Larry Fink’s Latest Sermon

The BlackRock CEO auditions to be the next Treasury Secretary.

BlackRock CEO Larry Fink is among the world’s most powerful investment managers, but it seems he longs for more influence. To wit, he has assumed a role as self-styled conscience of the business world in telling CEOs how to run their companies.

“We believe that sustainability should be our new standard for investing,” he wrote to clients in his annual letter this week. He added that “all investors—and particularly the millions of our clients who are saving for long-term goals like retirement—must seriously consider sustainability in their investments.”

Corporations in which BlackRock invests will also have to comply with the rules from a “Sustainability Accounting Standards Board” on issues such as labor practices and workforce diversity. “Disclosure should be a means to achieving a more sustainable and inclusive capitalism,” Mr. Fink writes.

Like his friends at the Business Roundtable, Mr. Fink is big on “stakeholder” capitalism. “Each company’s prospects for growth are inextricable from its ability to operate sustainably and serve its full set of stakeholders,” he says. If he means serving employees, customers, suppliers and communities, he is merely saying what any successful company already does. But our guess is that by stakeholders Mr. Fink really means regulators and politicians.

The giveaway is that Mr. Fink says BlackRock will divest its actively managed funds from corporations that generate 25% or more of their revenues from coal production. “We don’t yet know which predictions about the climate will be most accurate,” Mr. Fink acknowledges, but “even if only a fraction of the projected impacts is realized, this is a much more structural, long-term crisis.”

He might be right, but then estimates of future temperature increases are based on climate models that have overstated warming to date. Mr. Fink wants to make corporations plan for unknown temperature increases as well as climate regulations that are even less certain.

Coal is an easy target since its share of American power is declining. But the International Energy Agency projects that oil and coal demand will stay flat through 2040 and natural gas consumption will increase 40% even if all countries keep the promises they made in the 2015 nonbinding Paris climate accord. The U.S. is predicted to account for 85% of the increase in global oil production over the next decade thanks to shale drilling.

All of which means that fossil fuels still have a long shelf life, especially in developing countries. There are 170 gigawatts of coal-plant capacity under construction across the world, which is more than what currently exists in Europe. So what happens if Mr. Fink’s political and climate predictions prove wrong? His clients will pay the price.

BlackRock is a fiduciary and as such is legally obligated to act in its clients’ best interest. This is ostensibly why BlackRock has voted against more than 80% of the climate resolutions on proxy ballots by activist shareholders. But suddenly Mr. Fink is prioritizing the interests of liberal politicians and pressure groups.

We can’t help but wonder if Mr. Fink, after a profitable life in business, is auditioning to be Treasury Secretary in, say, the Warren Presidency. His “stakeholder” notions sound similar to her plans to put American corporations further under the government’s thumb.

CEOs who take Mr. Fink seriously might note that his political and moral importuning isn’t satisfying progressives. “BlackRock will continue to be the world’s largest investor in coal, oil and gas,” the Sierra Club said in response to Mr. Fink’s letter.

Businesses will never be able to appease the climate absolutists. The best way they can prepare for climate risks and serve their stakeholders is to succeed as a business and create the wealth and broad prosperity that will make the world better able to adapt to whatever happens. That’s real “sustainablility.”

Trump: I’m Smart Enough To Commit Crimes

Trump is hung up on telling people that he is smart enough to do quid pro quo.

“As Donald Trump gets dragged deeper, and deeper, and deeper into his Ukraine scandal and the impeachment inquiry accelerates toward a likely House vote before the year’s end, the president is increasingly insistent that, if he wanted to commit a crime, he wouldn’t be stupid enough to get caught.

At other times, Trump has privately avowed that if he wanted to commit the crimes or outrageous actions he’s accused of, he’d be smart enough to do it—and that people should stop saying he’s too dumb or incompetent to do crimes.”

Democrats and Republicans Aren’t Just Divided. They Live in Different Worlds.

The two parties represent radically different slices of the American economy.

America’s political polarization is almost complete. Its two main political parties increasingly represent two different economies. And they barely overlap.

Democrats can be found in educated cities and suburbs where professional jobs are plentiful. Republicans live in working-class and rural communities, home to agriculture and low-skill manufacturing.

It Starts With the Economy

 

Let’s look at GDP, or the value of goods and services produced, to understand how the two parties are divided. These days, Democratic House districts are doing substantially better: Two-thirds of the nation’s GDP comes from those areas, with Republican districts making up the rest.

Eric Holder’s Judicial Gerrymanders

Obama’s AG wants state judges to carve out Democratic majorities.

The Supreme Court’s recent decision to stop judges from interfering with partisan political gerrymanders is already looking prescient, as no less than Eric Holder informs us. The former Attorney General under Barack Obama is now pledging to persuade liberal state judges to overrule elected politicians with partisan judicial gerrymanders.

“My organization, the National Democratic Redistricting Committee, will continue to bring racial gerrymandering claims in the federal courts and partisan gerrymandering cases in the state courts,” Mr. Holder wrote on July 4 in the Washington Post. “An affiliate of the NDRC is supporting a state-based partisan gerrymandering case in North Carolina that seeks to strike down the maps for both chambers of the General Assembly.”

Mr. Holder’s op-ed is best understood as a fund-raising letter. And note that Mr. Holder didn’t mention Maryland, where Democrats gerrymandered their 7-1 congressional-seat majority that the Supreme Court also chose not to toss out. His outfit is suing North Carolina, where Republicans gerrymandered an 8-3 majority in congressional seats (two seats previously held by Republicans are vacant).

Mr. Holder claims the High Court has damaged “democracy,” but the Court merely left redistricting questions to the voters and elected representatives. That’s called democracy. Mr. Holder wants judges, most of whom aren’t elected, to overrule representatives elected by voters. His model is the 5-2 ruling by Pennsylvania’s liberal Supreme Court in 2018 that the Keystone State’s gerrymander violated state law. The judges substituted their own map that helped Democrats gain three seats in Congress last year.

That’s not democracy. It’s judicial usurpation of democracy. Mr. Holder wants to repeat this across any state where he can promote a liberal judicial majority if he can’t elect a liberal Legislature or Governor. Partisan gerrymanders won’t go away. They’ll merely be drawn by judges instead of elected officials.

Chief Justice John Roberts was right to keep federal judges out of this line-drawing that will inevitably have some voters viewing the decision as political. Too many voters already think of judges as politicians in robes. If Mr. Holder gets his way, that’s precisely what voters in states with judicial gerrymanders will be right to conclude.