Amid climate change denial and cries of “go woke, go broke” from the extreme right, at least one large U.S. investment bank has identified bipartisan support for sustainability investments that are likely to yield big returns without political drama.
Modernizing the U.S. power grid, fortifying climate-vulnerable regions, supporting carbon-removal technologies, and eliminating college education as a hiring requirement are economic drivers with support from both Democrats and Republicans, Aniket Shah, global head of ESG and sustainable finance strategy at the global investment banking firm Jefferies, told corporate sustainability executives and bankers at the GreenFin conference in Boston.
“If you work in our field of [environmental, social and governance (ESG)] investing and green finance, you are used to division and pessimism,” Shah said. “But we think there is a bigger story, which is that there are very clear areas of agreement and, therefore, optimism on ESG matters between policymakers, corporates, and civil society of different political persuasions and world views.”
In the run-up to the 2024 presidential election, laws prohibiting the use of ESG factors in managing investments have been passed in 15 states, with additional legislation coming, according to BloombergNEF.
Culture wars are spilling over into brand reputation and consumer buying habits. Bud Light lost billions in revenue in a boycott that began when the formerly top-selling beer sent a customized can to a transgender social media influencer. Target was assailed for selling Pride Month merchandise. Even a brand long associated with Christian conservatives, Chick-fil-A, was criticized for a hire it made years ago to improve diversity, equity and inclusion at the quick-service restaurant chain.
But passage of the Bipartisan Infrastructure Law demonstrates there’s broad agreement from Democrats and Republicans on investments to accelerate and strengthen the economy, said Shah, who teaches at Columbia University in addition to his management role at Jefferies.
“They say the first step in solving any problem is to admit that you have one — and for the energy transition we have a significant problem in the U.S. grid, which is simply outdated for the major renewable buildout that is beginning in this country and underdeveloped in terms of transmission lines needed," said Shah, citing Lawrence Berkeley National Laboratory data estimating the new grid will be 50 percent larger than today’s, and consisting of 95 percent wind, solar and battery storage.
However, regulatory approval for new renewable power projects now takes more than four years, and transmission projects require six and a half years, Shah said, calling for an overhaul of the U.S. permitting policies.
There is political consensus to invest in climate adaptation, Shah said, pointing to $400 billion in economic damage in red and blue states due to storms, flooding, wildfires and other disasters. In June alone, the largest California property insurer stopped underwriting policies, while rates in Florida rose 50 percent, he said.
“We think technologies ranging from precision agriculture, to construction, to water-desalination, to weather intelligence and more will become increasingly important to the U.S. economy and therefore interesting places for investors to invest," said Shah, predicting a federal plan for adaptation and resilience will be published by the Joe Biden White House.
Investment in technology to remove carbon from the atmosphere will also receive bipartisan support, Shah claimed.
“To achieve global net-zero goals, we will need to remove approximately 10 gigatons of CO2 per year from the atmosphere by 2050 for every year going forward, a several order of magnitude increase from where we are today,” he said, heralding new industries that are both nature-based and engineered will be scaled up worldwide.
Outside environmental investments, Shah pointed to the tightening U.S. labor market as a significant risk equally impacting conservative and liberal regions. He pointed to Gallup research showing sharply higher support among Democrats and Republicans for labor unions.
Employers are responding, eliminating a college degree as a requirement for a job at select companies and in multiple states including Alaska, Colorado, Maryland and Pennsylvania, Shah said. Other trends to make jobs more appealing include remote work and four-day work weeks for many white-collar roles.
“There is a growing realization that the United States is facing major worker shortfalls for the twin policies of reshoring manufacturing and accelerating decarbonization,” said Shah, citing predictions for 550,000 additional clean energy jobs by 2030, including electricians and construction roles where there are already shortages.
“This is a problem that will need to get solved,” he said. “It’s a problem that exists in states of all political persuasions, and therefore will get solved.”
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