Charged Conversations - Paul Tice - BOOK - The Race To Zero

In this episode, Brigham talks with Paul Tice, author of the book "The Race To Zero - How ESG Investing Will Crater the Global Financial System"

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Encounter Books - Paul Tice - The Race To Zero

The Race to Zero provides a detailed rebuttal to the case for sustainable investing from the perspective of a long-time Wall Street analyst, investor, and latter-day finance professor. Sustainable investing does not aim to generate excess returns for investors or to further ethical goals such as improving society or saving the planet; rather, it seeks to seize control of the world’s financial system in order to ensure that the allocation of capital and investments across markets is politically favorable to establishment interests.

By limiting financial market access, ESG is designed to create a compliant corporate sector to serve as both Greek chorus and funding source for the environmental and social causes championed by government and the elite class. Climate change is its driving force and priority goal, and its main targets are fossil fuel companies operating in the industrialized Western world. This book is designed to expose these truths in plain-spoken language—free of financial jargon—to reach the widest possible audience, including the silent majority on Wall Street that is now afraid to speak up about ESG.

Episode Transcript

(00:00):
Welcome to another episode of Charged Conversations. I'm your host Brigham account. Joining
me today is Paul Tice. Paulhas spent forty years working on Wall Street
and is the author of a newbook, The Race to Zero. How
ESG investing will creator the global financialsystem. He's worked in some of the

(00:21):
industry's most recognizable firms, and formost of his career he specialized in the
energy sector. Paul, Welcome tothe program, Ragl, Thanks for having
me. My first question is howdid you decide to get started on this
topic and why write a book.So in the last ten years of my
career working on Wall Street, youknow, ESG has obviously come out of

(00:44):
nowhere, so it was kind ofa day to day thing in terms of
my everyday job and what I found. And one of the reasons why I
felt compelled to write the book isthat you can't criticize ESG and sustainability.
You're not allowed to have a divergentopinion about it if you work within the
industry, and that's the reason whyyou haven't heard anyone from within Wall Street

(01:08):
really offer a critical word about it. So I thought it was important to
articulate that point of view. Ithink it speaks to a silent majority on
Wall Street that are not allowed tospeak out about it. You know,
I think the focus of some ofthe anti ESG opposition over the last few
years has been a little misplaced.I think we really need to focus more

(01:30):
on climate change as opposed to someof these more woke issues. So I
wrote the book in order to kindof give that tactical approach. And so
just maybe for any of our listenerswho don't know what ESG is, Environmental,
social and governance, do I havethat right? That's right. Yeah.

(01:51):
So ESG are non financial factors.They fall in those three pillars.
It's morally subjective. And the argumentis that you need to use these ESG
factors to drive your company policy andyour investment decision making as opposed to financial
metrics. And it's all part ofthe stakeholder capitalism argument, which says that

(02:13):
you run your companies not for thegood of your owners and your capital providers
and your employees, but you runit for the good of society, which
is really closer to fascism than itis to capitalism. And we don't know
each other, we haven't met beforetoday, but one of my roles is
I'm a professor at a university.I've taught business law and business ethics at

(02:35):
a major Midwest public institution. Andwhen we talk about this, what's wrong
with being all truistic? What's wrongwith saying, gee, we should all
do our best, we have someduty or obligation to help out the less
fortunate. Why has this gone wrong? I think businesses already do a lot

(02:58):
of good for society in terms ofemploying people, putting money into the community,
developing new technologies, and Wall Streetis financing a lot of that growth.
And we can't overlook how much capitalhas been raised for third world countries
and the emerging markets over the lastthirty years since the crisis of the nineteen

(03:19):
eighties. So Wall Street and business, I think, are already a moral
universe and they are contributing to society. So the whole argument that you've seen
come up in the last few yearsin business schools that we need to reimagine
capitalism because it's not working or ithas all these ethical failings, I would
argue a lot of the issues thatwe have around capitalism, the problems are

(03:40):
more government related as opposed to aninherent problem with capitalism. But there's nothing
wrong with investing based on an ethicalapproach or running your company based on an
ethical approach. But the problem withESG is you've got third party activists who
are telling you what is ethical onwhat it's not. And again, it's

