There are also basic things around true universal broadband. Mentioning “universal broadband” is like saying “skills training”—it’s something everyone says but nobody ever really does. But it’s absolutely fundamental. As if we needed evidence of that, the tragedy of education under COVID has just reinforced it.
More optimistically, in a world where distributed labor is much more possible, there are better leveling up opportunities, ways to distribute higher-value jobs regionally.
There is also, by the way, a big, big question globally of the extent to which you allow outsourcing across borders because price equalization could push wage inequalities within countries much higher.
Ensuring people can be in the labor force, that they have skills, access to the broadband system, distributed work opportunities—these are all components of it. And then very importantly, in a series of countries, the energy transition has to be very deliberately handled in a way that’s going to support regional solidarity to counterbalance some quite considerable forces of inequality that could come along.
It really needs to be an obsession. No simple policy prescription can address this. Some people posit universal basic income, but I don’t think simply ticking that very expensive box can suggest it’s been addressed.
In trying to raise the world’s understanding of the financial risk of climate change, you’ve begun to talk more about the transition as the greatest commercial opportunity of our time. How do you think about the conversation moving more in the direction of opportunity—for the financial sector, for the broader private sector—as an important component of getting to where we need to be?
Let’s tie a few things together. Years ago, I helped come up with this idea of “the tragedy of the horizon,” which is, essentially, if we could see far enough into the future, we’d act today. If we wait to act until the physical risks are so manifest and painfully obvious, then there are going to be wholesale assets stranded, there are going to be very sharp adjustments in the economy, especially to the financial sector. It would be much, much less expensive to start now. That’s the tragedy.
You and I opened the conversation discussing this relationship between value in the market and values of society. And what’s been happening in recent years, which ties back into stakeholder capitalism and the purpose of companies, is a greater emphasis on dealing with climate change. It really has accelerated over the last 18 months or so. You see it in social movements. You see it in voting patterns. Governments act with a lag, but you’re increasingly seeing it in government policy, these net-zero commitments.
Now you bring those together and all of a sudden there’s a possibility of addressing this risk, of us actually breaking the tragedy of the horizon. Well, at 30,000 feet, if you turn an existential risk—which is what climate change is—if you solve that, you’ve created tremendous value. If that’s what society wants you to do, you create enormous value.
This is an issue that, in general, investors, lenders and competitors have not looked at except in the extreme. At first it was mostly the energy sector. People looked at coal versus renewables or heavy oil versus solar, but now they’re comparing two consumer goods companies or tech companies or heavy industrials. They’re seeing who has better prospects, who has worse prospects, who has big investment needs, who might get left on the wayside. It’s now tied to lofty values likes resilience and sustainability. All of that drives big, big differences in value and value creation.
It’s an enormous commercial opportunity and we’re starting to see capital shift. I increasingly hear the argument that this is the internet in the mid-1990s, where you’re just on the cusp of understanding that there’s going to be a wholesale rewiring of the economy for sustainability—that scale of change.
You can anticipate a series of initial opportunities. But it’s such an order of magnitude. It’s so fundamental that there will be new solutions that come up, huge business-process re-engineering that will come along with it, and tremendous and exciting opportunities as a consequence. Every day I’m confronted with further evidence that this is just an enormous commercial opportunity.
Did COP26 accomplish what you hoped it would?
COP26 was a watershed moment. Many of the world’s largest banks, insurers, asset managers and pension funds stepped up to finance the enormous investments needed to transition the global economy to net zero. GFANZ (the Glasgow Financial Alliance for Net Zero) made rapid progress, bringing together in only a few short months a coalition of over 450 financial institutions—spanning the waterfront of global finance—who committed to aligning their balance sheets with achieving net zero and limiting the temperature rise to 1.5 degrees.
But, of course, there is more to be done. COP26 should be seen as a launchpad. In 2022, we’re rolling up our sleeves to turn commitments into action. The focus of all stakeholders will be making meaningful and credible progress on the net-zero commitments made at COP26 including the mobilization of significant capital to emerging markets and developing countries. We will be saying more about the priorities for GFANZ in the coming months, as we approach our one-year anniversary.
You’ve led a coalition that’s committed to aligning over $130 trillion of private capital to delivering net zero, along the way winning a lot of praise, but there has also been some skepticism. What would you say to those who are skeptical toward commitments and demand action?
I understand the skepticism. After all, if governments didn’t follow through after COP21 in Paris six years ago, why should private financial institutions this time? Public and media scrutiny are welcome because they help distinguish what is credible and science-based from corporate greenwashing. GFANZ members are required to use the most rigorous, science-based pathways, grounded in the UN’s Race to Zero. In addition to net-zero emissions by 2050, GFANZ members have also committed to their fair share of 50% greenhouse gas emissions reductions by 2030 and, within 18 months of joining, banks must set out detailed transition plans. These sector-specific plans will show the hard numbers. Emissions can’t be greenwashed. The numbers will either go up or down—and companies will be judged accordingly.
Is inflation your primary concern about the global economy?
I’m too much a central banker to ever deny that inflation is a primary concern. But it is joined by the need to translate commitments into actions, not just for the climate and future generations, but also for current growth and jobs. Climate policy is a new pillar of macro policy, and credible and predictable climate policies, when combined with the new net-zero financial system, will drive investment and growth across our economies.
Neal Wolin is Brunswick Group CEO. He previously served as Deputy Secretary of the US Treasury from May 2009 until September 2013, and Acting Secretary of the Treasury in January and February 2013.
Photograph: Simon Dawson/Bloomberg via Getty Images