WEBVTT - Big Oil vs. Divestment 0:00:10.160 --> 0:00:11.360 Hey, Drilled listeners. 0:00:11.520 --> 0:00:15.120 We are still on a production hiatus working on our 0:00:15.200 --> 0:00:19.040 next season, but there's a little sneak peek of that 0:00:19.239 --> 0:00:22.599 season at the end of this episode, so make sure 0:00:22.640 --> 0:00:25.360 you listen to the end for that. The reason we're 0:00:25.360 --> 0:00:27.680 coming at you today is because I had the opportunity 0:00:27.960 --> 0:00:31.639 to speak with David Serrata about a recent piece that 0:00:31.720 --> 0:00:35.440 he did in his newsletter TMI too much Information. You 0:00:35.520 --> 0:00:38.879 might recognize David's name from his previous gig at The 0:00:38.960 --> 0:00:43.520 Guardian or as a speechwriter for Bernie Sanders. I wanted 0:00:43.520 --> 0:00:45.960 to talk to him because I get his newsletter and 0:00:46.000 --> 0:00:49.240 I saw an item in there that we had actually 0:00:49.280 --> 0:00:51.600 missed on our policy trackers, so I added it. But 0:00:51.640 --> 0:00:53.760 I also wanted to get the backstory on it. 0:00:53.360 --> 0:00:54.520 It was a. 0:00:54.960 --> 0:00:59.360 Sort of obscure, little proposed rule that basically makes it 0:00:59.400 --> 0:01:05.000 harder to to invest retirement funds in environmentally sustainable funds. 0:01:05.319 --> 0:01:09.240 It's been pushed mostly by the fossil fuel industry, no surprise, 0:01:09.640 --> 0:01:12.560 and we're going to pick up this conversation with David 0:01:12.720 --> 0:01:16.160 explaining more about it in a minute after this message 0:01:16.200 --> 0:01:20.920 from today's sponsor. I'm a Westervelt and this is Drilled. 0:01:40.000 --> 0:01:42.280 So I was I was hoping that you could start 0:01:42.319 --> 0:01:44.240 by sort of saying, you know, what is this rule 0:01:44.360 --> 0:01:48.160 change and what brought it to your attention initially? 0:01:49.320 --> 0:01:56.400 Sure, So ESG investing is basically the technical term for environmental, 0:01:56.840 --> 0:02:01.160 social and governance based investing, And what that's a lot 0:02:01.160 --> 0:02:05.640 of jargon for is investing in a way that takes 0:02:05.720 --> 0:02:10.880 into account what the companies you're investing in are actually 0:02:10.960 --> 0:02:16.120 doing in the world and how their corporate behavior affects 0:02:16.360 --> 0:02:21.200 the environment and the like. And to be clear, it's 0:02:21.240 --> 0:02:25.080 not just to make you as an investor feel good, 0:02:25.440 --> 0:02:29.760 but there's also a financial reason that proponents argue that 0:02:29.840 --> 0:02:33.560 you want to engage in this kind of investing. For instance, 0:02:33.680 --> 0:02:37.480 you don't necessarily want to be investing your retirement money 0:02:37.520 --> 0:02:42.560 in investments that are at risk of being destroyed by 0:02:42.639 --> 0:02:45.680 climate change. Or you don't want to be investing your 0:02:45.720 --> 0:02:53.320 money in investments that are based on destroying the climate 0:02:54.240 --> 0:02:59.080 and could be financially imperiled at the point, hopefully soon 0:03:00.240 --> 0:03:04.280 that we actually take action to not use those products anymore. 0:03:04.320 --> 0:03:08.280 So you don't necessarily want your retirement savings in oil 0:03:08.320 --> 0:03:12.400 companies if you think that at some point we're going 0:03:12.440 --> 0:03:14.440 to basically say, you know what, we have to use 0:03:14.760 --> 0:03:19.280 less oil to not destroy the entire planet. So that's 0:03:19.280 --> 0:03:24.960 what ESG investing is. And the Trump administration has put 0:03:25.000 --> 0:03:30.960 forward a rule that aims to make it harder for 0:03:31.360 --> 0:03:38.240 financial managers to help you move your money and help 0:03:38.920 --> 0:03:45.400 worker retirement systems move that money into ESG investments. Now, 0:03:45.480 --> 0:03:50.800 what the Trump administration says is that the current existing 