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Profit and Power Drive Environmentalism on Wall St. and in Washington

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Closeup image of a man with a dollar symbol in his eye

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It used to be rare that regulators in Washington D.C., and money men on Wall St. would find common cause, but that has changed in an era when the government is so big, its subsidies alone drive the profits of many businesses.

Big Wall St. firms like BlackRock have found a way to turn Washington into a profit machine. The Biden administration is loaded with former BlackRock employees. Do you think they left their high-paying jobs on Wall St. to do what’s best for the farmers of Iowa or the fishermen of Maine?

No, they came to Washington to grease the skids for policies that will make money for their former bosses.

The biggest scam the combined forces of Washington and Wall St. are running right now is ESG. Federal subsidies make “green” companies profitable, and Wall St. charges investors extra to invest in only such companies. BlackRock’s CEO, Larry Fink, loves it.

Charles Gasparino explains in the NY Post, writing:

Fink has been a huge cheerleader for so-called ESG (environmental, social and corporate governance) investing. ESG is all about ensuring that companies BlackRock holds in its multitudes of funds adhere to certain progressive edicts (like executives not paying themselves too much money).

Sounds good on paper — until you drill down. For starters, such investing methods are highly political and veer far to the left. Companies often get good grades for supporting lefty causes such as Black Lives Matter. Oil companies like Exxon will get higher marks for building wind farms that produce energy inefficiently.

Something else for investors to consider: These funds lately haven’t beat ­indices that are simply created to make you money and only do so when they pack themselves with high-flying tech names.

But here’s where Fink and BlackRock still come out ahead: They have sensed that with all the media hype of ESG investing as the next frontier, they can also make a lot of money creating a new type of fund dedicated specifically to ESG — and then charge more for it.

My sources inside BlackRock say that over the past year, Fink has transformed the place into an ESG cultural center. Fink talks ESG nonstop at company town halls. Seminars on ESG investing seem to take place every week. An executive named Brian Deese was promoted to push money managers to consider ESG in all their investment decisions.

Deese is now one of several BlackRock officials who hold key positions in the Biden administration, as director of the president’s National Economic Council.

This revolving door between Washington and Wall Street gives Fink a huge voice in US economic policy. It’s no surprise that the Biden White House is issuing new environmental rules left and right to satisfy its woke base and, by extension, those who want woke investments, which Fink is happy to provide.

By the end of the year, BlackRock could have as many as 150 so-called exchange-traded funds that adhere to ESG standards. ETFs are supposed to carry lower fees than normal funds because they mirror a typical basket of stocks like the S&P 500.

But with ESG screening methods, BlackRock has found a way to inflate management fees of this seemingly prosaic investment. In fact, studies show that management fees on ESG funds are more than 40 percent higher than other ETFs.

BlackRock currently manages about $200 billion in ESG client money, which means that number is likely to grow and add to BlackRock’s profits.

The funds charge investors much higher fees, but haven’t really outperformed the S&P 500, and don’t really offer any more safety.

Action Line: Talk to an advisor about your investments. They should be able to easily explain their fiduciary duty to you, not how your investment will help stop climate change. I would love to talk with you.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com