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The Guardian

Green investing ‘sure won’t work’, says former BlackRock executive

Tariq Fancy once oversaw the start of the larger effort to make Wall Street ‘green’ – but now believes the climate crisis can never be solved by today’s free markets. Manhattan, Tariq Fancy has already overseen the start of the biggest, most ambitious, effort ever to make Wall Street “green.” Today, as eco-friendly investing grows at an exponential rate, Fancy has come to a blunt conclusion: “It certainly won’t work.” As a former Director of Investments for Sustainable Investing at BlackRock, the world’s largest asset manager, Fancy has been tasked with integrating corporate environmental, social and governance (ESG) policies into the portfolio. from the investment giant. Fancy was a leader in a movement that gave many, including investors, activists and academics, hope that after years of supporting polluters, Wall Street was finally mobilizing to deal with the crisis. climate. “I looked inside the machine and I can tell you companies don’t have it,” Tariq told The Guardian. “Not because they are bad people, but because they use profit machines that will perform exactly as you expect them to do,” Fancy said. Fancy, 42, worked for BlackRock between 2018 and 2019 and was the investor’s director of investments for sustainable investing at a time when BlackRock was preparing to announce a major change in strategy. Tariq Fancy, former BlackRock executive. Photograph: Rumie “Evidence on climate risk is pushing investors to re-evaluate fundamental assumptions about modern finance,” wrote BlackRock chairman Larry Fink in his highly influential annual letter to CEOs in 2020, shortly after the departure from Fancy. “In the near future – and sooner than most anticipate – there will be a significant reallocation of capital.” Going forward, Fink said, BlackRock would abandon investments in companies that “pose high sustainability risk.” BlackRock manages around $ 7 billion in assets and, with one of Wall Street’s biggest voices sounding the alarm on the need to address the climate crisis, the news was seen as a pivotal moment for the community. financial. But for Fancy, who now runs the digital learning nonprofit Rumie in Toronto, Canada, BlackRock’s decision, and those it inspired, contains a fundamental flaw: the climate crisis can never be solved by free markets today. “It’s not because they’re evil, it’s because the system is designed to extract profit,” he said. Investors have a fiduciary duty to maximize returns for their clients and as long as there is money to be made in activities that contribute to global warming, no rhetoric about the need for sustainable investment will change that, thinks. he does. “In many cases, it’s cheaper and easier to sell yourself as being green rather than doing the long job of improving your sustainability profile. It’s expensive and if there is no sanction from the government, in the form of a carbon tax or whatever, then this market failure will persist, ”he said. said Fancy, a former investment banker who is now leading an initiative to bring affordable digital education. to underserved communities around the world. The amount of money that has been invested in sustainable investing through vehicles such as exchange-traded funds (ETFs) hit record highs last year. It’s a trend that Fancy says could continue for years to come and have no impact on climate change because “there is no connection between the two things.” In many cases, it is cheaper and easier to sell yourself as green Transferring money to green investments does not mean that polluters will no longer find donors. The argument is similar to divestment, another strategy according to Fancy does not work. “If you sell your shares in a company with a high ecological footprint, it doesn’t matter. The business still exists, the only difference is you don’t own them. The company will continue as it was and there are 20 hedge funds that will buy these shares overnight. The market is the market. “I don’t think the public realizes that we are not talking about stopping climate change,” he said. “We are literally talking about selling assets so that we don’t get caught in the damage when they strike.” Businesses know it, Fancy said, and they know the solution too – they just don’t like it. He compared the business community’s reaction to the coronavirus pandemic to his views on climate change. “Science shows us that Covid-19 is a systemic problem where we all need to lower a curve, the infection curve.” As the crisis escalated, business leaders immediately backed government initiatives to restrict travel, shut down places and shut down the economy. “The business roundtable [the US’s most powerful business lobby] says we should make masks mandatory. They were right about all of these things, ”he said. The world needed the government to use its extraordinary powers “because if you had left it to the free market everything would have been open in the United States and we would have lost millions of people, it wouldn’t have been a half. million”. Climate change is also a problem, according to science, systemic and one where we must lower the curve. “The difference is the incubation period. It’s not a few weeks, it’s a few decades. For that, they keep saying that we should rely on the free market. This is where I have a problem. A survey of 250 senior executives confirms Fancy’s point of view. About 64% of executives polled in a recent survey commissioned by UK lender Standard Chartered said they “believe the operating economy is net zero. [carbon emissions] the organization is not up to its business ”. And 79% of senior executives said the short-term CEO tenure made it harder for companies to transition to net zero. In the current system, the costs, says Fancy, are just too high and the benefits of doing business as usual are too great. A 2019 Morgan Stanley study found that reaching net zero by 2050 would cost $ 50 billion. “The reality is that their incentives are very short term,” he said. “What concerns me is that when it comes to climate change, it is actually expensive. It’s like saying when it comes to Covid-19 it’s a crisis and an opportunity. Well yes, this is an opportunity for Zoom, it is not an opportunity for the company. There is a solution, Fancy said, and it’s the one business leaders adopted in the coronavirus crisis: government intervention. But – given the long run of climate change – it’s a problem business leaders don’t like. What would work is a change in government policy that would make pollution more expensive, like a carbon tax, because it would change the business world and the incentives on Wall Street. “If you impose a carbon tax, each portfolio manager would adjust their portfolio,” he said. BlackRock takes issue with Fancy’s analysis. In a statement, the company said, “Sustainable investing can generate strong returns on investment while helping solve pressing social and environmental issues.” The company added that it believes greenwashing “is a risk to investors and undermines the credibility of the asset management industry, which is why we strongly support regulatory initiatives aimed at establishing consistent standards and improving the credibility of the asset management industry. increase the transparency of sustainable portfolios ”. But for Fancy, the most important point is that real change must be led by government, not Wall Street. “If I was on a panel and someone asked me what is the best way to fight climate change? Should I buy an ETF or should I call my congressman and demand carbon legislation and a price? The truth is, someone is better off calling their congressman.

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