What the asset manager backed by Peter Thiel gets wrong about climate change

Many of Exxon’s far-flung, expensive projects over the last decade have turned into busts, leaving the company at a big disadvantage.
Many of Exxon’s far-flung, expensive projects over the last decade have turned into busts, leaving the company at a big disadvantage.
Image: REUTERS/Essam Al-Sudani
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Contrarian tech billionaire Peter Thiel and hedge fund billionaire Bill Ackman are backing a new asset management firm that aims to get companies to stop making business decisions for political reasons, and instead focus on short-term stock gains.

The fund, called Strive, will be led by Woke, Inc. author Vivek Ramaswamy, who told the Wall Street Journal he wants to push back against the hegemony of “Big Three” asset managers like BlackRock and Vanguard; Ramaswamy characterized the Big Three as a left-wing “ideological cartel” that pushes environmental, social, and governance initiatives at companies in which they are invested. As evidence of this trend, he pointed to last year’s board of directors vote at ExxonMobile, in which the Big Three sided with climate activist hedge fund Engine No. 1 to unseat three directors. That episode was ultimately detrimental to Exxon’s share price, Ramaswamy said on CNBC.

“Many of the underlying companies are performing more poorly because these large shareholders are telling these companies what to do,” he said. “[Exxon] would be a more successful company today if it were drilling for more oil.”

Strive’s anti-ESG claims don’t add up

There are a few problems with this argument. First, it misrepresents the behavior of the key players. Exxon didn’t suddenly morph into a climate champion—it plans to boost spending on drilling 45% in 2022, to $24 billion. If that figure is below pre-pandemic levels, it’s because the company is returning more money to investors via share buybacks and dividends, not because it’s pouring cash into low-carbon technologies (which will get only $1 billion this year).

Big Three asset managers, meanwhile, routinely vote against ESG-related shareholder proposals. The same day Ramaswamy went on CNBC, BlackRock issued a statement saying it won’t support most climate-related proposals this year because they are too “prescriptive” and not “consistent with our clients’ long-term financial interests.” Even Engine No. 1 is voting against some climate proposals. If anything, ESG investing is riddled with greenwashing and illogical metrics that don’t do enough to incentivize science-based climate strategies.

Second, climate change isn’t merely a political issue. It’s a huge material risk to investors. At least $4 trillion in fossil fuel assets are poised to become worthless, according to the latest UN climate report; countless trillions more are at risk from physical climate damages. For investors to ask companies to plan accordingly isn’t micro-managing; any company that isn’t planning is playing chicken with investors’ money (to say nothing of, you know, causing climate change). Companies may soon even be subject to prosecution now that regulators in the US and Europe are demanding more disclosure and detailed climate plans.

Third, Ramaswamy’s underlying claim about the role of politics in business is disingenuous. To specifically exclude “political issues” from a company’s decision-making is itself a political decision, and a form of climate change denial. Many of Ramaswamy’s talking points can also be heard from Republican politicians in fossil fuel-reliant states like Texas and West Virginia that want to outlaw ESG investing.

If there are problems to solve with ESG investing, they’re about making it more meaningful and productive—not pretending like climate change doesn’t exist or can be solved without conscientious action by companies.

Correction: An earlier version of this story referred to Strive as Peter Thiel’s investment fund. Thiel is an investor in Strive, which is an asset management firm.