0:03:51.160 --> 0:03:56.320 Labor Department rules about how financial managers have to invest 0:03:56.640 --> 0:04:00.600 other people's money, that those long standing rules say that 0:04:00.680 --> 0:04:05.880 the financial manager must prioritize above everything else, they have 0:04:05.960 --> 0:04:13.040 a fiduciary responsibility to maximize returns regardless of what kind 0:04:13.040 --> 0:04:16.719 of investments the money is going into. Now, there's a 0:04:17.080 --> 0:04:23.120 good reason for that basic idea of fiduciary responsibility that 0:04:23.640 --> 0:04:26.880 you don't want financial managers to be able to self deal. 0:04:27.200 --> 0:04:30.560 You don't want people who are managing your money to 0:04:30.640 --> 0:04:33.760 be able to just throw their friends your money for 0:04:34.000 --> 0:04:36.960 reasons that have nothing to do with whether they're generating 0:04:36.960 --> 0:04:39.719 good returns. But what the Trump administration is doing, and 0:04:39.760 --> 0:04:43.440 which is so insidious, is that they are taking that 0:04:44.520 --> 0:04:51.200 understandably good concept of fiduciary responsibility and then saying, in effect, 0:04:51.720 --> 0:04:55.680 that that means it should be harder to invest in 0:04:56.160 --> 0:05:03.080 ESG investments, and the underlying insinuation is ESG investments environmental investments, 0:05:03.120 --> 0:05:06.799 investments that take into account climate risk, that those must 0:05:06.839 --> 0:05:14.440 be inherently worse performing as investments. That's actually not the 0:05:14.520 --> 0:05:18.560 way the markets are working. But that concept has been 0:05:18.600 --> 0:05:20.760 out there forever. Hey, you know, if you want to 0:05:20.800 --> 0:05:24.479 go invest in some in some feel good investments, you know, 0:05:24.520 --> 0:05:27.160 you want to feel like you're really socially responsible, fine, 0:05:27.200 --> 0:05:28.680 do it on your own time. If you want to 0:05:28.720 --> 0:05:31.760 do that individually with your own individual investments, fine, And 0:05:31.880 --> 0:05:37.520 of course, not surprisingly, the fossil fuel industry is cheering 0:05:37.600 --> 0:05:41.200 on this new rule, and the fossil fuel industry is 0:05:41.240 --> 0:05:46.080 saying in one letter, they said, the push to divest 0:05:46.240 --> 0:05:51.320 money from the fossil fuel industry has become a serious 0:05:51.360 --> 0:05:56.160 problem for the industry because because large institutional investors are 0:05:56.160 --> 0:05:59.000 increasingly moving their money out of fossil fuel investments, and 0:05:59.040 --> 0:06:02.039 that's depriving us of capital, which of course is the 0:06:02.080 --> 0:06:03.640 point of the devestment movement. 0:06:03.800 --> 0:06:04.080 Right. 0:06:04.160 --> 0:06:06.599 That's so interesting because I want to say, maybe four 0:06:06.680 --> 0:06:11.200 or five years ago now, one of the early lawsuits 0:06:11.279 --> 0:06:14.960 against Exon was about exactly this kind of thing, except 0:06:14.960 --> 0:06:17.760 they were making the opposite argument, and it was like 0:06:17.800 --> 0:06:22.200 a worker retirement fund that was suing Exon for an 0:06:22.279 --> 0:06:27.000 abdication of fiduciary responsibility because they had, you know, put 0:06:27.040 --> 0:06:30.520 off writing down assets forever, and they were doing various 0:06:30.560 --> 0:06:33.279 things that they were you know, the workers were arguing 0:06:33.800 --> 0:06:39.080 would sort of reduce their returns from their retirement fund. 0:06:39.520 --> 0:06:42.440 If you're a worker, any of you work for Exon, 0:06:42.839 --> 0:06:45.040 I mean, there's a good case to be made that, 0:06:45.440 --> 0:06:48.559 especially in the era of climate change, you don't want 0:06:48.680 --> 0:06:52.200 your money or lots of your money in your own 0:06:52.279 --> 0:06:55.720 company just as a matter of future returns for your 0:06:55.760 --> 0:06:59.480 retirement sattings, I mean putting money, and especially now at 0:06:59.480 --> 0:07:02.400 a time when the the fossil fuel industry is reporting 0:07:02.520 --> 0:07:07.240 I mean just big earnings losses, right, big losses, and 0:07:07.320 --> 0:07:09.840 you see, you know, I think it was there was 0:07:09.840 --> 0:07:12.800 a story in the Financial Times about how ESG investments 0:07:13.040 --> 0:07:17.560 are actually performing or in some cases outperforming the market. 