2019: How does Berkshire measure up ESG?

ANDREW ROSS SORKIN: Thanks, Warren. Governance question from a shareholder.

Larry Fink of BlackRock has predicted that in the near future, all investors will be using ESG —environmental, social, governance — metrics to help determine the value of a company. I’m worried we don’t score well on everything from climate to diversity to inclusion. How well do you think Berkshire measures up on those metrics, and are they valuable metrics?

WARREN BUFFETT: I think in reality we measure up well, but we don’t participate in preparing reports for anybody that asks about it.

And we have this idea that even though all shareholders are equal, we sort of — we prefer individual shareholders. We actually prefer people we know as co-owners.

And we don’t want to be preparing a lot of reports and asking 60 subsidiaries each to do something, where they’ll set up a team, and they’ll mail things to headquarters, and then we’ll supply them to somebody who, if our stock goes up some, is probably going to sell it anyway.

We want our managers to do the right things. We give them enormous latitude to do that. And I think that our batting average really is quite good.

You saw that in the movie, we talked about having a hundred percent of the electricity we sell in Iowa come from, essentially, wind generation. Now that doesn’t mean that we get to do it 24 hours a day. We sell some and we buy it. But essentially, we will be creating as much wind energy as all of our customers use in electricity.

There’s one competitive — there’s one other utility — electric utility — that’s about our size — roughly our size — in Iowa, and they have practically no wind resources. And the wind blows where they exist, too. But we have — we will have that hundred percent — and as a matter of fact, it’s a moving target, because we do so well — partly — we do so well on wind generation that a number of the high-tech companies want to locate in Iowa and get clean energy from us at very low prices. And therefore, the moving target becomes our growth in customers in that area.

But we are not going to put out a — we’re not going to spend the time of the people at Berkshire Hathaway Energy responding to questionnaires or trying to score better with somebody that is working on that.

It’s just, we trust our managers and I think the performance is at least decent. And we keep expenses and needless reporting down to a minimum at Berkshire.

We do not get — and I mentioned this in the annual report — I can’t imagine another company like it — but here we are, with 500 billion of market capitalization — we do not have a consolidated P&L monthly. We don’t need it.

Now I can’t imagine any other organization doing that, but we don’t need it. And we’re not going to tie up resources — people resources — doing things we don’t need to do just because it’s the sort of standard procedure in corporate America.

And corporate America is very worried about, in general, they’re very worried about whether somebody’s going to upset their apple cart, you know, with activists and everything.

So, they want to be very sure that every shareholder is happy on issues like that. And in the end, fortunately, we don’t have to worry about that. So, we don’t have to run up a lot of expenses doing things that don’t actually let us run the business better. Charlie?

CHARLIE MUNGER: Well, I think at Berkshire the environmental stuff is done one level down from us. And I think Greg Abel is just terrific at it. And so, I think we score very well.

When it gets to so-called best corporate practices, I think the people that talk about them don’t really know what the best practices are. They just know what they think are the best practices. And they determine that based on what will sell, not what will work.

And so, I like our way of doing things better than theirs, and I hope to God we never follow their best practices. (Applause)