Citizens pay when CSR takes over
What the world needs now, according to big-time U.S. money manager Larry Fink, is a lot more corporate policy intervention in the world economy. In a letter to investors and corporate executives earlier this year, Fink — whose BlackRock Inc. manages US$6-trillion globally — called on “the private sector” to become more heavily involved in “broader societal challenges.” According to Fink, “Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”
When you get to the top of a heap of investments worth $6-trillion, the question “What the hell am I doing here” would understandably become a little more puzzling. With thousands of companies in the portfolio from all over the world, it must seem more like a big government than a free-market enterprise. It would be easy to forget the fact that the corporations you’re investing in are producing products and services — from oil to food, medical equipment to iPhones, shoe laces to automobiles and airplanes and supermarkets — that are actually serving the biggest social purposes of all: production and consumption! Corporations make profits and reinvest or distribute trillions of dollars to produce more goods and services that are exactly what the world’s people want and need.
Fink, alas, is not the only corporate player advocating for greater “corporate social responsibility” and the expansion of business into areas beyond the purpose they already fulfil.
In fact, it’s a CSR stampede. Most of the world’s top executives think like Fink and want to use their corporate positions to change society — or at least to be seen to be pushing society in a different direction, usually in opposition to the market economy on which they are based. To achieve these ends, executives hire little armies of corporate relations and sustainable development underlings, and give money to universities and other institutions dedicated to re-making the corporate model to achieve ends for which corporations are fundamentally ill suited.
One topical result: HSBC, the biggest bank in Europe, last week announced that it will henceforth not provide financial services to new coal-fired power plants, new offshore oil and gas projects in the Arctic, new greenfields oil sands projects, and new large dam projects and nuclear projects that are inconsistent with international standards.
HSBC’s new energy policy was issued by the bank’s Group Head of Strategy and Global Head of Sustainable Finance, in conjunction with HSBC’s sustainable risk policies. To be sure, banks have a right to make their own risk decisions, but the motivation behind HSBC energylending policies is not so much about risk as it is about assuming the role of a quasi-government, making decisions based on the bank’s own assessment of what is or is not in the interests of society, regardless of the wishes of citizens or local governments.
HSBC says its new energy-lending policy is based in part on making sure environmental objectives are met. “Animals, plant life and sensitive habitats may be damaged by pollution or leaks,” says the bank, while “pipelines and pylons may result in excessive subsequent development in sensitive areas.” The bank adds that it is taking action in the context of the Paris Agreement on carbon emissions — even though the Paris Agreement’s targets are not being met by the governments that ratified it.
Effectively, HSBC has decided to cut off Canada’s oil sands and Canadian corporate investment in Arctic oil, as if the bank were the government and regardless of whether Canadian authorities have decided such projects might be economically and environmentally sound and within the country’s Paris Agreement commitments.
While saying no to the oil sands, the bank has signed on to the usual subversive international organizations and frameworks, such as the Equator Principles (which are designed to manage environmental and social “risk”), and has promoted itself as a willing financer of renewable energy and an enthusiastic issuer of green bonds.
Among activists, HSBC’s energy policies are welcome. A senior British banker at Macquarie Capital recently joined HSBC’s CSR crusade, and wrote about “Why global banks are pledging billions to fight climate change.” Pledging? Is that what banks do with their assets these days? Instead of backing profit-making enterprises, they pledge to finance projects that meet one of Larry Fink’s artificially created and hard-to-define social objectives.
Instead of fossil fuels and other taboo investments, many banks now claim to be dedicated to lending to green projects such as solar and wind power — whether or not such investments make economic sense. It’s the green thing to do, despite the fact that renewable energy has so far proven to be uneconomic without massive government and taxpayer support.
While bankers get to feel good, consumers and citizens are paying the cost. A good example is Ontario’s electricity fiasco. With the help of green lenders, the province’s power system is loaded with debt to pay for the abandonment of coal and adoption of solar and wind power. Electricity prices have soared to repay the green lenders who provided the financing under government guarantee.
One of the quaint ideological mysteries is why green leftists who so aggressively oppose corporate market power in society can so enthusiastically embrace increasing activist corporate power. Or maybe it’s not a mystery. They don’t mind corporatism, so long as it’s green corporatism.