Here’s What Private Sector Leadership Looks Like to Me
Last Wednesday, the Council on Foreign Relations invited me to do a live interview with Larry Fink as part of their 2-day virtual symposium, “Investing in a Sustainable Future.” What a privilege. I’ve admired Larry for a long time, and I’ve always considered him to be a visionary thinker and an inspiring business leader.
As I wrote several weeks ago, I was particularly impressed with Larry’s most recent letter to CEOs and thought it was a clear shot across the bow for companies to get in line with net-zero climate goals. Regular readers of The Instigator know that I favor bold strategies because they make business sense and they’re also what we need. The clock has run out on incremental action. I was curious to probe Larry’s views further—to understand what he sees as the opportunities and limitations of private sector engagement in environmental problem-solving.
I don’t want to try and recap Larry’s words; if you’re curious, have a listen here.
Instead, let me note what I took away from our conversation, some of which was already on my mind, and some of which is a new direction or emphasis for me.
- When it comes to environmental goals, we can’t let private companies off the hook. If we’re only leaning on public companies to meet environmental standards, we’re forming a big loophole. In that case, we should expect controversial activities not to be replaced or disappear but to simply migrate from public companies over to private ones where they will be free from scrutiny. In fact, it’s probably happening right now. Carbon-intensive companies are selling assets to private players. But this is highly problematic because it looks like a win, thereby pacifying stakeholders when we should be riled up. It masks the fact that no progress is actually being made and takes the pressure off. So private companies need to step up, and private equity firms should lead the charge. Limited partners investing in private equity (pension funds et al) should push hard for this to happen now.
- Environmental justice must be a priority. This is a common theme in my newsletters. It’s essential that we bring together diverse voices into a broad coalition as we pursue environmental solutions. And even more important, we must understand the disparate impacts of our proposals. All too often, the increased costs associated with the environmental initiatives are borne by those least in a position to do so. We can do better. Let’s start by prioritizing lowest cost strategies.
- Finance is an accelerant. The attention of the financial community is real and will drive action sooner rather than later. After all, finance is all about making projections for the future and discounting them back to today. (See net present value.) Once a financier has assessed the risks and opportunities, put together a good forecast, and run the numbers, there’s no reason to delay acting on NPV positive opportunities. I expect that this approach will accelerate climate-addressing initiatives. There is no good reason to delay.