0:07:17.760 --> 0:07:21.120 So the whole idea that ESG investments are you know, 0:07:21.240 --> 0:07:29.000 automatically bad for your own portfolio is just increasingly proven wrong. 0:07:29.400 --> 0:07:32.920 But again that's why the proverbial smoking gun here is 0:07:32.920 --> 0:07:35.520 is that when the letter from the one of the 0:07:35.560 --> 0:07:38.400 oil industry's lobby groups is saying, we really want this 0:07:38.480 --> 0:07:42.520 rule because the devestment movement is draining us of capital, 0:07:42.840 --> 0:07:45.920 then you see the real motive. At the same time 0:07:46.040 --> 0:07:51.440 this has been going on, essentially, the SEC has stalled 0:07:51.560 --> 0:07:57.920 the effort to require more disclosure by companies about their 0:07:57.920 --> 0:08:02.280 own climate risks, and these two things are linked. Basically, 0:08:02.360 --> 0:08:06.840 the upshot of the new Trump proposed ESG rule is 0:08:06.880 --> 0:08:09.320 to just make it that much harder. There's all sorts 0:08:09.360 --> 0:08:14.400 of new kind of due diligence requirements and kind of 0:08:14.440 --> 0:08:19.560 paperwork requirements to justify when financial managers want to want 0:08:19.560 --> 0:08:22.960 to shift money into ESG, just to kind of bog 0:08:23.040 --> 0:08:23.520 it down. 0:08:23.760 --> 0:08:24.440 Do you know if. 0:08:24.400 --> 0:08:25.240 There's any. 0:08:26.600 --> 0:08:30.200 Any way that this might impact the role out of 0:08:30.280 --> 0:08:33.520 all of the ESG stuff that's happening in Europe? 0:08:33.880 --> 0:08:36.520 You know, ultimately, the global pool of money is one 0:08:36.679 --> 0:08:41.520 giant pool of money, and so certainly it and the 0:08:41.640 --> 0:08:43.679 United States has an outsized role in that, and so 0:08:43.720 --> 0:08:48.800 certainly it can deprive the move into those investments. And 0:08:48.880 --> 0:08:51.520 here's what's really interesting is that if you read the 0:08:51.559 --> 0:08:54.960 comment letters on the rule, the big opponents of the rule, 0:08:55.400 --> 0:08:59.600 not exactly, not necessarily. You know, the most altruistic people 0:08:59.600 --> 0:09:01.440 in the world. I mean, yes, you've got some great 0:09:01.640 --> 0:09:03.880 environmental groups on there. But but there's a lot of 0:09:03.920 --> 0:09:06.600 Wall Street firms, right, Like Wall Street firms that that 0:09:06.600 --> 0:09:09.600 that don't they don't they don't really have an ideology, right, 0:09:09.720 --> 0:09:13.240 They're just looking for customers, and they know that customers 0:09:13.880 --> 0:09:16.959 and you know, the people who's money they're managing. They 0:09:17.000 --> 0:09:18.760 know that there's a demand for I don't want to 0:09:18.760 --> 0:09:22.360 invest in oil companies. I'm more interested investing in green investments, right, 0:09:22.559 --> 0:09:25.440 And so a lot of these sort of you know, 0:09:25.800 --> 0:09:29.640 Wall Street firms that aren't do gooders have put in 0:09:29.720 --> 0:09:31.480 letters saying, you know, we don't like this rule. This 0:09:31.640 --> 0:09:33.840 rule is not good because we want to have as 0:09:33.920 --> 0:09:39.319 much freedom as possible to meet the consumer demand for 0:09:39.400 --> 0:09:40.679 more sustainable investments. 0:09:41.160 --> 0:09:44.200 Yeah, that's super interesting and also kind of flies in 0:09:44.240 --> 0:09:46.839 the face of the whole we're just worried about returns 0:09:46.880 --> 0:09:50.360 thing exactly exactly. 