Harris Kupperman when asked about his thoughts on ESG in an interview with Real vision
“I think that ESG as being excessive stock price growth. When you look at sectors, this whole parts of the market that just can’t get financing right now, two weeks ago, Peabody tried– their large cooking coal miner, they tried to roll over some debt that was due for a few years out. They’re trying to lower interest rates, and they took it to market and Peabody’s a very profitable company. It has minimal net debt, it should be a very easy debt to roll over and reduce the interest rate on. It turned out that no one wanted to own cold debt because everyone’s mandate suddenly is ESG. It’s a marketing pitch really, and if one mutual fund doesn’t, one bond funds doesn’t. They all have to.
When you look around the world, everyone’s adopted ESG because if you don’t, you can’t raise money, which means that a company like Peabody can’t roll their debt. If Peabody can’t roll their debt, what does that say for Peabody when the debt comes due? They’re going to have to pay it off. They’re not going to be able to roll at any price. What does that say for building a new coal mine? What does that say for expanding your coal mine? I think there’s going to be no new coal production really, and yes, everyone’s mad at thermocol, thermocol, it produces carbon dioxide and everything else. Without cooking coal, you don’t have solar panels, you don’t have wind farms, you need cooking coal. It’s the key ingredient still.
It’s illogical to be against cooking coal because it has the word coal in it. If you go to something like uranium, uranium is the base load for America’s utility. It’s the base load for most countries’ utilities right now. You need baseload power. We just don’t have the technology yet to use batteries to store the solar in the wind. We will, but it’s going to take a few years. Right now with ESG, who’s going to fund a new uranium mine? It’s on the blacklist. It’s up there with coal.
You have a situation where globally, the demand for uranium is about 200 million pounds a year and supply is like 130 and there’s a bit of secondary supply. Maybe you’re looking at like 160, you’re looking at a decent size deficit. As they go through the above ground stocks, which is happening rapidly, the price of uranium is going to go from 25 where it is today to some price above the cost of producing it, which is probably in the 40 to 50 range. Even then, how are you going to add 30, 40 million pounds of uranium plus future growth when no one wants to fund this thing because of ESG?
There’s no bond fund who’s going to fund it. Who’s going to fund it on the equity side? It’s going to be some hedge fund that’s going to want some obscene return on capital, and even most of my hedge fund friends, because their mandate is to raise capital and grow, well, who do you raise capital from? Pensions endowments, other guys with ESG mandates. It’s a circular thing. You have whole sectors of the economy that are cut off, which means that investing in them likely has excess returns and excess stock price growth. That’s ESG to me.”