The journey to a net-zero world will follow a route that’s less like Google Maps and more like Waze, according to the chairman and chief executive of investing giant State Street.
As nations, corporations and capital markets embark on a multi-decade effort to decarbonize, Ronald O’Hanley cites the COVID-19 pandemic and the war in Ukraine as examples of situations that will introduce delays and require detours.
“Stuff will happen over time. The answer is not to say we can’t do this anymore,” O’Hanley said, adding, “These are Waze journeys.”
O’Hanley, whose Boston-based bank holding company manages $4 trillion in assets, spoke Wednesday at Greenfin 22 in New York, where he urged dialog with greenhouse gas emitters rather than divestment.
“It doesn’t help to be confrontational all the time,” said O’Hanley. “Divestment is very seductive... but you have no say” after selling or when a company is taken private.
O’Hanley is not alone among senior banking executives pursuing an environmental, social and governance (ESG) agenda on a global scale. Bank of America chief Brian Moynihan is co-chair of the Sustainable Markets Initiative launched by Britain’s Prince Charles in 2020.
“This is the first problem that the entire global community will face,” O’Hanley said of the climate crisis while acknowledging capital will need to flow from state-owned sovereign wealth funds, pension funds and other large asset managers to lessen the political and currency risk associated with decarbonization.
"In our mind, it's not just to say to emerging markets that we burned a lot of coal and cut down a lot of trees to get to where we are, but you can't. How do we make sure it's fair across companies and across markets?” he asked.
Just months after rival BlackRock chairman and chief executive Larry Fink attacked “woke capitalism” in his annual letter to CEOs, O’Hanley defended a multiple stakeholder focus that focuses on employees, communities and environmental rules.
“For us, a just transition is being completely stakeholder friendly,” he said.
Another barb was thrown at cryptocurrency, which O’Hanley described as “about as carbon-generating as any activity out there.”
Digital currency, when offered in an environmentally responsible way, can serve an unbanked population in developing nations as well as underserved U.S. consumers. “They bring finance to the rest of the world. There is a role for digital currency.”
Image credit: Bruno/Germany via Pixabay