0:09:50.440 --> 0:09:53.440 I mean, I mean those firms want returns also. So 0:09:53.520 --> 0:09:57.400 it's a weird situation where in some senses, it's like 0:09:57.720 --> 0:10:00.520 the Trump administration is so devoted to going to bat 0:10:00.600 --> 0:10:05.360 for the fossil fuel industry that it's willing to piss 0:10:05.440 --> 0:10:07.679 off the financials. 0:10:09.440 --> 0:10:26.360 Yeah, that's it for this time. 0:10:26.480 --> 0:10:28.960 Thanks for listening. I also want to thank all of 0:10:29.000 --> 0:10:32.600 our Patreon members. You guys are really helping us to 0:10:32.679 --> 0:10:35.200 get more work done. We appreciate it. And I want 0:10:35.200 --> 0:10:38.280 to share a little preview of what's coming up in 0:10:38.320 --> 0:10:41.880 the next season of Drilled. If you're curious and you 0:10:42.040 --> 0:10:45.560 want to get the scoop on these episodes, please consider 0:10:45.640 --> 0:10:49.920 becoming a Patreon subscriber. We have all different levels of 0:10:50.000 --> 0:10:54.400 membership and you will get early access to episodes for 0:10:54.520 --> 0:10:58.040 the next season. You can also get ad free episodes, 0:10:58.559 --> 0:11:01.320 and I've gotten some questions from folks about how to 0:11:01.400 --> 0:11:05.280 access AD free episodes. Those actually come into a special 0:11:05.400 --> 0:11:09.319 Patreon feed, but then you're able to kind of connect 0:11:09.360 --> 0:11:13.200 that to whatever podcast app you use. If you're having 0:11:13.240 --> 0:11:15.520 trouble doing that, let me know and we can try 0:11:15.559 --> 0:11:18.400 to help sort that out for you. Thanks again, and 0:11:18.520 --> 0:11:33.679 here's the season five preview. This season on Drilled, then. 0:11:33.640 --> 0:11:37.360 They went after Kandi asked they come truly to believe 0:11:37.440 --> 0:11:39.520 that Donager is a criminal. 0:11:39.600 --> 0:11:42.000 There's a lot in the film that they could have 0:11:42.160 --> 0:11:47.360 used to go on a more narrow request, but they've 0:11:47.400 --> 0:11:50.600 not done that. They've simply asked for the entire footage 0:11:50.640 --> 0:11:52.839 to be turned over to go on a fishing expedition. 0:11:53.280 --> 0:11:54.720 I think if I had it to do over, I 0:11:54.720 --> 0:11:59.000 would advise my client to completely protest the trial. And 0:11:59.120 --> 0:12:02.840 unfortunately Stephen didn't have that option because Stephen lives in 0:12:02.840 --> 0:12:05.400 New York and he's subject to the jurisdiction of the 0:12:05.440 --> 0:12:08.320 court and he has to defend the case. But my 0:12:08.440 --> 0:12:11.440 clients did have that option, and that was not a 0:12:11.440 --> 0:12:14.280 card we chose to play. In retrospect, that may not 0:12:14.320 --> 0:12:16.679 have been the best decision. Hindsight is twenty twenty. 0:12:16.760 --> 0:12:19.400 It was cold, so we would be all bundled up. 0:12:19.480 --> 0:12:21.800 We would be in this long line to get through 0:12:21.840 --> 0:12:25.240 security to get into the courthouse, and then you would 0:12:25.240 --> 0:12:32.120 see a row of five black suburbans arrive with tinted windows, 0:12:32.640 --> 0:12:36.400 and out of it would come senior management of Chevron, 0:12:36.679 --> 0:12:40.640 their head of litigation, their entire legal team, and they 0:12:40.640 --> 0:12:44.840 were ushered in through a separate entrance as VIPs, so 0:12:44.880 --> 0:12:46.480 they didn't have to stand in the line with all 0:12:46.520 --> 0:12:49.400 the rest of us. I am now tired of rating 0:12:49.520 --> 0:12:51.400 about Stephen and the ankle. 0:12:52.360 --> 0:12:54.240 Enough with Stephen and the. 0:12:54.200 --> 0:12:57.640 Ankle I want the attention to go back on the 0:12:57.640 --> 0:13:00.000 Ecuadorians and what they had said. 0:13:00.600 --> 0:13:04.560 A state cannot contract human rights away. 0:13:05.080 --> 0:13:09.760 Human rights are inalienable. They belong to humans, They belong 0:13:09.880 --> 0:13:10.640 to the people.