Speaker 1: Hey, Drilled listeners.
Speaker 2: We are still on a production hiatus working on our
Speaker 2: next season, but there's a little sneak peek of that
Speaker 2: season at the end of this episode, so make sure
Speaker 2: you listen to the end for that. The reason we're
Speaker 2: coming at you today is because I had the opportunity
Speaker 2: to speak with David Serrata about a recent piece that
Speaker 2: he did in his newsletter TMI too much Information. You
Speaker 2: might recognize David's name from his previous gig at The
Speaker 2: Guardian or as a speechwriter for Bernie Sanders. I wanted
Speaker 2: to talk to him because I get his newsletter and
Speaker 2: I saw an item in there that we had actually
Speaker 2: missed on our policy trackers, so I added it. But
Speaker 2: I also wanted to get the backstory on it.
Speaker 1: It was a.
Speaker 2: Sort of obscure, little proposed rule that basically makes it
Speaker 2: harder to to invest retirement funds in environmentally sustainable funds.
Speaker 2: It's been pushed mostly by the fossil fuel industry, no surprise,
Speaker 2: and we're going to pick up this conversation with David
Speaker 2: explaining more about it in a minute after this message
Speaker 2: from today's sponsor. I'm a Westervelt and this is Drilled.
Speaker 3: So I was I was hoping that you could start
Speaker 3: by sort of saying, you know, what is this rule
Speaker 3: change and what brought it to your attention initially?
Speaker 4: Sure, So ESG investing is basically the technical term for environmental,
Speaker 4: social and governance based investing, And what that's a lot
Speaker 4: of jargon for is investing in a way that takes
Speaker 4: into account what the companies you're investing in are actually
Speaker 4: doing in the world and how their corporate behavior affects
Speaker 4: the environment and the like. And to be clear, it's
Speaker 4: not just to make you as an investor feel good,
Speaker 4: but there's also a financial reason that proponents argue that
Speaker 4: you want to engage in this kind of investing. For instance,
Speaker 4: you don't necessarily want to be investing your retirement money
Speaker 4: in investments that are at risk of being destroyed by
Speaker 4: climate change. Or you don't want to be investing your
Speaker 4: money in investments that are based on destroying the climate
Speaker 4: and could be financially imperiled at the point, hopefully soon
Speaker 4: that we actually take action to not use those products anymore.
Speaker 4: So you don't necessarily want your retirement savings in oil
Speaker 4: companies if you think that at some point we're going
Speaker 4: to basically say, you know what, we have to use
Speaker 4: less oil to not destroy the entire planet. So that's
Speaker 4: what ESG investing is. And the Trump administration has put
Speaker 4: forward a rule that aims to make it harder for
Speaker 4: financial managers to help you move your money and help
Speaker 4: worker retirement systems move that money into ESG investments. Now,
Speaker 4: what the Trump administration says is that the current existing
Speaker 4: Labor Department rules about how financial managers have to invest
Speaker 4: other people's money, that those long standing rules say that
Speaker 4: the financial manager must prioritize above everything else, they have
Speaker 4: a fiduciary responsibility to maximize returns regardless of what kind
Speaker 4: of investments the money is going into. Now, there's a
Speaker 4: good reason for that basic idea of fiduciary responsibility that
Speaker 4: you don't want financial managers to be able to self deal.
Speaker 4: You don't want people who are managing your money to
Speaker 4: be able to just throw their friends your money for
Speaker 4: reasons that have nothing to do with whether they're generating
Speaker 4: good returns. But what the Trump administration is doing, and
Speaker 4: which is so insidious, is that they are taking that
Speaker 4: understandably good concept of fiduciary responsibility and then saying, in effect,
Speaker 4: that that means it should be harder to invest in
Speaker 4: ESG investments, and the underlying insinuation is ESG investments environmental investments,
Speaker 4: investments that take into account climate risk, that those must
Speaker 4: be inherently worse performing as investments. That's actually not the
Speaker 4: way the markets are working. But that concept has been
Speaker 4: out there forever. Hey, you know, if you want to
Speaker 4: go invest in some in some feel good investments, you know,
Speaker 4: you want to feel like you're really socially responsible, fine,
Speaker 4: do it on your own time. If you want to
Speaker 4: do that individually with your own individual investments, fine, And
Speaker 4: of course, not surprisingly, the fossil fuel industry is cheering
Speaker 4: on this new rule, and the fossil fuel industry is
Speaker 4: saying in one letter, they said, the push to divest
Speaker 4: money from the fossil fuel industry has become a serious
Speaker 4: problem for the industry because because large institutional investors are
Speaker 4: increasingly moving their money out of fossil fuel investments, and
Speaker 4: that's depriving us of capital, which of course is the
Speaker 4: point of the devestment movement.
Speaker 5: Right.
Speaker 3: That's so interesting because I want to say, maybe four
Speaker 3: or five years ago now, one of the early lawsuits
Speaker 3: against Exon was about exactly this kind of thing, except
Speaker 3: they were making the opposite argument, and it was like
Speaker 3: a worker retirement fund that was suing Exon for an
Speaker 3: abdication of fiduciary responsibility because they had, you know, put
Speaker 3: off writing down assets forever, and they were doing various
Speaker 3: things that they were you know, the workers were arguing
Speaker 3: would sort of reduce their returns from their retirement fund.
