Guest essay by Eric Worrall
According to The Atlantic, while governments squabble Investment Bankers are acting to save the planet from global warming.
Why Goldman Sachs Is Fighting Climate Change—And the UN Isn’t
Bankers on Wall Street brought the best news for the climate this week. What’s even happening? ROBINSON MEYER 2:51 PM ET
The most recent COP, the 25th, ended on Sunday. It ran two days longer than planned and went, by most accounts, very poorly. “There is no sugarcoating it: The negotiations fell far short of what was expected,” said a vice president of the World Resources Institute, a nonpartisan environmental think tank, in a statement. Corporate Accountability, a progressive advocacy firm, decried the result: “COP25 failed to rise to the challenge of our time.” Even the staid New York Times, in its headline, bemoaned “few commitments and ‘lost’ opportunity” at the meeting.
For the most helpful clue, it was best on Sunday not to look to Madrid, where the climate negotiations were wrapping up, but to New York, where a different kind of global governance was unfolding. This weekend, the investment bank Goldman Sachs updated its rules about when and how it would underwrite fossil-fuel projects. Goldman will now refuse to lend money or underwrite oil exploration or drilling in the Arctic, including in the Arctic National Wildlife Refuge in Alaska. It will also decline to finance new thermal coal mines, mountaintop-removal mines, or coal-fired power plants.
Generally, banks both lend capital directly to fossil-fuel companies and also connect those companies with third-party investors. Goldman says its ban applies to both kinds of activity. While other banks around the world—including Barclays and Société Générale—have adopted similar policies, Goldman Sachs is both the first American bank and the largest bank by market value to do so.
Goldman also committed to spend $750 billion on a number of clean-energy and climate-adjacent areas over the next 10 years. And David Solomon, the bank’s chief executive, called for countries to put a price on greenhouse-gas emissions in an editorial in the Financial Times.
Now Goldman has also pulled its support for coal. The bank has its own selfish reasons for this surge in climate spending. Among them: It is trying to move into consumer banking in the United States. and is especially keen on capturing climate-concerned millennials for its new online bank Marcus. It has a corporate image to clean that, 10 years after the financial crisis, remains tawdry to say the least. And it needs to recruit chipper young undergraduates (often from Harvard and Yale) to join its ranks, and generally today’s twenty-somethings prefer to avoid complicity in the scorching of the sky. On top of all this, fossil-fuel stocks have systematically underperformed expectations this decade, and financiers are wary of their business further suffering under future climate policy.
Read more: https://www.theatlantic.com/science/archive/2019/12/goldman-sachs-fighting-climate-change-un/603760/
For once I agree with something The Atlantic published, at least some of it.
Merchant banks like Goldman are surprisingly vulnerable to climate hype. Not only are their investments in fossil fuel potentially imperilled by what they call sovereign risk, the possibility politicians will enact adverse laws which affect their profitability, their lower ranks are rapidly filling with hardline greens, brainwashed Western university graduates who genuinely demand their new workplace respect their values.
I have personally seen these values at play in an internal meeting at a major US merchant bank. On that occasion upper management were apparently caught by surprise, by harsh demands from normally compliant junior staff that they do more to address climate change.
And its not just the junior staff. Upper management of such organizations contains a handful of green influencers, early pioneers of the modern climate movement who graduated in the 90s, who worked their way up the ranks and who now wield substantial influence over corporate policy. The meeting I attended was arranged by a senior management green.
Coal and oil companies will still get their cash, of course. Regardless of what Western banks do, there is a big world outside the anglosphere which is happy to invest in fossil fuel, which regards Western climate activism as an inexplicable own goal, or even as an aggressive underhand attempt to suppress their challenge to Western economic domination.
As the climate movement unravels, as global warming fails to accelerate or goes into reverse, even Western shareholders will eventually challenge the decisions of bankers to deliberately reduce their end of year profits for ideological reasons.
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