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The Blackrock Truth About Why Green Investing Doesn’t Work

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The laddie is quite right here. All this ESG investing just doesn’t work. Because it ends up just being that moral crusade that we’ll not make money out of being naughty – rather than working to reduce the amount of naughtiness going on.

The end lesson here can be taken to be a source of amusement or enragement. Because we end up back where we should be which is that if there is indeed a problem that needs to be dealt with then the solution is a carbon tax.

Green investing ‘is definitely not going to work’, says ex-BlackRock executive

That’s not really what he says.

Tariq Fancy once oversaw the start of the biggest effort to turn Wall Street ‘green’ – but now believes the climate crisis can never be solved by today’s free markets

That’s also not what he means either.

What he actually says is that free markets with the right crowbar in them will indeed solve both the investing and the climate problem. Why?

But for Fancy, who now runs the digital learning non-profit Rumie in Toronto, Canada, BlackRock’s move, and the ones it has inspired, contain a fundamental flaw: the climate crisis can never be solved by today’s free markets.

“It’s not because they are evil, it’s because the system is built to extract profits,” he said.

Investors have a fiduciary duty to maximise returns to their clients and as long as there is money to be made in activities that contribute to global warming, no amount of rhetoric about the need for sustainable investing will change that, he believes.

“In many cases it’s cheaper and easier to market yourself as green rather than do the long tail work of actually improving your sustainability profile. That’s expensive and if there is no penalty from the government, in the form of a carbon tax or anything else, then this market failure is going to persist,” said Fancy, a former investment banker who now leads an initiative to bring affordable digital education to underserved communities worldwide.

Quite so. Not investing in tobacco firms hasn’t changed the number of cigarettes smoked. Taxing the snot out of those who smoke has.

Which is why a carbon tax is indeed the solution. We’ve known this for 30 years in this specific case and for well over a century in the general.

We have an externality here. Something that isn’t included in market prices. The solution is to incorporate that something into market prices. Then that grand calculating machine of the economy grinds through the information and we gain our solution – emissions where emitting is worth more than not doing so, no emissions where not.

Of course, what all readers of The Guardian will take away from this piece is that “markets” won’t work against climate change. Which is entirely the opposite of what is actually being said. Which is that not-markets won’t solve it but markets suitably adjusted will.

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