Hey, Drilled listeners.
We are still on a production hiatus working on our next season, but there's a little sneak peek of that season at the end of this episode, so make sure you listen to the end for that. The reason we're coming at you today is because I had the opportunity to speak with David Serrata about a recent piece that he did in his newsletter TMI too much Information. You might recognize David's name from his previous gig at The
Guardian or as a speechwriter for Bernie Sanders. I wanted to talk to him because I get his newsletter and I saw an item in there that we had actually missed on our policy trackers, so I added it. But I also wanted to get the backstory on it.
It was a.
Sort of obscure, little proposed rule that basically makes it harder to to invest retirement funds in environmentally sustainable funds. It's been pushed mostly by the fossil fuel industry, no surprise, and we're going to pick up this conversation with David explaining more about it in a minute after this message from today's sponsor. I'm a Westervelt and this is Drilled.
So I was I was hoping that you could start by sort of saying, you know, what is this rule change and what brought it to your attention initially?
Sure, So ESG investing is basically the technical term for environmental, social and governance based investing, And what that's a lot of jargon for is investing in a way that takes into account what the companies you're investing in are actually doing in the world and how their corporate behavior affects the environment and the like. And to be clear, it's not just to make you as an investor feel good, but there's also a financial reason that proponents argue that
you want to engage in this kind of investing. For instance, you don't necessarily want to be investing your retirement money in investments that are at risk of being destroyed by climate change. Or you don't want to be investing your money in investments that are based on destroying the climate and could be financially imperiled at the point, hopefully soon that we actually take action to not use those products anymore.
So you don't necessarily want your retirement savings in oil companies if you think that at some point we're going to basically say, you know what, we have to use less oil to not destroy the entire planet. So that's what ESG investing is. And the Trump administration has put forward a rule that aims to make it harder for financial managers to help you move your money and help
worker retirement systems move that money into ESG investments. Now, what the Trump administration says is that the current existing Labor Department rules about how financial managers have to invest other people's money, that those long standing rules say that the financial manager must prioritize above everything else, they have a fiduciary responsibility to maximize returns regardless of what kind
of investments the money is going into. Now, there's a good reason for that basic idea of fiduciary responsibility that you don't want financial managers to be able to self deal. You don't want people who are managing your money to be able to just throw their friends your money for reasons that have nothing to do with whether they're generating
good returns. But what the Trump administration is doing, and which is so insidious, is that they are taking that understandably good concept of fiduciary responsibility and then saying, in effect, that that means it should be harder to invest in ESG investments, and the underlying insinuation is ESG investments environmental investments, investments that take into account climate risk, that those must be inherently worse performing as investments. That's actually not the
way the markets are working. But that concept has been out there forever. Hey, you know, if you want to go invest in some in some feel good investments, you know, you want to feel like you're really socially responsible, fine,
do it on your own time. If you want to do that individually with your own individual investments, fine, And of course, not surprisingly, the fossil fuel industry is cheering on this new rule, and the fossil fuel industry is saying in one letter, they said, the push to divest money from the fossil fuel industry has become a serious problem for the industry because because large institutional investors are increasingly moving their money out of fossil fuel investments, and
that's depriving us of capital, which of course is the point of the devestment movement.
Right.
That's so interesting because I want to say, maybe four or five years ago now, one of the early lawsuits against Exon was about exactly this kind of thing, except they were making the opposite argument, and it was like a worker retirement fund that was suing Exon for an abdication of fiduciary responsibility because they had, you know, put off writing down assets forever, and they were doing various things that they were you know, the workers were arguing
would sort of reduce their returns from their retirement fund.
If you're a worker, any of you work for Exon, I mean, there's a good case to be made that, especially in the era of climate change, you don't want your money or lots of your money in your own company just as a matter of future returns for your retirement sattings, I mean putting money, and especially now at a time when the the fossil fuel industry is reporting I mean just big earnings losses, right, big losses, and you see, you know, I think it was there was
a story in the Financial Times about how ESG investments are actually performing or in some cases outperforming the market. So the whole idea that ESG investments are you know, automatically bad for your own portfolio is just increasingly proven wrong. But again that's why the proverbial smoking gun here is is that when the letter from the one of the oil industry's lobby groups is saying, we really want this rule because the devestment movement is draining us of capital,
then you see the real motive. At the same time this has been going on, essentially, the SEC has stalled the effort to require more disclosure by companies about their own climate risks, and these two things are linked. Basically, the upshot of the new Trump proposed ESG rule is
to just make it that much harder. There's all sorts of new kind of due diligence requirements and kind of paperwork requirements to justify when financial managers want to want to shift money into ESG, just to kind of bog it down.
Do you know if.
There's any.
Any way that this might impact the role out of all of the ESG stuff that's happening in Europe?
You know, ultimately, the global pool of money is one giant pool of money, and so certainly it and the United States has an outsized role in that, and so certainly it can deprive the move into those investments. And here's what's really interesting is that if you read the comment letters on the rule, the big opponents of the rule, not exactly, not necessarily. You know, the most altruistic people in the world. I mean, yes, you've got some great
environmental groups on there. But but there's a lot of Wall Street firms, right, Like Wall Street firms that that that don't they don't they don't really have an ideology, right, They're just looking for customers, and they know that customers and you know, the people who's money they're managing. They know that there's a demand for I don't want to
invest in oil companies. I'm more interested investing in green investments, right, And so a lot of these sort of you know, Wall Street firms that aren't do gooders have put in letters saying, you know, we don't like this rule. This rule is not good because we want to have as much freedom as possible to meet the consumer demand for more sustainable investments.
Yeah, that's super interesting and also kind of flies in the face of the whole we're just worried about returns thing exactly exactly.
I mean, I mean those firms want returns also. So it's a weird situation where in some senses, it's like the Trump administration is so devoted to going to bat for the fossil fuel industry that it's willing to piss off the financials.
Yeah, that's it for this time.
Thanks for listening. I also want to thank all of our Patreon members. You guys are really helping us to get more work done. We appreciate it. And I want to share a little preview of what's coming up in the next season of Drilled. If you're curious and you want to get the scoop on these episodes, please consider becoming a Patreon subscriber. We have all different levels of membership and you will get early access to episodes for
the next season. You can also get ad free episodes, and I've gotten some questions from folks about how to access AD free episodes. Those actually come into a special Patreon feed, but then you're able to kind of connect that to whatever podcast app you use. If you're having trouble doing that, let me know and we can try to help sort that out for you. Thanks again, and here's the season five preview. This season on Drilled, then.
They went after Kandi asked they come truly to believe that Donager is a criminal.
There's a lot in the film that they could have used to go on a more narrow request, but they've not done that. They've simply asked for the entire footage to be turned over to go on a fishing expedition.
I think if I had it to do over, I would advise my client to completely protest the trial. And unfortunately Stephen didn't have that option because Stephen lives in New York and he's subject to the jurisdiction of the court and he has to defend the case. But my clients did have that option, and that was not a card we chose to play. In retrospect, that may not have been the best decision. Hindsight is twenty twenty.
It was cold, so we would be all bundled up. We would be in this long line to get through security to get into the courthouse, and then you would see a row of five black suburbans arrive with tinted windows, and out of it would come senior management of Chevron, their head of litigation, their entire legal team, and they were ushered in through a separate entrance as VIPs, so they didn't have to stand in the line with all the rest of us. I am now tired of rating about Stephen and the ankle.
Enough with Stephen and the.
Ankle I want the attention to go back on the Ecuadorians and what they had said.
A state cannot contract human rights away.
Human rights are inalienable. They belong to humans, They belong to the people.