History books will likely look back on September 2016 as a major milestone for the world’s climate. https://t.co/x3C7ife8Ij
Capitalism to the rescue
Capitalism has gotten a pretty bad rap over the past couple years, and even the most bloodthirsty plutocrat might begrudgingly admit that some of the knocks are deserved. The avarice of recent years underscores one of the main shortcomings of capitalism in America — too much focus on short-term profits at the expense of the longer-term future.
The popular response is to call for greater government regulation, with the aim of forcing companies to do not only whats right, but what in many cases is in the best interest of those companies. Not all capitalists need such intervention, however — some are taking matters into their own hands with a more enlightened view of the future, especially on the subject of climate change.
One example is the Investor Network on Climate Risk, a group of activist investors (and by investors, I mean the people who have the greatest interest in increasing corporate profits) that realized years ago that climate change poses a major threat to long-term corporate growth. With a membership of 70 institutions managing over $7 trillion in assets, INCR has catalyzed a growing movement within the asset management industry aimed at, among other things, measuring the impact of climate risk on the long-term profit potential of corporations, and prioritizing investments in companies that score well in this measurement.
Another firm, Risk Metrics, has started to rate companies based upon their exposure to climate risk and their ability to manage or mitigate that risk. Such ratings are intended to increase (or decrease) investor interest in such firms, as the ratings reflect the likelihood that a particular firms profits will rise or fall in the future due to climate change.
Sometimes corporate managers take an enlightened view on their own. Recent examples of this were moves by several electric utilities, Pacific Gas & Electric, PNM Resources, and Exelon, to leave the U.S. Chamber of Commerce over the Chambers position on climate change. (The Chamber has recently been criticized for questioning the science of climate change and attempting to block climate change legislation.) Of course, electricity generation is the single largest source of carbon emissions in the United States, so utilities are among those most affected by climate change legislation. A less surprising example is the insurance industry, a massive global industry that has long believed in — and worried about — the science of climate change.
On a broad level, these developments represent a major breakthrough in private sector thinking in this area. Environmentalism was once the enemy of corporate profits; most companies acted to reduce their environmental impact only because they were forced to by government. But many executives are beginning to understand that it is in their best interest to take a pro-active approach instead of engaging in self-sabotage for the sake of short-term profits. Even Exxon purports to be on board, in a sharp turnaround from 2 years ago.
In any case, we can increasingly count on investors to encourage executives to do the right thing, thanks to the leadership of some forward-thinking groups like INCR. Moreover, it is clear that Meg Whitmans recent implication — that one can either support the economy or the environment, but not both — is fundamentally false.