This week, the New York state pension system announced it would divest its $200 billion+ from fossil fuels, citing financial risk — rather than climate activism — as the primary motivating factor. When activists first undertook divestment campaigns, the fund’s managers were skeptical of moving their millions of public employees’ retirement funds. But after crunching the numbers, and watching the fossil fuel industry’s economic prospects dim, it became clear that continued investment in the industry is too risky.
Yet only days earlier, the Wall Street Journal, supposedly the leading institution of financial journalism, was telling readers just the opposite. Its opinion page published a column by Walter Russell Mead confessing ignorance, at best, regarding the consequences of incorporating climate change into financial risk assessments (as the Biden administration is apt to do).
He wrote, “the consequences will also be unpredictable — and many will inevitably be perverse.”
Which is it, Mead, will the consequences be unpredictable? Or will they “inevitably” be bad? If only there were evidence to suggest that those consequences might be positive, like how past funds have done, or how funds would have performed with and without a climate risk component...
In fact, there is! Lots. That evidence is why NYPS is divesting, but for some strange reason, Mead didn't seem to acknowledge any of that...
Instead, he continued with his evidence-free fearmongering, writing that “adding an extra layer of requirements, even if justifiable on climate-policy grounds, can make it impossible for finance ministers and central bankers to fulfill their essential roles.”
Here’s a thought, and hear us out on this one: if justifiable requirements render finance roles inoperable, then maybe it’s those roles that need to change! That’s what “justifiable” means!
Mead doesn’t even attempt to justify his opposition to financial regulators looking at climate risk. What he does do, though, is invoke a slippery slope — because “the climate-change movement is best-placed to achieve quick results” from activist campaigns to use “the vast powers of central banks and finance ministries to engineer social change,” then its success would mean that “other social movements will follow eagerly.”
So, if justifiable concerns are validated and acted upon, others might make similar efforts to show how their concerns are justifiable. As a result, capitalists won’t be able to exploit something unjustifiably anymore, and in the end, “a new wave of climate-based global financial regulation will most likely do more to slow global growth than the sea’s rise.”
But if growth depends on profits that can’t withstand regulations that are “justifiable on climate-policy grounds,” and that makes it “impossible” for central bankers to do their jobs, that sounds like a problem with capitalism, not climate policy.