By David L. Bahnsen
Tuesday, January 14, 2020
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.
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