In 1999 Time magazine put three heavyweights from America’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 accomplishment was stopping economic upheavals from Russia to Brazil causing mayhem in the global financial system. Big stuff, for sure. But nothing compared with the task facing those who today could 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 firm, and Jamie Dimon, ceo of JPMorgan Chase, America’s biggest bank.
Their aims are no less than to stop global warming and create a fairer, more enlightened form of capitalism. In just a few years they have marshalled to the cause more than 100 central banks, tens of trillions of dollars of investors’ cash and bank finance, and the bosses of America’s biggest firms. Their ambitions are not just big. They are epochal. So why are they suddenly figures of mockery in the war on “woke” capitalism?
Mr Carney was the first global policy wonk to raise his cufflinked fist. In 2015 he focused attention on the systemic risks to banks and insurance companies as a result of climate change. In doing so, he set in motion a blitzkrieg of regulatory activity to press firms and their lenders to disclose their exposure to the risks of global warming. But he has also stirred a backlash. During a polemical presentation last month Stuart Kirk, hsbc Asset Management’s head of responsible investment, attacked the “unsubstantiated, shrill, partisan, self-serving, apocalyptic warnings” about the risk a changing climate poses to financial markets. There was no mistaking the target of the dig: it was Mr Carney. Conservatives, including the Wall Street Journal, smelled red meat. They ridiculed central bankers’ focus on the long-term effects of climate change while missing more immediate risks such as inflation.
Mr Fink has brought big money to Mr Carney’s climate crusade—and done well out of it, too. BlackRock, with $9trn of client assets, is a big force behind a surge in environmental, social and governance (esg) investing in recent years, with which it has wooed investors. For asset managers esg has been a high-fee gravy train. But it is an unholy muddle for investors. Returns have been shrivelling as tech stocks, a favourite of esg funds, swoon, and oil stocks soar. Since the war in Ukraine, the sustainability mantra has switched from shunning oil and defence stocks to embracing them. There is an emerging whiff of scandal. Last month dws, Deutsche Bank’s asset-management arm, was raided by German police over esg “greenwashing” allegations, which it has denied. And esg finds itself in the trenches of America’s culture wars. Ted Cruz, a senator, talks of a “Larry Fink surcharge” when people fill up their petrol tanks. Texas, which he represents, threatens to keep state money from funds that boycott oil and gas. No wonder Mr Fink now says: “I don’t want to be the environmental police.”
Mr Dimon is the architect of the corporate corollary to this financial do-goodery. As chair in 2019 of the Business Roundtable, a ceo lobby group, he led efforts to change its creed from prioritising the interests of shareholders to putting them alongside those of customers, employees and others. Stakeholder capitalism has given rise to the activist ceo, speaking out on issues ranging from voting laws to education on sexual orientation. Questions about whether such concerns are relevant to a company’s bottom line, or agreed upon by all stakeholders, are mostly brushed aside. It may be tested if rising interest rates choke off the economic recovery, leading firms to fire some of the stakeholders whose interests they claim to serve. It is already costly. JPMorgan has been largely excluded from the Texas municipal-bond market since last September, when a law was passed stopping the state from doing business with companies that have anti-gun policies. And it is widely misunderstood. “I am a red-blooded free-market capitalist and I’m not woke,” Mr Dimon said in a defiant outburst this month.
For all the pushback, the triumvirate can point to a few genuine reasons for using the bully pulpit. Governments are abjectly failing to take steps, such as high and co-ordinated carbon taxes, to tackle climate change. Companies have got away for too long without taking account of—or paying for—their externalities, especially their impact on the natural world. Consumers, employees and investors are increasingly motivated by threats to the environment, as well as to social welfare, and gravitate towards firms that want to make a difference.
Yet there is a ring of truth to some of the criticisms, too. Take the accusations of mission creep. In tackling climate change, Mr Carney has urged central banks out of their comfort zones, though so far with little evidence that financial systems are being destabilised by the costs of the energy transition. Though Messrs Fink and Dimon are bound by fiduciary constraints to serve the interests of their asset-owners and shareholders, esg and stakeholder capitalism make such duties harder to define. The second valid criticism concerns the tendency towards sanctimony. Until recently the private sector was a sanctuary from political partisanship and moral crusades. Bosses should speak out when events occur that materially impact their businesses, rather than pontificate about all manner of extra-curricular concerns.
Third, critics have a point when they note that it is governments’ responsibility to solve societal problems. This may be a world bereft of inspiring political leadership. But that is something voters must fix at the ballot box, not billionaires smuggling in their political views via the backdoor at annual general meetings. Saving the planet is one thing. Saving it by committee smacks of elite overreach. Sadly, that appears to be part of the future Messrs Carney, Fink and Dimon have in mind. ■
Correction (June 8th, 2022): The phrasing in the last paragraph was changed from “plutocratic overreach” to “elite overreach”.
Read more from Schumpeter, our columnist on global business:
Why Proxy advisers are losing their power (Jun 2nd)
BASF’s plan to wean itself off cheap Russian gas comes with pitfalls (May 28th)
Why America’s clean-energy industry is stuck (May 21st)