(04:01):
very morally subjective, and none ofthese things will drive financial value or lead
to better performance if you're investors,So the whole argument is fraudulent to begin
with. If I'm the president ofa company, I have a fiduciary duty
to my board and to my shareholdersto maximize the long term value of the
company. As an investor, I'minvesting in a company because I want the

(04:27):
maximum return for my money, andI may believe in what they're doing,
or maybe I just like Harley Davidson. But how does ESG run a foul
of these traditional notions of maximizing return? I think it preaching is the fiduciary
responsibility, both for company management aswell as for investors. And there's a

(04:48):
reason why the ESG movement for thelast ten years has been focused on redefining
fiduciary duty because it is the lastline of defense. So if you can
break that down, then you canallow this whole ESG agenda, and that's
what's happening now at the regulatory level, both in the US with the SEC

(05:08):
and some of the other agencies,and then over in Europe. So you
know, finnuciary responsibility is a problem. What the activists to try to do
is redefine good governance and finducial responsibilityas requiring you to follow an ESG approach.
Again, it's all self serving,it's somewhat circular, but you know,

(05:28):
if you were observing your finucial responsibilityauditory investors, or if you're running
a company your shareholders, then youwould not be spending really much time on
a lot of this sustainability agenda,which is very costly and implementing everything that
the ESG movement wants to I wouldargue as a negative in terms of financial
value because it all has a costattached to it, particularly around getting your

(05:53):
emissions down. You know, whetheryou're an energy company or you know a
non industrial company, that's going tohave a cost to it, because as
alternative energy renewables is not cheap,right, and it's a problem. But
the other side is trying to useregulation to force it on everybody, And
you know, from this notion ofsustainable investing, do you agree that it's

(06:15):
a change to the capitalist system wherethey're trying to alter, you know,
the very definitions itself as to whatcapitalism is. We look at it and
go through this in the book.ESG needs to be seen in the context
of every other attack against capitalism goingback over the last two hundred years,

(06:35):
you know, starting with Marxism.I think ESG is the most effective and
just to kind of bookend that wholetwo hundred year period, Marxism tried to
go after the means of production throughthe labor function. ESG is now doing
that through the capital function, andI think that's going to be much more
effective because if you can starve acompany for capital or direct capital to a

(06:57):
favored company, then you can decidewho lives and who doesn't, at least
at the corporate level. But ESGis the latest program that is basically being
driven by the United Nations Climate ChangeSustainable Development, both of which came together
in the eighties, and then ESGInvesting was the third leg of the stool
that over the last fifteen years haskind of overtaken Wall Street and It's not

(07:23):
surprising that climate change is the corepriority for the ESG movement, so getting
to net zero it's the funding mechanismis the way I would look at it.
ESG will provide the capital to facilitateclimate change and sustainabile development, but
it is just another attack on capitalism. Reimagining capitalism sounds nice, but again,

(07:44):
it's not capitalism. It's n stagecapitalism unless we reverse what's happening between
now and twenty thirty. How muchof this, especially you mentioned the un
with lesser developer developing countries, howmuch of this is about wealth transfer from
First War World countries to developing countries. They think it's all about wealth transfer.
Honestly, the goal is to havean uneven playing field. So there's

(08:09):
a two tiered system, and thatgoes through climate change and all the goals
there sustainable development and now ESG investing. The program is being applied more aggressively
on the developed world Europe and NorthAmerica, and then the third world is
being given a pass. So wehave to de industrialize, cut our emissions

(08:31):
here in North America and Europe,and then China and India and the rest
of the developing world. Gets apass, they'll catch up eventually some point
down the road. And sustainable developmentis the same thing. And esg IS
is also targeted at the developed marketsas opposed to the emerging markets, which
if you were worried about the sustainabilityusing that on an objective definition of that

(08:54):
word, the other side kind ofuses it as a gauzy term, which
really has no meaning. But ifyou're worried about company solvency as a sustainability
definition, you would be more concernedabout emerging markets and some of the companies
there than a large cap company herein the US like Exxon or Chevron,
which clearly they've been around for almostone hundred and fifty years. I would

(09:16):
call that sustainable. But if youlook at the other side, they would
say that, no, these arenot sustainable companies. You know, when
we look at energy, let's touchon energy for just a couple of moments.
You know, throughout human history we'venever used less energy, only more,
right, and as countries develop,they sort of want what we have.

