Joeri de Wilde: If you turn too often, you'll get stuck.
This column was originally written in Dutch. This is an English translation.
By Joeri de Wilde, Senior Economist at Triodos Investment Management
Bill Gates and Jens Stoltenberg recently made a shift that was packaged as sober realism. In reality, this reversal could seriously harm the sustainability transition.
The world has changed since the ethical guidelines were first adopted,' said Norwegian Finance Minister Jens Stoltenberg. And so the Norwegian Parliament decided that the sovereign wealth fund, the largest investment fund in the world, would stop ethical divestments. The reason: they could be forced to divest from a number of large American tech companies, and that was not the intention.
With a similar twist, former “climate alarmist” Bill Gates recently surprised friends and foes alike when he argued that we should invest less money in the fight against climate change. We would do better to abandon that “doomsday view” and shift our attention to disease and famine.
After the usual suspects, even less short-sighted lenders are now scaling back their sustainability ambitions under the banner of realism. Gates has long been considered an outspoken advocate of climate action, and the Norwegian sovereign wealth fund was one of the first major funds to adopt ethical guidelines. That is why their change of heart is so disruptive: if even the vanguard slows down, the entire transition loses momentum.
Realism
A change of course based on new insights can be a sign of realism and sometimes of courage. But the shift by Gates and Stoltenberg seems more motivated by cowardice. The new “insight” is that American political resistance to progressive policies is increasing. It is no coincidence that the Norwegian sovereign wealth fund's shift came two months after fierce American criticism of its ethical investment policy.
At the same time, the heavyweights are ignoring the real facts that should force them to be realistic: rising temperatures, loss of biodiversity and increasing inequality. Instead, they are responding to the political weather forecast.
Weak backbone, major consequences
We should not underestimate the effect of this weak backbone among such influential players. Unlike BlackRock, for example, both the Norwegian sovereign wealth fund and Bill Gates had a progressive reputation. If they now also start to downplay sustainability goals, this will affect the overall sense of urgency. It was not for nothing that Trump cheered after Gates' U-turn, saying that he had “won the war against the climate change hoax” and that “Bill Gates had finally admitted that he was completely wrong”. This could give citizens the impression that they have been lied to about the climate emergency.
Furthermore, if the conditions for providing capital become less and less stringent, the conviction that a sustainable economy is the future may disappear. Companies could then postpone or abandon their sustainability efforts and focus their investments primarily on the latest political weather forecast: fossil fuels, short term.
The capitulation of Gates and Stoltenberg also has consequences for the remaining progressive lenders who still adhere to a strict sustainability policy. Fortunately, there are still enough financiers who adhere to sustainability criteria. But when powerful gatekeepers step aside, they find themselves increasingly exposed to the wind. Things can then move quickly: what was an absolute minimum requirement yesterday is considered exaggerated idealism tomorrow.
Progressive capital only has steering power if it sends a clear signal. Especially in times of political headwinds, steadfastness is crucial. Those who change course too often in a storm will never move forward.