A sign for BlackRock Inc hangs above their building in New York City.
Lucas Jackson | Reuters
Governments should lead the sustainable transformation of the global economy, not markets, according to author and economist Ann Pettifor.
Pettifor, author of “The Case for the Green New Deal,” told CNBC on Friday that resorting to financial markets to move the economy away from fossil fuels was “untenable.”
She argued that since markets and companies have different interests, government intervention would be needed to design a new Green Deal with public funding. A so-called Green Deal for the global economy would see ambitious – and possibly expensive – targets set in an attempt to move the world away from fossil fuels and reduce greenhouse gas emissions.
“We know governments can step in. We know we’ve developed an advanced monetary system that will allow us to raise significant amounts of funding, and we did it for Wall Street, we did it in the face of the pandemic. , we know governments can do this and so I want to see the state play a much bigger role, “Pettifor told” Squawk Box Europe “.
“I want to see the public authority over the transformation system and not the private authority. I want to see the EU leading this, not Black rock, “she added.
His comments come after BlackRock CEO Larry Fink writes an annual public letter to CEOs in which he described the transformation towards a green economy as “historic investment opportunity” and called for more disclosure from companies on how they will survive in a world of net greenhouse gas emissions.
Fink argued that climate risks and investment risks are one and the same, meaning that investment managers have a fiduciary duty to direct capital to assets seeking to tackle climate change.
In a interview with the Financial Times in January, Fink compared the potential benefit of climate investing to its early days trading mortgage-backed securities in the 1970s.
“In five consecutive years we have elevated it to the dominant component of global financial markets. It could take 10 years, not five years, for sustainability. But the underlying potential is huge,” Fink told the FT .
Mortgage-backed securities – bonds made up of bundles of real estate loans purchased from the issuing bank – were to play a key role in triggering the global financial crisis in 2008.
“If (Fink) is going to extract from our ecosystem the kind of rate of return his company has extracted from mortgage securities and our financial system, then we are in a very difficult situation,” said Pettifor, who is also director of the Macroeconomics Policy Research Network.
“He’s right. He thinks of it in terms of huge profits for his business, but when we talk about the ecosystem’s finite resources, it can’t be tapped for the profits of individual companies or entire markets. ecosystem is here to serve the survival of mankind. “
Blackrock declined to comment directly on Pettifor’s comments, but directed CNBC to its January client letter, in which it stressed that keeping the carbon investments in its portfolios was part of its fiduciary duty to clients.
“Because today’s global economy is itself carbon intensive, the portfolios of the most diverse investors – including the portfolios of BlackRock clients as a whole – remain carbon intensive.” , did he declare.
“This cannot and will not change overnight, and BlackRock’s overall portfolio will necessarily be subject to the investment decisions of our clients. Nonetheless, there is significant global momentum towards a net zero economy, and BlackRock believes our customers are best served by being at the forefront of this transition. “
Since the historic Paris Agreement in 2016, 60 of the world’s largest commercial and investment banks have invested more than $ 3.8 trillion in fossil fuels, according to a report released Wednesday by a range of climate organizations.
Pettifor argued that stricter regulation of banks and investment managers is needed to restrict investment in fossil fuels, and accused governments of “deep ignorance” for allowing the same institutions that invest in fossil fuels. fossil fuels to take the lead in the climate transition.
“No changes were made after the last big financial crisis, and that’s because they just lobbied Congress, lobbied parliaments, and made sure no changes were made and that they can continue as before, ”she said.
In 2011, three years after the height of the crisis, the The National Bureau of Economic Research published a study showing that the better a bank’s lending behaved during the crisis and the bigger its bailout, the more aggressively it lobbied against major regulatory reform.
“Until we really get these companies under control and limit their ability to continue to fuel fossil fuels, and therefore greenhouse gas emissions, there is really no hope for our future,” Pettifor added. .