Speaker 4: If you're a worker, any of you work for Exon,
Speaker 4: I mean, there's a good case to be made that,
Speaker 4: especially in the era of climate change, you don't want
Speaker 4: your money or lots of your money in your own
Speaker 4: company just as a matter of future returns for your
Speaker 4: retirement sattings, I mean putting money, and especially now at
Speaker 4: a time when the the fossil fuel industry is reporting
Speaker 4: I mean just big earnings losses, right, big losses, and
Speaker 4: you see, you know, I think it was there was
Speaker 4: a story in the Financial Times about how ESG investments
Speaker 4: are actually performing or in some cases outperforming the market.
Speaker 4: So the whole idea that ESG investments are you know,
Speaker 4: automatically bad for your own portfolio is just increasingly proven wrong.
Speaker 4: But again that's why the proverbial smoking gun here is
Speaker 4: is that when the letter from the one of the
Speaker 4: oil industry's lobby groups is saying, we really want this
Speaker 4: rule because the devestment movement is draining us of capital,
Speaker 4: then you see the real motive. At the same time
Speaker 4: this has been going on, essentially, the SEC has stalled
Speaker 4: the effort to require more disclosure by companies about their
Speaker 4: own climate risks, and these two things are linked. Basically,
Speaker 4: the upshot of the new Trump proposed ESG rule is
Speaker 4: to just make it that much harder. There's all sorts
Speaker 4: of new kind of due diligence requirements and kind of
Speaker 4: paperwork requirements to justify when financial managers want to want
Speaker 4: to shift money into ESG, just to kind of bog
Speaker 4: it down.
Speaker 5: Do you know if.
Speaker 1: There's any.
Speaker 3: Any way that this might impact the role out of
Speaker 3: all of the ESG stuff that's happening in Europe?
Speaker 4: You know, ultimately, the global pool of money is one
Speaker 4: giant pool of money, and so certainly it and the
Speaker 4: United States has an outsized role in that, and so
Speaker 4: certainly it can deprive the move into those investments. And
Speaker 4: here's what's really interesting is that if you read the
Speaker 4: comment letters on the rule, the big opponents of the rule,
Speaker 4: not exactly, not necessarily. You know, the most altruistic people
Speaker 4: in the world. I mean, yes, you've got some great
Speaker 4: environmental groups on there. But but there's a lot of
Speaker 4: Wall Street firms, right, Like Wall Street firms that that
Speaker 4: that don't they don't they don't really have an ideology, right,
Speaker 4: They're just looking for customers, and they know that customers
Speaker 4: and you know, the people who's money they're managing. They
Speaker 4: know that there's a demand for I don't want to
Speaker 4: invest in oil companies. I'm more interested investing in green investments, right,
Speaker 4: And so a lot of these sort of you know,
Speaker 4: Wall Street firms that aren't do gooders have put in
Speaker 4: letters saying, you know, we don't like this rule. This
Speaker 4: rule is not good because we want to have as
Speaker 4: much freedom as possible to meet the consumer demand for
Speaker 4: more sustainable investments.
Speaker 3: Yeah, that's super interesting and also kind of flies in
Speaker 3: the face of the whole we're just worried about returns
Speaker 3: thing exactly exactly.
Speaker 4: I mean, I mean those firms want returns also. So
Speaker 4: it's a weird situation where in some senses, it's like
Speaker 4: the Trump administration is so devoted to going to bat
Speaker 4: for the fossil fuel industry that it's willing to piss
Speaker 4: off the financials.
Speaker 1: Yeah, that's it for this time.
Speaker 2: Thanks for listening. I also want to thank all of
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Speaker 2: here's the season five preview. This season on Drilled, then.
Speaker 4: They went after Kandi asked they come truly to believe
Speaker 4: that Donager is a criminal.
Speaker 6: There's a lot in the film that they could have
Speaker 6: used to go on a more narrow request, but they've
Speaker 6: not done that. They've simply asked for the entire footage
Speaker 6: to be turned over to go on a fishing expedition.
Speaker 5: I think if I had it to do over, I
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Speaker 5: unfortunately Stephen didn't have that option because Stephen lives in
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Speaker 5: clients did have that option, and that was not a
Speaker 5: card we chose to play. In retrospect, that may not
Speaker 5: have been the best decision. Hindsight is twenty twenty.
Speaker 7: It was cold, so we would be all bundled up.
Speaker 7: We would be in this long line to get through
Speaker 7: security to get into the courthouse, and then you would
Speaker 7: see a row of five black suburbans arrive with tinted windows,
Speaker 7: and out of it would come senior management of Chevron,
Speaker 7: their head of litigation, their entire legal team, and they
Speaker 7: were ushered in through a separate entrance as VIPs, so
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Speaker 7: the rest of us. I am now tired of rating
Speaker 7: about Stephen and the ankle.
Speaker 1: Enough with Stephen and the.
Speaker 7: Ankle I want the attention to go back on the
Speaker 7: Ecuadorians and what they had said.
Speaker 5: A state cannot contract human rights away.
Speaker 1: Human rights are inalienable. They belong to humans, They belong
Speaker 1: to the people.