American Oil and Gas Reporter - June 2021 - 88

their money, thereby defying longstanding
wisdom among market-watchers that emphasizes
portfolio diversification. Nevertheless,
Darwall observes, the message
to the public continues to insist that ESG
adherence will boost investor returns.
Moreover, Darwall's analysis continues,
money managers are legally obligated to
try to make money for clients, not to try to
save the world by looking to fight climate
change and push social justice causes.
Making money for trust beneficiaries is
what trustees are legally required to do; a
trustee must consider only the interests of
the beneficiary. Seeking collateral benefits,
whether in the form of a just and sustainable
world, higher corporate tax revenues or
lower greenhouse-gas emissions, violates
trustees' exclusive duty of loyalty.
" Climate and market claims from
ESG leader BlackRock are contradicted
by the evidence, " the foundation maintains.
" The observable evidence contradicts
BlackRock's claims that climate risk is
not being adequately priced by the market
and that climate models underestimate
global warming. That the world's largest
asset manager opts for climate hyperbole
rather than hard data makes it difficult to
view BlackRock's climate stewardship
as a genuine attempt to understand climate
risk from an investor perspective. "
Darwall goes on to say that, when it
comes to climate, ESG ratings conflict
with the Paris climate agreement insofar
as they treat the globe as a homogenous
regulatory space. This assumption is inconsistent
with the architecture of the
Paris climate agreement, which is based
on bottom-up, nationally-determined contributions
and penalizes carbon-intensive
corporations operating in faster-growing
markets where emissions regulations are
weak or nonexistent.
According to Darwall, far from promoting
inclusive capitalism, as proponents
such as BlackRock Chief Executive Officer
Larry Fink claim, ESG is the essence of
insider capitalism, with huge societal decisions
being made by democratically unaccountable
Wall Street oligarchs and
public-sector pension chiefs, often at the
behest of representatives of billionaire
foundations. By usurping the functions
of democratic institutions and the ballot
box, the report asserts, ESG undermines
the legitimacy of capitalism.
As Darwall notes in a May 13 op-ed,
Fink acknowledges that ESG is not about
transparency for its own sake, but is a
matter of gaining disclosure that can
make the free market more sustainable
and inclusive. " The SEC is giving activist
investors the green light to table shareholder
motions to force ConocoPhillips
and Occidental Petroleum to set out detailed
plans for cutting Scope 3 emissions-those
emitted by their customers, "
Darwall observes. " BlackRock, the world's
largest fund manager, is pressuring companies
to formulate business plans 'consistent
with achieving net-zero global
greenhouse gas emissions by 2050.' "
Ultimately, Darwall's report argues,
ESG is the continuation of politics by
other means. The weaponization of finance
by billionaire climate activists, foundations
and nongovernmental organizations threatens
to end traditional capitalism by degrading
its ability to function as an economic
system that generates higher living
standards. This usurpation of the political
prerogatives of democratic government
invites a populist backlash, he warns.
Far from a fulfillment of inclusive capitalism,
Darwall assesses, ESG culminates
a trend away from democratically accountable
lawmaking. In his op-ed, he recounts
how in 2009, despite large majorities in
both chambers of Congress, the Democrat-controlled
House of Representatives
passed a GHG cap-and-trade bill by a
narrow margin only to see the bill fail in
the Senate. " After the 2010 midterm elections,
such efforts became the purview of
the administrative state and the Obama
administration's Clean Power Plan-until
the U.S. Supreme Court ordered a stay on
its implementation, " he notes. " Now, society
is apparently to be regulated by the top executives
of multitrillion-dollar index funds
and a handful of activist shareholders.
" Inclusive it is not, " he continues.
" Americans' savings are to be deployed
for wider societal ends, ones determined
not by them or by elected politicians but
by Wall Street oligarchs. The end point
is the socialization of American capital.
Rather than being inclusive, ESG is pure
insider capitalism: it excludes the many
from power exercised by the few. " ❒
Columbia: Build Pipelines, Cut CO2
NEW YORK-Although it may seem
counterintuitive, investing more in the
U.S. natural gas pipeline network can
help the country reach net-zero emission
goals more quickly and affordably, suggests
a report by Columbia University's
Center on Global Energy Policy. According
to the analysis, fortifying and upgrading
the pipeline system may prepare the existing
infrastructure to transport zero-carbon
fuels as they become available and,
in the meantime, reduce methane leaks.
The researchers note that studies by
energy agencies, universities and the industry
that model future U.S. natural gas
consumption consistently show consumers
will continue to use natural gas for at
least the next 30 years, even in scenarios
where the country achieves net-zero targets
by midcentury.
" There is no quick replacement for
gas in the U.S. energy mix, " the report
acknowledges. " And for many of the
needs natural gas currently meets, the
88 THE AMERICAN OIL & GAS REPORTER
eventual replacement may be zero-carbon
gaseous fuels (e.g., hydrogen, biogas).
These fuels may play a significant role
in supporting reliability and making the
energy transition more affordable-but
they, too, will require a pipeline network
for efficient delivery to markets and
end-users. "
Short And Long Term
Pipeline construction is a time-consuming
and costly process, especially
atop all the other infrastructure needs associated
with the energy modernization,
the Columbia report notes. When possible,
adjusting existing infrastructure that already
is permitted and built can help minimize
the costs and even accelerate transition.
The United States has 2.5 million miles
of natural gas pipeline infrastructure across
the country, which, with investment, can
be upgraded to cut emissions and may be
retrofitted for future transport of cleaner
fuels, the analysis indicates.
" However, investments in pipeline infrastructure
have drawn concern that they
would lock fossil fuels into the U.S.
energy mix for a longer period of time
and work against the energy transition, "
the report acknowledges. While such concerns
are understandable, it continues,
retrofitting and otherwise improving the
existing pipeline system does not pose a
choice between natural gas and electrification
or between fossil fuels and zerocarbon
fuels. " Rather, these investments
in existing infrastructure can support a
pathway toward wider storage and delivery
of cleaner and increasingly low-carbon
gases while lowering the overall cost of
the transition and ensuring reliability
across the energy system. In the same
way that the electric grid allows for increasingly
low-carbon electrons to be
transported, the natural gas grid should
be viewed as a way to enable increasingly
low-carbon molecules to be transported. "
The study notes that it examines pro
American Oil and Gas Reporter - June 2021

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