I woke up to the news that a “fundamental reshaping of finance” was about to take place because of climate change. This dramatic announcement came from Larry Fink, CEO of Blackrock, the world’s largest asset manager, and a frequent public voice for various social causes of the day. He made clear that this was not hyperbole — that “climate change has become the defining factor in companies’ long-term prospects.” He is forecasting a “significant reallocation of capital . . . sooner than most anticipate.”
Fink is a brilliant and accomplished CEO, and he is no stranger to bold and melodramatic proclamations. I read diligently to better understand what capital reallocations he was anticipating and how this fundamental reshaping would take place. He did say, after all, that “climate change is the top issue that clients around the world raise with Blackrock.” One would think that, given such urgent and pragmatic considerations, he might have put a little meat on the bone of his explanation, but alas, none was forthcoming. He explained that climate change is worse than any financial crisis and challenge he has faced — from “the inflation spikes of the 1970s and early 1980s, the Asian currency crisis in 1997, the dot-com bubble, and the global financial crisis. . . . Even when these episodes lasted for many years, they were all, in the broad scheme of things, short-term in nature. Climate change is different.”
Shortly thereafter I was on set at CNBC to appear as a market guest on their popular morning show Squawk Box. Just before my segment, anchors Joe Kernen and Andrew Ross Sorkin engaged in a heated and prolonged argument, live on air, about the Fink article and the implications that climate change had for investors. The confrontation continued into the commercial break, right up to the time that my interview was to begin. Joe Kernen introduced me and prepared to ask the questions he normally would have for me, about my market outlook and such, but then called an audible and switched back to the prior discussion. That teed up this chance for me to elaborate on my Elizabeth Warren book, Larry Fink’s letter, virtue-signaling in corporate America, and, most important, the regressive nature of leftist suggestions for climate stewardship.
Larry Fink has taken flak in Manhattan charitable-board circles for being a little too much of a CEO and not enough of a social activist. But the time has come for corporate America to stop rank virtue-signaling, transcend marketing messages and feel-good platitudes, and devise some substance behind their bold proclamations. As they fly on their private jets into Davos next week, it may be a good time to think about the positive impact fossil fuels have had in reducing starvation, or in providing either heat or coolant to the world when desperately needed. It is perhaps past the time to consider more thoughtfully the tradeoffs at stake, the quality-of-life ramifications, and the brute facts of some of the more extreme efforts to reduce fossil-fuel usage .
I have no doubt that investors worldwide are concerned with sustainability and earnest about stewardship. I have no doubt that CEOs such as Fink mean well. But until the rhetoric evolves to engage actual policy discussions with transparent admissions about what costs will be incurred, it is impossible not to see such posturing as virtue-signaling. Carbon emissions can come down (they are coming down), but at the cost of decimating lower-income households or causing large parts of the population either to starve or to freeze to death. The binary logic according to which one must either be an environmental villain or support extremist measures such as the Green New Deal must end.
No such “fundamental reshaping of finance” is coming. Capital will continue its relentless pursuit of its most efficient and productive use. Perhaps what we need instead is a fundamental reshaping of how to publicly engage major social issues. We need to change the political climate, which currently underrates substance.