Green investing’s “saintly narratives distract the public from seeing the need for aggressive, systemic reforms that only governments have the ability and legitimacy to pursue,” argues Tariq Fancy
WHEN COVID-19 began to tear through countries, politicians and business leaders largely followed the advice of experts and accepted swift government action to flatten the curve of infections. So why do so many of them still cling to the hope that firms and the market, left to their own logic, can flatten the curve of carbon emissions?A daily newsletter with the best of our journalismPerhaps the inconsistency is because commercial incentives are skewed to the short term.
I saw this firsthand in my role as BlackRock’s chief investment officer for sustainable investing from 2018 to 2019, based in New York. We, along with virtually every other large asset manager, eagerly engaged in a form of financial virtue-signalling that has become de rigueur in the industry, exaggerating how beneficial ESG information had suddenly become to all our investment processes.
And the market “sanction”, divesting the shares of fossil-fuel companies, does not lower emissions; playing whack-a-mole against trillions of dollars sloshing around global financial markets is not a solution. It wouldn’t accomplish more than a tiny fraction of the change at the speed and scale that’s needed. Only in a distorted vision of economics, where the market is seen to solve all problems, are engagement and divestment the only options.
Unfortunately, the utopian storyline around ESG actually undermines the case for government to play a role. Misleading public-relations activities foist the idea that sustainable investing, stakeholder capitalism and voluntary compliance are the answers. Whether “greenwashing” or “greenwishing”, they make the public and policymakers complacent, wasting valuable time. All the while, the share prices and marketing budgets of ESG-focused companies steadily rise, along with carbon emissions.
A carbon tax is the obvious starting point to change economic incentives, followed by strict industry-by-industry regulations guided by independent experts who set clear and predictable targets that businesses must meet, such as vehicle emissions limits. Governments are more likely to act if the ESG community were honest about the need for them to do so.
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