A sign for BlackRock Inc hangs over their New York building.
Lucas Jackson | Reuters
According to author and economist Ann Pettifor, governments should lead the sustainable transformation of the global economy, not the markets.
Pettifor, author of “The Case for the Green New Deal,” told CNBC on Friday that reliance on financial markets to steer the economy away from fossil fuels was “unsustainable”.
She argued that since markets and societies have different interests, government intervention would be required to develop a new green deal with government funding. A so-called Green Deal for the global economy would set ambitious – and likely costly – goals to move the world away from fossil fuels and reduce greenhouse gas emissions.
“We know governments can step in. We know we have developed an advanced monetary system that allows us to raise large sums of money, and we did that for Wall Street. We did that when we got to grips with the.” Address pandemic. We know governments can. ” Do this and that’s why I want the state to play a much bigger role, “Pettifor told Squawk Box Europe.
“I want to see public authority over the transformation system and not private authority. I want the EU to lead this, not BlackRock,” she added.
Your comments come after BlackRock CEO Larry Fink penned an annual public letter to CEOs promoting the transition to a green economy“Historic investment opportunity” and required companies to disclose how they will survive in a world of net zero greenhouse gas emissions.
Fink has claimed that climate risks and investment risks existone and the same, which means that investment managers have a fiduciary duty to direct capital into assets that aim to fight climate change.
In a January interview with the Financial Times, Fink likened the potential boon to climate investing to his beginnings in mortgage-backed securities trading in the 1970s.
“For five consecutive years we have made it a dominant part of the global capital markets. Sustainability could take 10 years instead of five years. The underlying potential, however, is huge,” Fink told the FT.
Mortgage-backed securities – bonds made up of bundles of home loans bought by the issuing bank – would play a key role in sparking the global financial crisis in 2008.
“If (Fink) wants to extract from our ecosystem the returns his company has made on mortgages and our financial system, then we are in big trouble,” said Pettifor, who is also director of policy research for the macroeconomic network.
“He’s right. He thinks about making huge profits for his business, but when we talk about the finite resources of the ecosystem, it cannot be used for the profits of individual companies or entire markets. The ecosystem is.” here to serve the survival of humanity. “
Blackrock declined to comment directly on Pettifor’s comments, but referred CNBC to its January customer letter, in which it stressed that keeping carbon investments in its portfolios was part of its duty of loyalty to customers.
“With the global economy itself now being carbon-intensive, the portfolios of most diversified investors – including those of BlackRock customers as a whole – remain carbon-intensive,” it said.
“That cannot and will not change overnight, and BlackRock’s overall portfolio will necessarily be subject to our clients’ investment decisions. Still, there is significant global momentum towards a net-zero economy and BlackRock believes that our clients will can be best served when they are with. ” the top of this transition. “
Since the landmark Paris Agreement in 2016, 60 of the world’s largest commercial and investment banks have invested more than $ 3.8 trillion in fossil fuels. This emerges from a report released on Wednesday by a collection of climate organizations.
Pettifor argued that tighter regulation of banks and investment managers was necessary to curb fossil fuel investments, accusing governments of “deep ignorance” that the same institutions that invest in fossil fuels could take the lead on climate change.
“No changes were made after the last major financial crisis, and that was because they were just campaigning for Congress and Parliaments and making sure that no changes were made and that they could go on as before,” she said.
In 2011, three years after the brunt of the crisis, the National Bureau of Economic Research published a study that found that the worse a bank’s lending was during the crisis and the larger its bailout, the more aggressive it was against large ones Regulatory reforms had begun.
“Until we actually get a grip on these companies and limit their ability to continue to fuel fossil fuels and thus greenhouse gas emissions, there is really no hope for our future,” added Pettifor.