Last month the Main Street Investors Coalition launched our campaign to protect the interests of America’s retail investors. A first of its kind, the initiative aims to draw attention to the increasing politicization of the investment system and the damaging repercussions for America’s retail investors.
Much of the resultant media reporting of the Coalition focused on environmental issues. “Former Trump adviser heads effort to crack down on climate shareholder resolutions,” as one newspaper put it.
Climate is a major concern for many, and there has been a surge in the number of climate-related proposals introduced for a vote by shareholders in public companies. Such activism is up from an average of around 30 per year between 2001 and 2005, to 229 proposals focusing on environmental and social issues on company ballots during the 2017 proxy season.
I believe that climate change is real and that it poses a serious threat to our world. My track record of working on these issues, not just for President Trump but across multiple administrations, bears testimony to the seriousness with which I take the subject.
But the Main Street Investors Coalition itself has no position on the issue. We are not opposed to climate action, financial or otherwise, aimed at stemming the release of greenhouse gases into the atmosphere. What we do oppose is the use of other people’s money to achieve these goals without their knowledge.
In recent years, there has been a systematic appropriation of funds by large institutional investors, public pensions, proxy advisory firms and others, to pursue political objectives that are entirely contrary to the average retail investor’s interests and his primary objective — to maximize the value of his or her holdings.
As a part of this effort, environmental activists have also begun to exploit the corporate governance process as a backdoor strategy to achieve their goal of keeping fossil fuels in the ground, transforming oil, gas, and coal reserves which are now assets, into liabilities.
Despite frequently owning a negligible amount of stock, they have begun to call for greater disclosure of the risks posed by possible carbon regulation on companies’ operations. This earnings season, Anadarko, Range Resource, and Kinder Morgan have all agreed to such proposals.
While proponents argue that undertaking research into the effects of climate change will reduce the associated risks that companies face and thus enhance their stock value, recent research by a pair of leading international economists suggests there is no factual basis for this argument.
And activists are largely hiding their end goal from the retail investors they claim to protect. If successful, these efforts will ultimately channel investment away from companies, in the process harming the value of the stock and with it the value of investors’ holdings.
While the climate disclosure campaign will likely continue to grow in profile, its proponents should ask themselves a basic question: What happens if they succeed in keeping the fossil reserves held by publicly-traded companies in the ground?
Roughly 75 percent of the world’s oil supply is in the hands of state-owned enterprises that are much dirtier than their Western counterparts. Those entities are not the innovators because they are not driven by market economics.
Knee-capping U.S. energy firms will only hand greater control of the world’s energy supply to entities that need only report to their political elites, many of whom care little about climate change, nor about other environmental safe-guards. Simultaneously, it will torpedo investment in the next generation of low-carbon technologies which is overwhelmingly driven by traditional energy companies.
Climate activists need to learn from the mistakes of the past. Opaque processes might achieve short-term goals, but they will fail at achieving the national consensus on climate that America needs. Unfortunately, in this case, they are also likely to undermine America’s energy security and the energy innovation agenda needed for deep greenhouse gas emissions cuts and long-term storage of carbon, as well as the investment futures of everyday Americans.
George David Banks is executive director of the Main Street Investor Coalition. He is also executive vice president of the American Council for Capital Formation and President Trump’s former adviser on international climate change.
