WWildfires burned nearly 10.4 million acres across the United States last year. The costliest electrical storm in US history caused $ 7.5 billion in damage in Illinois, Iowa, Nebraska and South Dakota. As the climate crisis swept across the world on a biblical scale, it left behind a record number of billion dollar disasters.
And yet from these ashes has risen an unlikely savior: Wall Street. After decades of backing polluters and opposing legislation to control them, finance says it is turning green.
A steadily growing trend in investment went mainstream in 2020 when a record number of corporations pledged to go “net zero” and act to cancel the carbon emissions they produce to halt a catastrophic rise in global temperatures.
The corporate tectonic shift is being led by a strategic diversion on the part of some of the world’s largest investors. It used to be the protesters outside Davos and the annual shareholder meetings who talked about greenhouse gases and rising sea levels. Now it’s the bankers. And when money talks, corporations listen. But can Wall Street really save the planet? There are at least positive signs that they are trying.
Joseph Stiglitz, a Nobel laureate and professor of economics at Columbia University, doesn’t think Wall Street has a choice. “People used to use the analogy that climate change was like boiling a frog and we didn’t notice it until it was too late,” Stiglitz said. “Well, they boiled us. We are trying to get out of this. “
Countries like the UK, France, Denmark and New Zealand have committed to reaching net zero by 2050 and the EU and Canada are working on their own plans.
The financial calculation is obvious. As the climate crisis continues, the risk of doing nothing increases and money moves.
In 2013, Exxon was the largest company in the world, last year it abandoned the Dow Jones index, the first-class index that is synonymous with “stock markets” for many investors. Last year it lost $ 22 billion and the company, which for decades denied the climate crisis was real and actively lobbied against change, there has been forced to choose climate activist investors to your board.
By September of last year, more than 800 cities, 100 regions and 1,500 companies had pledged to decarbonize their societies and economies, according to the research group. Data-driven EnviroLab and the NewClimate Institute. Between them, those companies have combined revenues of more than $ 11.4 trillion and are responsible for 3.5 gigatons in greenhouse gas emissions, a larger amount than India’s annual emissions.
More than 1,000 companies have joined the Science-Based Goals Initiative, an initiative to help corporations set measurable emissions standards administered by the nonprofit CDP (formerly the Carbon Disclosure Project), the United Nations, and others. An analysis of 338 of those companies, including Mastercard, the Italian energy company Enel and the British supermarket chain Tesco, found that they have reduced their emissions by 25% since 2015, a difference of 302 million tons of CO.two equivalent, the same as the annual emissions from 78 coal-fired power plants.
With the planet still warming at an alarming rate, an economic crisis looms, Stiglitz said. And the longer we delay, the greater the “transition shock” will be. “By delaying action we are exacerbating the magnitude of the adjustment that the economy is going to have to go through,” he said.
Some ethical investors have been driving climate action for decades, but now top money managers are on board too. Larry Fink, founder and CEO of BlackRock, announced that environmental sustainability was now a central goal for his company, which manages $ 7 trillion in investments. Other big money managers, including Fidelity and Vanguard, are also on board.
But this is not a Damascene conversion. Wall Street is not changing the tips of its bank-made wings for Birkenstocks. BlackRock still has large investments in coal and other fossil fuels, but the change in attitude should not be underestimated and, wherever it goes, others will follow, driven by huge financial opportunities.
Doing nothing will be bad for business, with 58% of the US suffer an economic decline by 2060-2080 if nothing is done. There is also the transfer of generational wealth from baby boomers to Generation X and millennial investors who, as a recent BlackRock report suggested, have a “heightened awareness of sustainability.”
But, make no mistake, it is about money. Sustainability is “a new source of profitability in all asset classes” according to Jean Boivin, the director of the BlackRock Investment Institute. BlackRock’s new green deal is not so much about excluding bad actors or managing climate change risk as it is about “riding a wave that should be a source of profitability in itself.”
With Joe Biden in power after ousting Donald Trump, the chief climate denier, trillions of dollars of investment could soon go to sustainable solutions.
One of Fink’s initiatives is a commitment to publish a “temperature alignment metric” for BlackRock funds, an increasingly popular way for companies and mutual funds to measure whether their carbon footprint is compliant. of 2015 Paris to combat climate change by limiting global warming to wells. below 2C.
It’s a move also championed by Generation Investment Management, the investment firm co-founded by former US Vice President Al Gore and Goldman Sachs chief asset management officer David Blood.
For Edward Mason, chief engagement officer at Generation Investment Management, the move is part of an encouraging societal shift in how companies are reacting to the climate crisis and how investors are helping drive that change. “The pace is huge and it’s going in the right direction,” Mason said. “The challenge is also huge. I am not being Panglossian about it, we are not where we should be. But sitting where I am, I see a lot of change. “
Meanwhile, worrying trends continue. Unless action is taken soon, carbon emissions from the energy industry will soon exceed pre-pandemic levels as economies begin to recover from Covid-19 restrictions, according to the International Energy Agency.
But even longtime environmentalists and activists are cautiously optimistic about the direction the investment community is taking. After years of campaigning against corporate damages, they see significant signs of progress, albeit with qualifications.
“I think there are reasons to be optimistic, but also to be extremely cautious. It’s moving in the right direction and it’s going green, ”said Josh Axelrod, the chief advocate for the Natural Resources Defense Council.
Axelrod focuses on the issues of energy, oil and gas and notes that BP and Shell have committed to achieving a net zero by 2050. “Well, what does that really mean? Are they really going to cut emissions or rely on offsets or rely on technology that hasn’t really proven it can do what it says it will? The answer, especially for Shell, is sadly the latter. “
Much of the Shell initiative is a promise offset 120 million tons per year of its emissions by 2030 using “Nature-based solutions” – projects that “will protect, transform or restore the earth”. Axelrod doubts it’s enough. “At the end of the day [for oil and gas production] the only way they are going to deal with their emissions is by stopping, ”he said.
Father Seamus Finn of the Interfaith Center on Corporate Responsibility has been a longtime activist on corporate responsibility and has often had top institutional investors hampering the progressive shareholder resolutions he has championed.
“We have tended to be somewhat ambivalent and perhaps overly critical of the BlackRocks, the Fidelitys and the Vanguards of this world simply because for too long they voted against our resolutions at annual meetings,” he said. “But little by little I think they have recovered and, let’s be clear, they are doing it because they are reading the writing on the wall. People who put money in their funds want to know how they voted on resolutions. They are being pushed by the customer, by science, by the general public. ”
Stiglitz recently joined a new committee of leading economic policy thinkers, the Regenerative Crisis Response Committee, which aims to recommend ways to use fiscal and monetary policy and financial regulation to address climate-related financial risks and other risks. The data on climate change seem dark, he acknowledges, but feels “qualified optimism.”
“There is a general consensus, not unanimity, that we have to do more,” he said.
Obstacles remain, including the “nightmare” of an American political system that has absorbed the climate crisis in the divisive culture wars of American politics.
“The main thing that can go wrong is our policy,” Stiglitz said. “Everything points in the right direction, technology, global consensus. The only thing that is not is climate change that is advancing at a rate and with really depressing manifestations, “he said.
But even that is “accelerating our willingness to cope.”
George is Digismak’s reported cum editor with 13 years of experience in Journalism