Sustainability can move from the margins of business management to the centre. Or can it?

First published in February 2021.

Can managing climate change ever be good business? It should be, as noted by a recent report commissioned by the US Commodity Futures Trading Commission.

Titled ‘Managing Climate Risk in the US Financial System’, the report assesses the current situation as alarming for more than just the physical costs of the damage caused by fires, floods, and hurricanes.

A world racked by frequent and devastating shocks from climate change cannot sustain the fundamental conditions supporting our financial system,” the report said.

As Clay Wilkes, CEO of Galileo Financial Technologies has noted, In other words, money won’t matter in a world where climate change is unchecked, where continents are ablaze, glaciers are melting, and rainforests are disappearing.”

This gives special significance to the recent decision of Blackrock, the world’s largest asset manager to put climate change risk at the centre of its investing strategy.

Arguably, the financial industry as a whole was put on notice.

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Climate change, Blackrock seemed to saying, would increasingly be the lens through which all investing decisions would be viewed.

Environmental Social Governance investing would be the watchword in all financial activity.

Sustainability would move from the margins of business management to the centre.

That sounds like a plan, except for a troubling lack of detail from Blackrock about how this might really work.

Add to that lingering uncertainty about whether going green is really rewarded in the market. (Here’s an empirical investigation of decarbonisation and stock returns.)

And finally, how does one reconcile this apparent paradox: Tesla, the world’s largest electric vehicle company, will use bitcoin, which is said to do significant environmental damage

Front page of the FT today. | FT

Further Reading:

Rashmee Roshan Lall, Journalist, World affairs columnist.

[This piece was originally published in Medium and re-published in PMP Magazine on 13 February 2021, with the author’s consent. | The author writes in a personal capacity.]

(Cover: NASA. / Licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.)

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