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Opinion: The imminent face-off: free markets vs. ESG


The old farmer quit feeding his cats thinking hungry cats would catch more mice. The cats quickly became too weak to catch a mouse, and the mice took over his grain bin. 

The little fable is a classic example of “unintended consequences.” Perhaps even Larry Fink — billionaire CEO of BlackRock and some say the smartest person in the room — could learn something from the fable. Mr. Fink is the grand poobah of the Environmental, Social, and Governance (ESG) movement. BlackRock is the world’s largest money-management firm, and Mr. Fink, with sword drawn, is leading the ESG crusade.

ESG is a movement conceived by the UN Environmental Programme in 2005. The primary objective of ESG is to pressure banking and investment companies to divest from the fossil fuel industry in order to cut off fossil fuel production and usage. The effort to address the existential threat of climate change knows no bounds.

Is Mr. Fink’s ESG strategy working? Unquestionably, the joint efforts of the ESG proponents and the Biden administration have dealt a gut-punch to the coal, gas, and oil industries. However, unintended consequences may be about to crash Mr. Fink’s party.

Under the Biden administration, federal departments and regulatory agencies are breathlessly pushing the president’s ESG directive. With coal plants shuttered, pipelines canceled, and drilling blocked, fossil-derived energy resources have been diminished, and prices have surged. The high prices have renewed investor interest in fossil fuels. Driven by the supply shortages, energy corporations are the best performing sector of the S&P 500 so far this year, and crude oil is likely headed for $100 a barrel. Yes, free-market forces have rallied to challenge the purely political ESG movement.

As a CEO of a private company, Mr. Fink is entitled to promote ESG. On the other hand, the federal government should not be picking winners and losers. That’s what they do in Venezuela.

Some state legislatures just can’t resist a fight. Red states (Texas, North Dakota, Oklahoma, West Virginia. and Arkansas) are working on, or have passed, legislation to ban state investments with companies that refuse to do business with the oil and gas industry. And blue states (Oregon, Illinois, New Jersey, and Maine) are working on legislation to block fossil fuel investments with state funds.

Legislators from both red states and blue states need to carefully weigh the potential for unintended consequences resulting from such retaliatory legislation.

John Muir said it best: “When we try to pick out anything by itself, we find it hitched to everything else in the universe.”

Implementation of pro-ESG policies harms Missouri residents and businesses. As many families struggle to heat their homes on these cold winter nights, we can only wonder why some leaders insist on the self-inflicted pain caused by depriving us of fossil fuels before we have viable energy alternatives in place.