BROOKFIELD'S ANTI-CAPITALIST ESG RESET.

Legacy conglomerate retools to cash in on climate policy upheaval

First, some words of modern economic wisdom from the Brookfield Institute for Innovation and Entrepreneurship:

“For some, capitalism has resulted in significant economic benefit, yet for many, it has resulted in low wages, unsafe working conditions, precarious work, and environmental exploitation. Capitalism has never existed without pushback, but this conversation has recently grown in prevalence, especially given growing climate change concerns and the noted unequal economic impacts that COVID-19 has brought. Growing calls to `build back better' and to revisit the social contract, and the exploration of a wealth tax to finance COVID-19 recovery, signal that capitalism may face significant reform in the coming years.”

The alternative to this rotting old-style capitalist system, according to a Brookfield Institute report last week, is a replacement strategy known as “degrowth.” Under the degrowth model, the focus of economic activity would shift to “ecological goals” and “new metrics of economic progress” along the lines proposed by Limits to Growth, the 1972 book of false economic prophesy from the Club of Rome.

All this and more anti-capitalist blather comes from the Brookfield Institute, a research outfit founded in 2015 in part by Canadian business legend Jack Cockwell with $16 million provided by the Brookfield Partners Foundation, which in turn is a charitable offshoot of Brookfield Asset Management (BAM), the Toronto-based Canadian investment giant. BAM tracks its roots back through 120 years of capitalist activity, from the Bronfman/Seagram liquor fortune to the late 20th century Brascan conglomerate to the 2005 creation of Brookfield, the global agglomeration that currently oversees $600-billion in assets.

So after more than a century of rollicking up-and-down the capitalist roller-coaster, the Brookfield colossus now seeks to establish itself as a corporate model for the new anti-capitalist conglomerate, apparently to repair the mess identified by members of the Brookfield Institute. Jack Cockwell, one of the unifying forces behind BAM, sits on the board of both BAM and the Institute whose report last week declared that capitalism is good for “some” but bad for “many.”

BAM's embrace of that theme is reflected in its recent appointment of Mark Carney as vice-chair and “head of ESG and Impact Fund Investing.” Carney's views on capitalism are easily aligned with the Brookfield Institute's conclusions. The blurb for Carney's new book describes the need for a “radical, foundational change that is required if we are to build an economy and society based not on market values but on human values.”

But all is not necessarily as ideologically advertised in this new world of green anti-capitalism. To convert these ESG ideas into action, Brookfield's strategic investment moves suggest it is adopting the language of anti-capitalism as linguistic cover for some aggressive old-style capitalist methods and objectives based on market values. “I want to put words into action,” said Carney last week as he donned his hat as investment hustler to announce a new Brookfield renewable energy investment fund.

Consider these corporate manoeuvres in the context of the great green reset that is said to be taking the energy world by storm — part of what Brookfield Renewables CEO Connor Teskey describes as a “multi-decade opportunity to advance decarbonization and assist with the transition of global electricity grids to a more sustainable future.”

Wind and solar: Brookfield Renewables is one of the world's leading wind and solar operators with big plans “We believe,” said Teskey, “that we have established ourselves as one of the few entities with the scale, track record and global capabilities to partner with governments and businesses to help them achieve their goal of greening the global electricity grids, while earning a strong total return of 12-15 per cent for our investors over the long term.”

Batteries: In 2018, a Brookfield unit bought Johnson Controls for US$13.5 billion. Johnson Controls was the world's largest maker of automotive batteries. Now renamed Clarios, a report last week said it could soon be offered as a $20 billion IPO.

Nuclear: Also in 2018, Brookfield paid US$4.6 billion for Westinghouse Electric, one of the world's leading nuclear energy firms. It would appear to provide a foothold in an industry that could emerge anew as a non-carbon source of electricity, although an executive hinted recently that Brookfield might be changing its strategy.

Oil and gas: Last week Brookfield Infrastructure launched a C$13.5-billion hostile takeover of Inter Pipeline Ltd., a Calgary company that operates crude oil pipelines, oil sands pipelines, natural gas liquids extraction, and bulk liquid storage businesses in Canada and Europe. Not a great CV for seekers of green new deals, but the acquisition of Inter Pipeline (IPL) is portrayed as a great opportunity to bring ESG to dirty fossil fuels. Brookfield said it is “uniquely positioned to support IPL through the environmental social & governance ('ESG') focused transition.”

Analysts like the Inter Pipeline takeover idea. Among other benefits, it could boost the Trans Mountain pipeline expansion project to move fossil fuels from Alberta to the West Coast. Trans Mountain was purchased by the Trudeau government in a $4.6-billion rescue operation back in 2018. One analyst told the Financial Post that Brookfield could eventually end up buying Trans Mountain from the government.

Good idea. In fact, I would bet on it: A Brookfield ESG bailout scheme to rescue the Trudeau Liberals from their dirty fossil fuel pipeline project, with everybody — in classic Brookfield form — making big money on the way. In all, a fine demonstration of Brookfield's modern green anti-capitalism.