For years, environmental, social and governance investing was all the rage,
but it's become something of a political hot potato recently, with 18 states now
either enacting or proposing legislation to bar state governments from dealing
with a financial institutions that take ESG into account in their investing.
We asked Jane Fraser, CEO of Citi, whether her bank has lost any money
because of ESG, and she had a very simple, direct answer.
No. But I think that's not really where
we're focused. So when we look at it, the world's got a
number of major transitions that we're going through.
And to your point, these aren't these aren't easy ones.
So where we're focused on is helping it. Let's take climate.
We're trying to make sure that there is both the realization of energy security
for the well, which is critically important for economic growth at the
same time. Is it there is the investment and the
innovation required in sustainable green sources of energy and cleaner sources of
energy. And we've got to solve both of them
together. They're not equally exclusive.
So our focus is trying to move the darlings out of the way and actually
roll up our sleeves and get on with the hard work of how do we help support our
clients who are investing in the innovations, get them to scale that will
get those cleaner technologies that we need up and running at the same time as
supporting clients who are also critical sources of energy for the world right
now and helping them with that transition.
But recognizing this takes time. BlackRock CEO Larry Fink went even
further to say that at least in Europe. If you do not have a lens towards
decarbonisation, you're not going to win one one year old business.
You know, we are one of the largest hydrocarbon, if not the largest
hydrocarbon investor in the world because we're the largest indexer and we
work with all these different companies at the same time.
We're one of the fastest growing companies related to decarbonisation.
Let's be clear, the IRS in the United States is a game changer to whether
banks are losing money or making money from ESG.
The one thing every category and we need to know what it is and by the way, how
to measure it. Something that Brian Moynihan, the head
of Bank of America, has been working on in his capacity as chair of the National
Business Council for the World Economic Forum.
We started many years ago thinking about how the private sector had to make the
changes to to drive economies and what was all going on in the public sector
with all going on and debt levels and all that.
And so we sat there and said, okay, what do you need to do that?
And what you need to do that was define a set of standards that we believe are
the right standards. And then we got to stop from having a
perforation standard service. At one point there's gonna be 600 in
2020 or schedule B, I think in North America, like 600 seminars on metrics.
Yes, you've got stuff. So we've come off a straightforward
metrics that match the FTSE and these other things that people talk about, the
straightforward metrics that say, you know, are we good for our our customers?
Yes. Are we good for our teammates?
Yes. Are we good for shareholders?
Yes. Are we good for society?
Yes. You know that that's how we drive a
company. And so we're saying if you disclose
those metrics, then people can see what you're doing.
It is not just investors and financial firms that are concerned with climate
and what can be done about it. Tech is also moving into the area.
As we talked to Gary Cohen, he's now vice chair of IBM.
So environment is really important. It is a technology company.
We think about how we can help our clients and we look at we look at
climate, no different than any other sort of business operation.
First of all, it's a data problem. It's a big data problem.
So you have to collect the data and you have to get it into a usable format.
That's something that IBM really thrives on, is we help people collect data.
We help getting it into a usable format. Once you have the data, you need the
technology, you need the software, you need the analytic tools to start
evaluating the data. So you've not got a baseline, you're
evaluating your data. You know how much carbon you're
admitting now. Once you know how much carbon you're
admitting, you can go through policies and procedures to change the way you're
running your business, how you're running your business, and you can
measure success. So you operationalize it and you become
much more efficient at running your business.
Once you had the technology, once you have the data and in a way that's useful
to you as a company, as global Wall Street talked about climate in Davos.
One of the main topics of conversation were those electric vehicle tax credits
in the Inflation Reduction Act, which I'd say says it's a big step toward
clean energy. But Europe is very concerned that it's
actually protectionist because the favorable treatment it gives for U.S.
manufactured batteries. Democratic Senator Joe Manchin of West
Virginia came to Davos to talk about energy and why he thinks the U.S.
approach makes really good sense. They've been coming to me for years
saying you've got to have a carbon tax, you've got to have a carbon fee.
And I said we don't have any any other choices except to use fossil right now
because we don't have the. Power to run our economy and our
country. But you want to penalize people thinking
it'll make them do it quicker. I never used.
I never thought that that would work. I thought incentives worked better.
And guess what? The Europeans have used the carbon tax
and carbon fees forever. We come along all of a sudden and do
something and we says, we're going to incentivize you.
We're going to help your partner and take some of the risk out.
But you're going to have to invest when I send you a check.
You've got to have the production tax credits or desperate investment.
Tell me which way you're going. We're going to work with you.
You can have a 10 year runway, but that 10 year runway with the ISE Ray and I
know the administration has been touting this as an environmental bill.
Environmental bill. This is truly an energy security bill.
And we need everything. But we need the horsepower from fossil
for 10 years. When I mean, not wind, but as far as
coal, gas and oil. But do it cleaner than anywhere.
That's climate that's helping the climate.