Two years ago, efforts by climate activists and Environmental, Social, and Governance (ESG) investors to block investment in oil and gas production by Western companies appeared to have received a
March was a bad month for the Dodd-Frank Act. We now know that Dodd-Frank, passed in the wake of the 2007–2008 banking crisis, doesn’t prevent bank runs. Neither do post–2008 arrangements tell depositors whether large deposits are safe or should be withdrawn with a swipe on a smartphone. This time, uninsured deposits were bailed out. But in testimony to the Senate Finance Committee, Treasury Secretary Janet Yellen couldn’t say what would happen to uninsured deposits at other regional banks, telling Oklahoma Senator James Langford that whether they were bailed out would depend on what federal regulators decided. Instead of clarity and predictability, we have subjectivity and confusion. In short, Dodd-Frank and the post-2008 framework failed.
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As regular as the turn of the seasons, each January sees Larry Fink, founder and CEO of BlackRock, the world’s largest asset manager, publish a lengthy letter on the state of the world and its implications for finance and investors. This year, January turned to February, and still no letter. Instead, February saw Tim Buckley, CEO of Vanguard, global number-two asset manager, give a groundbreaking interview explaining Vanguard’s decision late last year to quit the Net Zero Asset Managers (NZAM) initiative, which had been formed ahead of the 2021 Glasgow climate conference to reallocate capital in line with net zero emissions targets.
p>Politicians and climate activists portray net zero climate policies as a win–win: good for the planet, good for the economy. A recent example is “Mission Zero,” a supposedly independent review of Britain’s net zero target led by the former minister who signed net zero into law. “Net zero is the economic opportunity of the 21st century,” it breathlessly proclaims. “We must act decisively to seize the opportunities in a global race.” Economics isn’t about races or moon shots but about comparative advantage and allocative efficiency. Nonetheless, the message we’re given is that the faster an economy decarbonizes, the wealthier it becomes. Through green alchemy, costs are transmuted into benefits.