(09:37):
They want to develop energy, theywant to use energy. You know,
why have hydrocarbons been singled out asthe evil of the world, because
they are the fuel of capitalism andeconomic growth. So if you control fossil
fuels, if you come up withan arbitrary definition of carbon pollution and use

(09:58):
that ton strained fossil fuels, youcan control the economy. You can control
every person within America using that newstandard. And so I think it's again
the latest attack on fossil fuels,going back to breaking up the Standard Oil
Trust one hundred years ago. Andthe argument has changed over the last century.

(10:20):
You know, it went from toomuch economic power being concentrated in one
industry, to a geopolitical risk becausewe were dependent on the Mid East,
to an environmental concern because we wererunning out of oil. The original definition
of sustainability was to use it asa criticism of oil and gas because it

(10:41):
was unsustainable because we were going toeventually run out of oil and gas,
and that hasn't proven to be thecase. So now the problem is still
an environmental one, but it's climatechange and we can't keep on killing the
planet by burning hydrocarbons. Again,it's all based on this faulty clime mid
data and science which has been conclusiondriven for the last several decades. But

(11:05):
it's just a way to control theentire economy, and it will touch every
American if this, you know,succeeds in defunding the industry. Because if
you can control how much you admit, then you can control your mobility,
you know, how much where youlive, right, how much you buy,
you know. So it's the ultimatepolitical control, and that's what's driving
all of this. Yeah, it'sinteresting. I saw a study been out

(11:28):
for almost a year but not widelycolored by UC Davis that admitted that even
if you did all of the thingsthat those wanting us to hurry a transition
to a renewable environment would do,it's not enough. And they admitted that,
well, you know, really,we have to use less energy,

(11:52):
we have to live in smaller houses. We all can't afford to drive cars
any longer. Does that resonate withyou? Do you? Is that part
of the ultimate goal is to haveus live this kind of communal life and
a smaller footprint, not consuming anything. Yeah, I mean, if you
look, you know, the WorldEconomic Forum has kind of been the fellow

(12:13):
traveler at the UN really since theeighties, so you know, they they
have been pushing the stakeholder capitalism,which is what animates ESG and sustainability.
So if you look at some ofthe trial balloons that the World Economic Forum
has put up over the last severalyears, a lot of it is fairly
scary and creepy. But you know, I think the other side means it

(12:35):
right, so you know, wehave to take them at their word.
So the fact that people won't havecars anymore, that would be living in
fifteen minute cities where your use ofa car is restricted, your ability to
move around the city is restricted,what you buy is restricted. I mean,
they're already implementing a lot of thesecrazy ideas over in Europe, so
it's happening at the city and thelocal council level. I mean they're taking

(12:58):
meat and dare off of menus forhospitals and schools over in the UK.
Right, And again that gets downto you know, we have so many
emissions. Now they're going after theagricultural sector and they're making the argument that
farms are a danger to the planet, even though it's the only way we're

(13:18):
gonna be able to feed our population. So do you think there's a disconnect
between the urban population that just showsup to the grocery store and everything is
there runs into Starbucks and relies onmass transit and doesn't need a car.
You know, a lot of myfriends in New York don't even have a
driver's license, right, they don'tneed one. Is it as simple as

(13:39):
saying there are people living in twodifferent universes that don't understand each other.
Or is it They're more to itthan that. Having worked in the city
most of all my career grew upin Brooklyn, I'm in the suburbs now
around Energy, which I was involvedwith. I would travel a lot around
the company. There are two Americas, I mean clearly. So I think

(14:01):
there's a different view if you're livingin a city about everything being there,
not needing a car, which againI would find that a challenge, right,
not having that a mobility, Andso it's partly that that may be
partly generational. Younger people, Ithink have a different view than older people.
There's definitely an urban versus rural suburbandifference of opinion around this thing.

