EPA as “emissions that are the result of activities from assets not owned or controlled by the organization, but that the organization indirectly impacts in its value chain.” Although the Board opposed the proposal, “the resolution earned majority shareholder support, including from its three largest shareholders at the time, Vanguard, State Street and BlackRock—and would have required Chevron to account for whether its employees drive hybrids or Humvees to work, etc.”. Although the Chevron Board stood its ground on Scope 3, it later announced a new $10 billion in spending on low-carbon projects and said that it “supports the Paris Agreement and a carbon tax.”
Yes, this is truly “Orwellian”!!! What ever happened to the fiduciary obligation of evaluating all projects on financially measurable return on investment? Perhaps Jeff Landry’s “warning” will bring back a sense of sanity and fiduciary responsibility to Wall Street.

Steve Gardes is a Certified Public Accountant (CPA) and Certified Valuation Analyst (CVA) with over 40 years of public accounting experience.