Wall Street is letting Orwellian doublethink kill climate action

Only a fool would say the people running the world’s top financial companies are fools. But when historians look back at Wall Street’s response to climate change in the third decade of the 21st century, they will see much that looks deeply unwise. 

Exhibit one: the growing number of financial giants pulling back from climate action in the face of specious campaigns against so-called “woke capitalism”. In the past five weeks, JPMorgan, State Street, Pimco and Invesco have all quit Climate Action 100+, an international investor coalition that pushes big companies to address global warming. 

BlackRock, the world’s biggest money manager, also scaled back its involvement with the group. Vanguard, the second-biggest asset manager, never joined up but has deserted another large climate alliance, the UN-backed Net Zero Asset Managers initiative. Separately, a sister net zero group for insurers has suffered such an exodus of members that some thought it would collapse. 

These defections matter. The world is warming faster than scientists expected. Fossil fuel emissions must come down pronto. Cash-strapped governments need all the private sector help they can get to boost global clean energy spending that ideally should rise from $1.8tn in 2023 to $4.5tn annually by the early 2030s. 

Instead, we’re seeing the reverse. Big investors are not merely distancing themselves from clubs they recently joined. They have also contributed to a steep plunge in support for shareholder resolutions aimed at pushing companies to do more on climate change and social issues. They may plead that climate resolutions have grown more demanding, and shunning fossil fuels when energy prices are high risks breaching their duty to maximise returns. But they also know that ultimately, this business-as-usual approach poses a powerful risk to those returns. 

All this reflects the rising success of US Republicans who claim “woke corporations” that take ESG factors into account and join industry climate alliances are putting politics above profits, with a leftwing agenda that could violate antitrust laws.

Their victories show how easy it is to manipulate language, deny basic facts and deploy the process of “doublethink” that George Orwell warned of more than 70 years ago. If you doubt this I urge you to read a law journal article by corporate governance luminary, Leo Strine, the former chief justice of the Delaware Supreme Court.

Strine’s paper, titled “Ignorance is Strength”, bluntly compares climate action opponents with the truth-denying, self-serving party elites in Orwell’s dystopian novel, 1984, and the ruling pigs in Animal Farm.

To begin with, Strine shows it is settled law that companies and investors can take into account ESG principles that relate to profitability, and may even be required to do so as a fiduciary duty. He then sets out the doublethink pervading anti-ESG campaigns.

Orwell coined the idea of doublethink in 1984 to describe the process of indoctrinating people to accept two conflicting beliefs — “war is peace”, “ignorance is strength”. Strine argues such thinking is needed to trust anti-ESG Republicans who insist business leaders should focus on profits, not politics, when they themselves are “among the most well-fed pigs at the corporate political spending trough”.

He points out the Republican Attorneys General Association, which has received millions of dollars in company contributions, is a major contributor to state attorneys-general who attack firms for supporting climate action. Likewise, Republicans who claim that joining an industry group to collaborate on climate action violates antitrust laws have not had similar qualms about fossil fuel industry alliances, such as the American Petroleum Institute.

Strine accuses anti-ESG politicians who downplay the urgency of climate action of another Orwellian sin: ignoring science and objective fact in order to keep a grip on power.

So can anti-climate doublethink be defeated? Not easily. But Strine offers a list of questions that climate critics should be asked far more often, such as: if net zero alliances are illegal under antitrust laws, why aren’t you investigating the American Petroleum Institute? And, if companies breach their fiduciary duties by taking stands on political issues, how come you have accepted millions of dollars in contributions from them?

These are good questions. Here’s another for all the firms that have retreated from climate action instead of making the increasingly necessary case for it: why did you cave in to such disingenuous and flawed attacks in the first place? 

pilita.clark@ft.com

Climate Capital

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Letters in response to this article:

Don’t muddle defence stocks and ESG concerns / From John Alty, London E9, UK

Companies that politicise ESG agenda risk self-harm / From Jan Bouwens, Professor of Accounting, Amsterdam Business School, University of Amsterdam, The Netherlands

How advocates for climate action can hurt their cause / From Robert H Wade, Professor of Global Political Economy London School of Economics, London WC2, UK