(14:24):
But it is already starting to beimplemented around a lot of the blue cities
in this country right. A lotof them are members of the C forty
group. They're already implementing each congestionpricing here in New York City. It's
going to start up in the nextcouple of months. That is not to
raise taxes. I mean, thatis kind of the headline cause, but
if you listen to the other side, they say, it's going to cut

(14:46):
down on traffic, right, it'sgoing to make this city less hospitable to
cars. Right, So if youdon't have cars, you know, you
can use public transit. But again, we know what crime is like in
New York City, so that's goingto be a joke. So it will
restrain your mobility and your choices.Right. Electric vehicles, I think,
by definition are also constraining because youhave to worry about what their range is

(15:11):
and all the technology challenges. Howlong will this battery last in cold weather?
You know, that's why there's notmuch of a take up in the
rural parts of this country, andrightly so, only in city using it
as a commuter car or your fourthcar, and even then only with subsidies,
because you know, and the peoplebuying it are also at the higher
end, so it's you know,clearly there hasn't been a mass uptake of

(15:33):
electric vehicles because there are problems withthe technology. Yeah, So speaking about
electric vehicles for a minute. Youknow it's interesting because I think, look,
if you want to buy an EVis a second car, you want
to make a commute car, You'vegot a garage, you can charge at
home. You know, most carsdon't go more than fifty miles a day.
Okay, all that makes sense.But you know, we have the

(15:56):
current administration, through the tailpipe emissionStandards, coming out saying we're going to
make those emissions so low that weare going to force a transition to evs
here at the end of the decade, and despite overwhelming criticism, they've really
doubled down by coming out with thefinal rule and not really changing much.

(16:18):
Do you find that these kind oftop down government approaches through the regulatory agency
is also undermining the free market economybecause they're dictating, they're turning companies into
utilities, basically telling people what goodsand services they'll produce. Do you see
that tie or my overstating it?Do you think I think ESG at the

(16:42):
end of the day, is thegovernment working through third party activists to direct
the private sector of the financial markets. Right, And this is on top
of all the regulation that's been pushedon the financial industry since the crisis,
particularly under the Obama administration. Soyeah, no, this is the heavy
hand of regular and as I mentionedbefore, the next wave of ESG is

(17:03):
going to make it mandatory. Youknow, the last ten years, it
was kind of suckering everybody into itby saying you can signal your virtue,
right, and you could do whateveryou want, right, you can follow.
It was bespoke, it was aspirational, all these you know, happy
buzzwords. Right. But now thateveryone is like on board and advocated for

(17:26):
it, you can't really find theexit door, right. And now the
regulators are going to come and makeit mandatory, starting with climate disclosures from
the SEC, which they just finalizedthat rule. So ESG is a regulatory
push. And then on top ofall that, since climate changed the focus,
you have everything else from the otheragencies now. So you have the
EPA, as you mentioned coming outwith the tailpipe rules. You also have

(17:49):
the EPA going after gas stows andgas furnaces. You have the Department of
Energy posing energy exports, and thatmy guess is will or into a moratorium
if Biden is re elected. Okay, so it's an anti fossil fuel agenda
on many fronts, but it's allbeing implemented through regulations. No one's voting

(18:11):
on this agenda. Republicans say it'sa de facto ban. I've said that
actually testifying myself in Congress. ButDemocrats will say, no, no,
no, it's a pause. We'reexporting a lot more than we ever thought
we would. We need to considerthe life cycle of missions. And others
saying, oh, this is justpolitical, Yes, it is political,
but he has to do this rightnow. Don't worry. After the election,

(18:34):
everything will go back to being normal. The ban will be listed.
You don't see it that way.I mean, I would remind you if
you go back to twenty twenty duringthe Democratic primary, they went to Houston,
and everyone on that stage, includingBiden, basically said they were going
to shut down fracking, fossil fuels, drilling, what had It was all

(18:55):
the same thing, And I thinkthat was an aggressive move to obviously go
to Houston as the spiritual capital ofthe energy industry. So everything that they
have done over the last three yearsshows an antagonistic approach to oil and gas.
I think what they did with theLNG pause, the political spin there
is that it allows some Democrats torun against it. Right, So you've

(19:17):
had a number of people come outand say, oh, this is terrible,
we need to be all of theabove or energy, what have you.
So it helps certain marginal democrats thatare in tighter contests I think,
run against it. But at theend of the day, they are anti
fossil fuels. They have a climateagenda, and if you analyze every project,
infrastructure project using that global emissions test, then you would never approve another

