Tuesday, January 28, 2020

Corporations and Climate

A few weeks ago, I was listening to a radio show about Milton Friedman who advocated for a concept called “Shareholder Theory” back in the 1970’s. In short, his thesis was that a company’s main responsibility is to its shareholders, no one and nothing else. This theory has driven policy and corporate thinking for the last 40 years.

If a company’s sole purpose is to maximize profit, then it should externalize as many costs as possible. Another term for “externalize” is “avoid paying for.”  By Friedman’s logic, it is in the company’s best interest to advocate for lax pollution and clean-up laws and regulations for example. A company should not have any interest in advancing society as a whole, because that behavior does not maximize profit. That’s up to individuals, not the company for whom they might work.

The problem is that when “corporations are people” and money is free speech, as the courts have ruled, then the voice of a large business or business lobby to influence laws and regulations will drown the voice of any individual or a group of individuals, unless the person or persons have as much money as a business, like Michael Bloomberg. 99.999% of us are not Mr. Bloomberg, so we are shouting into the gale force winds of corporate influence.

A light when off in my head after hearing this story, because it was not soon after Friedman’s theory took hold in the late 1970's that big companies started lavishly funding organizations that actively discredited the findings of climate science – namely, that greenhouse gases are rapidly altering our planet to our detriment. In addition, these companies themselves actively promoted doubt about climate science and global warming.

The Heartland Institute is just one example. Founded in 1984, its funders include the Koch brothers, Microsoft, General Motors, big pharmaceutical companies, big tobacco companies, and of course, Exxon.

Heartland, to this day, continues to actively cast doubt on human-caused climate change, work to repeal clean energy mandates, and fund so-called “climate skeptics”.

Why do they do this? The author Naomi Klein concluded that big business recognized decades ago that addressing climate change represented a “profound threat to our economic and social systems and therefore denying its scientific reality” was the only way to protect those systems, damn the consequences.

In other words – casting doubt on climate science increased shareholder value.

But there is now a new wrinkle in the whole “shareholder is king” story.

BlackRock, an asset management company with $7 TRILLION in investments recently decided to “make investment decisions with environmental sustainability as a core goal” according to the NY Times. “[The] intent is to encourage every company, not just energy firms, to rethink their carbon footprints.” As a major shareholder in many companies, large and small, it will “move more aggressively to vote against management teams that are not making progress on sustainability”.

Why this change in heart? Because it is now clear to BlackRock that climate change is a huge risk to investors. This firm is not turning into a tree hugger, they are still looking at the bottom line. BlackRock, according to its president, has a fiduciary responsibility to protect shareholder interests.

Used to be that saying a business is under water was a metaphor for drowning in debt. BlackRock is not interested in having the phrase become literally – drowning. Drowning is not good for the bottom line, as it were.

The other thing is the BlackRock has been behind the curve. Financial Advisor Magazine noted that investment in “sustainable” mutual and exchange traded funds increased four-fold in 2019 – to almost $21 billion.

Investors have to read the fine print on “sustainable” fund prospectuses however; because some of the companies in these funds may be more greenwash than green.

According to the Times article, if other investment firms like Vanguard ($6 trillion), Fidelity ($6.7 trillion) or Schwab ($2.5 trillion) follow BlackRock’s lead, a fundamental philosophical shift in how companies operate could be forced upon them by their biggest shareholders.

This trend is still in its infancy and may be too-little-too-late.

We just had the second warmest year on record, the Arctic is literally melting and Australia is literally burning.

Regardless, I’ll take any good news that I can. There is precious little of it in the environmental arena these days.

Friday, January 10, 2020

The Population Bomb

The Population Bomb, a book written in 1968, predicted widespread famine and starvation in the following decades caused by a rapidly increasing world population, exacerbated by “other societal upheavals” (Wikipedia).

Needless to say, the “bomb” never exploded. With advances in agricultural technology, we were (and are) still able to feed ourselves. The authors were subsequently criticized for their alarmist rhetoric.

I thought about this book after last Fall’s Town Meeting, where the Town Voted to pass Article 11, the Climate Change Action Resolution. One voter, Dominic Capriole, said that as long as the world did not address the population problem, nothing we did here would make a difference.

I agree with Dominic in many ways, although I did respond that regardless, I was not going to stick my head between my legs and kiss my butt good bye in the meantime - but I digress.

Since the publication of the Population Bomb, world population has almost doubled. Four to 7.7 billion in 45 years. It will be 9 billion by 2040.

What has also gone up in lock step is atmospheric pollution – especially greenhouse gases. Most of the increase from the pre-industrial era has taken place since 1960. This correlation is not a coincidence.

Why? Because people want to be like you and me – to get the benefits of an industrialized and relatively affluent society. That takes energy – a lot of it, from the most energy dense sources of energy we have in large supply – coal, oil and natural gas.

Here is (sort of) the good news. As people become more affluent, population growth rates slow. In fact, population growth rates have already slowed by half, having peaked in the early 60s. All things being equal, the world’s population will stabilize at around 11 Billion at the end of this century.

But are all things still equal? Can we keep expecting technology to bail us out – to keep the world’s people fed clothed and housed, as was the case 50 years ago?

 I am not optimistic, because the people on this planet are changing the inhabitable portion of it so fast, sustaining ourselves, let alone every other form of life which resides in our fragile biosphere, will become mind-bogglingly more difficult and in many regions, impossible.

In fact, the process is already underway, Australia’s devastating wildfire season, burning large swaths of the country, being just the most recent example. The ecosystems of the bush and forest areas burned may never recover. Off the coast, rising ocean temperatures have permanently altered the marine ecosystems around Tasmania. Kelp forests and the fish populations they sustained are just gone, in the space of 30 years.

A new report in the journal Nature, estimates that even under the most optimistic projections of sea level rise, 190 million people will be living on land below the projected daily high tide line by 2100.

In the mostly densely populated region of the planet – South Asia, home to 1.9 billion people, summer temperature and humidity levels are projected to become deadly for weeks at a time, instead of the days they are now.

All these people are going to want to go somewhere else.

You’d be hard pressed to believe it, but even in our current administration, the military is already thinking about this question. A 2019 report by the Army War College stated the following:

Sea level rise, changes in water and food security, and more frequent extreme weather events are likely to result in the migration of large segments of the population . . .  creating massive, enduring instability.

1968: “societal upheavals.”  2019: “enduring instability.”

We humans are incredibly adaptable animals.  In less than 100,000 years, humans spread to the far reaches of the planet without airplanes, ships, cars, GPS or even something as simple as a compass. We survived the last Ice Age using nothing more than stone and bone tools and spears. That same adaptability has also gotten us where we are today, unfortunately.

I think humans will survive the oncoming self-inflicted changes to our world, but I suspect there will probably be a lot less of us when the dust settles.

Something to keep in mind as you think about important stuff like your kid’s sports schedule, Christmas gift returns, Tom Brady’s future, D.C. politics or kitten videos on Facebook.

Happy New Year.