00:00President Trump is taking aim at ESG, or environmental, social, and governance agendas.
00:05He signed an executive order to review foreign proxy advisors.
00:09He says these advisors hold big sway over American corporations and even Americans' retirement accounts.
00:16Trump has determined the advisors are acting on radical ideas and are politically motivated
00:21and are not solely concerned with maximizing investor returns, which he said should be the top priority.
00:27One of the firms responded to the order, telling media they work for institutional investors independently.
00:33Let's look at the impacts of this with Diana Furchgott-Roth,
00:37director of the Center for Energy, Climate, and Environment at the Heritage Foundation.
00:41Thank you for your time, Diana.
00:43This is what we're talking about, Institutional Shareholder Services, Incorporated, and Glass, Lewis & Company, LLC.
00:49What do they do?
00:50And are they affecting Americans' financial bottom line positively or negatively?
00:54What they do is they collect proxy votes and they advise shareholders on how to vote.
01:02So those of our listeners who have shares might find that they get something in the mail from,
01:09which is a question on how they want to vote on a particular matter affecting the company.
01:15And what Glass-Lewis and ISS do is make recommendations.
01:18The problem is that sometimes their recommendations are not aligned with the best interests of the company.
01:27In particular, they're very much focused on environmental, social governance.
01:33They have climate transition plans that they often recommend against the advice of the board.
01:39And that means that these firms get driven in a different direction from what is most profitable for them.
01:48And that's against the interests of the shareholders, because shareholders want profitable firms.
01:54They don't want firms that lose money.
01:57Understood.
01:58Now, what good can come from these reviews that the Securities and Exchange Commission is now ordered to carry out,
02:04including rules, regulations, guidance, bulletins, memos?
02:09Well, it's the Securities and Exchange Commission, the Federal Trade Commission, and the Labor Department.
02:14So all three can decide that other proxy advisory firms should be allowed in.
02:21I have always been puzzled why this market was just allocated to ISS and Glass-Lewis.
02:28There should be a number of other companies that are approved to collect these proxy votes.
02:34And the Federal Trade Commission, in particular, will be looking at evidence of antitrust violations,
02:41that these two groups basically colluded to take this business and have the same standards.
02:50And also that these standards are not in the interests of the American people.
02:55They're not in the interests of the firms.
02:58And they are foreign-owned.
03:00They're owned by Canada and Germany.
03:03So these are countries that are propelling an environmentalist agenda.
03:10And this agenda is being reflected on the choices American shareholders have.
03:15Thank you for explaining that, Diana.
03:18And at the same time, we've seen allegations that these ESG policies are costing Americans big bucks
03:24by not going with the cheapest energy policies or even leading to some-called indoctrination of employees
03:30being forced to take courses, training courses, they call them,
03:33that don't align with the common knowledge of how you should normally interact with people.
03:38But broadly speaking, how does this new push from the Trump administration
03:41fit in with broader efforts to dismantle ESG, and how successful could it be?
03:47Well, it could potentially be very successful if other firms are allowed in to collect these proxy votes
03:55and if other firms reflect the preferences of the board.
03:58The ultimate challenge for any organization is choosing the best policies and the best qualified people.
04:05You don't want to choose on the basis of affirmative action.
04:08You want the most qualified workforce that you have.
04:11And you don't want to choose on the basis of political correctness.
04:15You want to have the least expensive, most reliable fuel.
04:19That is going to make your company get further ahead than if they endorse renewables
04:26that might cost the firm more, both in the short and the long run.
04:31So this could have very positive effects on firm governance and the American economy and shareholders' wallets.
04:39Those of our listeners who own shares know that they want them to grow as fast as possible.
04:46That means the most qualified people, the least expensive sources of energy, and the best policies.
04:54It's so interesting how this is turning into something political.
04:57I mean, it depends on who you ask.
04:58If you ask certain people who are not the federal government,
05:00they might say that coal isn't that much cheaper than, say, solar or wind power,
05:05where if you ask the government and they're pretty reliable, they say, no, coal is much cheaper.
05:10So it's all a big mix.
05:12And then the issue of, well, if you get these renewables, where are the solar panels coming from?
05:15China.
05:16So you're enriching a genocidal regime.
05:18It's just something you all have to weigh when you go about this.
05:20Now, you mentioned the FTC and their antitrust investigations, these proxy advisors.
05:25And you mentioned that this may be happening.
05:27Now, how would that impact Americans if it is?
05:31What it would do is it would give American shareholders a broader choice.
05:35It would mean that the boards of these companies can rely on shareholders having the most accurate
05:41information when it comes to votes instead of being prejudiced by foreign-owned proxy companies.
05:50And I think that that's very important.
05:52And in terms of renewables, we know that they're weakening the electricity grid and driving up prices
05:58because in terms of high electricity prices, nine out of the top 10 states in electricity prices
06:06require renewables.
06:07Nine out of the bottom 10 states in electricity prices do not require renewables.
06:13And it's a difference of three to one, about 11 cents an hour in Utah, about 32 cents an hour in California.
06:19And we know what people like, low electricity prices, because that's better on their wallets.
06:26It's so important to pay attention to what you're saying.
06:28And we know that Americans do not like foreigners interfering with their elections, their 401ks, their corporations.
06:36That's why this is big news here.
06:38Now, have we seen any of these racial equity audits or a significant reduction in greenhouse gas emissions
06:44from large American corporations or investment firms that may be tied to these proxy advisors?
06:52I think it's very clear that when proxy advisors have ESG themes and climate transition themes that they're trying to push,
07:00then that prejudices them against using America's oil and natural gas because they're biased against those sources of energy.
07:12But Americans want low electricity prices, not high electricity prices.
07:17And many communities are turning down what they see as ugly wind turbines and ugly solar panels.
07:2570% of wind turbines, solar panels and batteries are made in China.
07:33And China subsidizes these to undercut American and European producers.
07:39So we don't want proxy advisory firms that are lobbying essentially on behalf of China.
07:45Very, very important to note and interesting that you bring that up.
07:49And if they're avoiding American energy and if it's oil, it might be Iranian oil that's being produced in order to fill the gap,
07:56which may not be environmentally created.
07:58And it may just be fueling a state sponsor of terrorism.
08:02So that's pretty clear that that's not in the American interest.
08:06Now, when you look at the Trump administration, how is it going about uprooting and exposing all these things?
08:12Is it using the correct legal avenues and is it doing enough?
08:15President Trump is asking three agencies, the Securities and Exchange Commission that deals with stocks,
08:23the Labor Department that deals with pension funds and the Federal Trade Commission that deals with collusion,
08:33to look at this.
08:34And each of these agencies is going to take a look and see what they come up with and see what their conclusion is.
08:41I have always found it puzzling that it is just these two entities, Glass-Lewis and ISS,
08:48that are so prevalent, that have the advantage in collecting these proxy votes
08:54when they are so biased in terms of environmentalism and DEI, diversity, equity and inclusion.
09:04It is fascinating to think about the complexities of the big picture here.
09:16Thank you for that insight.
09:18I mean, how an American's take-home pay and their actual bottom line can be affected by someone
09:23who doesn't vote in this country, who's not even within the American jurisdiction at all.
09:27Diana Furch-Gott-Roth, we appreciate you.
09:30Thank you very much, Kevin.
09:32Thank you very much, Kevin.
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