Hayman Capital Management founder and CIO Kyle Bass explained in a Bloomberg interview that the mounting backlash against environmental, social, and governance investing in recent years is primarily a response to the extreme demands of radical climate activists, or "green" defenders. Bass argued that these activists were so disconnected from reality that their uncompromising stance on blackballing the fossil fuel industry—without acknowledging that energy transitions can take upwards of half a century—has fueled the backlash. He said plans to moderate fossil fuel usage over decades from the start would've possibly prevented the backlash.
Bass said the ESG backlash derives from climate activists' demands that fossil fuels be abandoned immediately. He said the demands were never realistic.
"There were all of these idiots that were just saying, if anyone is doing hydrocarbons, we're going to blackball them from doing business or from receiving capital," Bass said, adding, "And so Texas lashed back and said, if you're going to blackball someone that's producing hydrocarbons, we're not going to do business with you either."
He said, "Energy transitions take 40 or 50 years," pointing out that people "think we can just turn hydrocarbons off and turn on alternative power. But they have no idea how the grid works and no idea how business works."
Bass said the focus should now be on efficiency and electrification. He said the long-term goal should be the energy transition to nuclear. Until then, he noted, fossil fuels and renewable energy sources are "going to coexist for decades and decades to come."
In a separate interview with CNBC's "Squawk Box" in 2022, Bass said, "The desire for the world to engage in alternative energy is one that I think we all would love to see happen, but there are certain scientific realities, and there are certain narratives that get pushed by NGOs and teenagers. And I think we've been taking policy cues from NGOs and teenagers for a long time."
Bass pointed out that a proper energy transition takes upwards of a half-century. In the interview with CNBC, he said, "The move from coal to natural gas took forty years. They take a very, very, very long time. We can't just flip a switch."
In his most recent interview with Bloomberg, Bass said, "Skirting hydrocarbons is like bringing politics into investing," adding, "If you're willing to give up returns for that, then so be it. But I think that's naive and it's a breach of fiduciary duty."
The latest Bloomberg data shows that about half of the US power grid is powered by natural gas generators. This summer, renewable energy power has slid, with coal now producing more power than wind and solar.
In recent years, ESG policies have discouraged investment by banks, funds, pensions, and other entities in the natural gas and coal industries. The problem with this is that unreliable solar and wind can't power artificial data centers 24/7. We've noted that the financial industry's initial rush to commit to net zero carbon footprints has hit a reality check in a note titled "ESG Frustration And Backlash In The Banking Sector Continues."
The big takeaway is that anyone who puts their climate crisis or woke religion first ahead of rational decision-making is doomed to fail.
