What’s wrong with the Committee to Save the Planet?

In 1999 timemagazine put three heavyweights from the U.S. Federal Reserve and Treasury Department on its cover, calling them “The Committee to Save the World.” They were Alan Greenspan, Robert Rubin and Lawrence Summers. Their achievement was to stop economic upheaval from Russia to Brazil, causing chaos in the global financial system. Big stuff, sure. But nothing compares to the task facing those who today might be called “The Committee to Save the Planet”. They are Mark Carney, former Governor of the Bank of England, Larry Fink, boss of BlackRock, the world’s largest investment company, and Jamie Dimon, CEO of JPMorgan Chase, the largest American bank.

Their goals are nothing less than stopping global warming and creating a fairer and more enlightened form of capitalism. In just a few years, they have rallied more than 100 central banks, tens of trillions of dollars in cash and bank funding from investors, and the bosses of America’s biggest corporations to the cause. Their ambitions are not only grand. They are vintage. So why are they suddenly figures of mockery in the war against “woke” capitalism?

Mr. Carney was the first global politics buff to raise his cuff buttoned fist. In 2015, he drew attention to systemic risks for banks and insurance companies due to climate change. In doing so, he set in motion a blitzkrieg regulatory activity to urge companies and their lenders to disclose their exposure to global warming risks. But it also sparked a backlash. In a controversial presentation last month, Stuart Kirk, hsbc Asset Management’s head of responsible investment attacked the “unsubstantiated, strident, partisan, selfish doomsday warnings” about the risks climate change poses to financial markets. There was no doubt about the target of the search: it was Mr. Carney. preservatives, including the wall street journal, smelled of red meat. They have ridiculed central bankers’ focus on the long-term effects of climate change while missing out on more immediate risks such as inflation.

Mr. Fink contributed a lot of money to Mr. Carney’s climate crusade and did well too. BlackRock, with $9 trillion in client assets, is a great force driving a surge in environmental, social and governance issues (esg) investing in recent years, with which he has won over investors. For asset managers esg was a high priced sauce train. But this is unholy confusion for investors. Yields narrowed as tech stocks, a firm favorite esg funds, fainting and oil stocks skyrocketing. Since the war in Ukraine, the sustainability mantra has shifted from avoiding oil and defense stocks to embracing them. A scent of scandal emerges. Last month dwsthe asset management subsidiary of Deutsche Bank, was raided by German police esg allegations of “green bleaching”, which he denied. And esg finds himself in the trenches of America’s culture wars. Ted Cruz, a senator, talks about a “Larry Fink surcharge” when people fill up with gas. Texas, which he represents, is threatening to withdraw state money from funds that boycott oil and gas. No wonder Mr. Fink is now saying, “I don’t want to be the environmental police. »

Mr. Dimon is the architect of the corporate corollary of this financial trickery. As 2019 Chairman of the Business Roundtable, a CEO lobby group, he led efforts to change his creed from prioritizing the interests of shareholders to those of customers, employees and others. Participatory capitalism gave birth to the activist CEO, speaking out on issues ranging from passing laws to sexual orientation education. Questions of whether these concerns are relevant to a company’s bottom line or whether they are accepted by all stakeholders are mostly dismissed. It can be tested whether rising interest rates are stifling economic recovery, leading companies to lay off some of the stakeholders whose interests they claim to serve. It is already expensive. JPMorgan has been largely shut out of the Texas municipal bond market since last September, when a law was passed preventing the state from doing business with companies that have anti-gun policies. And this is widely misunderstood. “I’m a red-blooded free-market capitalist and I’m not awake,” Mr. Dimon said in a defiant outburst this month.

Despite all the pushback, the triumvirate can point to a few real reasons to use the bully pulpit. Governments are failing miserably to take action, such as high and coordinated carbon taxes, to tackle climate change. Companies have for too long refrained from considering – or paying for – their externalities, including their impact on the natural world. Consumers, employees and investors are increasingly driven by threats to the environment, as well as social well-being, and gravitate towards companies that want to make a difference.

missionary creep

Yet there is also a ring of truth in some of the reviews. Take the mission creep charges. In the fight against climate change, Mr Carney has urged central banks to step out of their comfort zone, but so far with little evidence that financial systems are being destabilized by the costs of the energy transition. Although Messrs. Fink and Dimon are bound by fiduciary constraints to serve the interests of their asset owners and shareholders, esg and stakeholder capitalism make these duties more difficult to define. The second valid criticism concerns the tendency towards moralizing. Until recently, the private sector was a sanctuary against political partisanship and moral crusades. Bosses should speak up when things happen that materially impact their business, rather than pontificating about all sorts of extracurricular concerns.

Third, the critics are right when they note that it is the responsibility of governments to solve societal problems. It may be a world devoid of inspiring political leadership. But that’s something voters have to settle at the ballot box, not the billionaires who smuggle their political views through the back door at annual general meetings. Saving the planet is one thing. Saving it by a committee smacks of plutocratic overreach. Unfortunately, that seems to be part of the future Messrs. Carney, Fink and Dimon have in mind.

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