(19:41):
LNG export facility, right, Andwhy would you do that. Let's assume
that you didn't have such an antifossil fuel agenda. Why would you do
it now when Europe needs more sourcesof natural gas? Right when we're competing
against a cutter which is now expandingcapacity. Why would they do that from

(20:03):
a competitive perspective, because you're onlygoing to drive potential buyers in Europe to
the Middle East for that gas.And you know once you do that,
they're locked up for twenty years.Yeah, it's a long term investment.
Want to ask you one other questionand then anything that you'd like to say
that maybe I've missed, is isthere also a nexus between ESG and DEI

(20:26):
that we're seeing also permeate society,businesses, college campuses. The number two
ESG factor or focus issue would beDEI after climate change. It's a continuation
of affirmative action that you know,started spreading through the university back in the

(20:48):
eighties and that started pushing into thebusiness world in the nineties. You know,
I saw that, you know inmy various jobs in terms of criteria
for who you hired, who youpromoted, and you know now DEI is
kind of that, you know,reverse discrimination, affirmative action on steroids,
right, and it's active discrimination againstcertain parts of society allegedly to promote others.

(21:15):
Right. It won't accomplish any ofthat, but it has permeated you
know, the corporate sector and WallStreet over the last ten years. But
as an investment strategy, if ESGis supposed to be an investment strategy,
it really doesn't hold any water,right, I mean, climate change somewhat,
you can make that argument, ButDEI is just a progressive want,

(21:36):
right, like everything else around theESC format. So I think if we
can just attack climate change aggressively interms of the regulatory complex then and win
that battle, then the rest ofESG will just blow away in the wind,
because again it's all disjointed, andyou can really not with a straight
face, make an argument that DEIis going to lead to a better company

(22:00):
or better investment portfolio performance. Andwe have a lot of examples where it
hasn't. We had a number ofbanks last year that went away that were
more focused on DEI that interest ratesright. Models with Boeing, I think
we can have an honest discussion aboutwho had been hiring recently in terms of
doing some of the maintenance. SoI guess, kind of in closing here

(22:22):
for our listeners who are listening tothis, what should we and what can
we as individuals do to push backon all this? I think individuals,
obviously you control your money, sodon't patronize a company that doesn't align with
your values. Right, So thebud Light example, right, And the

(22:44):
same argument goes for your investment advisor. If you have a public CEO that
is spatting off about ESG, whetherhe believes it or he's just afraid and
he has to say that on theduress, doesn't matter. I mean,
you should again take your money elsewhereso that it'll aligns with your values.
But I think the most important thingthat every American can do, whether they're
invested in the market or not,educate yourself a little more about climate change

(23:10):
so that you're comfortable having this discussionin public. I think most Americans would
argue, would agree that it's afraud intuitively, but we need to have
more people speaking out openly about theobvious nature that it is kind of a
fraud and it's being used to justifya lot of restructuring of the economy.

(23:30):
And then take that knowledge and pressureyour lawmakers because the only way we're going
to resolve this is through government actionbacked by government resources. And we're going
to need Republicans. And again itis a political issue, so I say
Republicans specifically because every Democrat supports thisagenda. So we need Republican lawmakers,

(23:52):
particularly at the state level, tocontinue the charge. So West Virginia versus
EPA, we succeeded in pushing backon the Clean Power Plan, the same
logic needs to be used for everyESG regulation. And then keep going,
keep going, and tack all theclimate regulations that have sprouted up through non
democratic means, and that includes itTrump is re elected, we've got to

(24:14):
submit the Paris Agreement to the Senate. He will not pass, and that
should dismantle a lot of these otherregulations. Well, I really appreciate you
joining me here today for this veryinsightful conversation. And again you've been listening
to Charged Conversations with me. BrighamMcCown your host, and we've been interviewing

(24:34):
Paul Tice. Paul your book.Where can folks find it? So?
You can get it at Acounter Books, which is the publisher's website, or
you can get at any major bookretail or, including Amazon. Well,
I've been reading it. I thinkit's fantastic. Please go out and get
yourself a copy. And we're outof time for today. But again you've

(24:55):
been listening to Charge Conversations, aJoe Strucker production.