TheSyllabus

At its core, green capitalism is about rendering our response to climate and ecological crisis into a form that is compliant with market-based mechanisms. That sounds very simple. That is fundamentally all it really is. But how it plays out is often messier than it sounds.

Green capitalism is about finding a way to wedge all of the complexity of addressing climate and ecological crisis through the prism of the market. That requires finding prices for things, whether carbon or other forms of natural capital, and finding ways to adjust our financial modeling. The market seeks to bring forward neutral arbitration between market actors in pursuit of profit, and then views this as somehow inherently aligned with positive outcomes like curbing emissions or addressing biodiversity loss.

My first experience with green capitalism came from working at a nonprofit that helped private financial firms optimize their role in the green transition. The sustainable finance industry was a window into this clear mindset about how to address climate and ecological crisis: by making small, market-led tweaks, and by resisting the supposed messiness of politics.

Its advocates are everywhere. The finance industry itself is, in my view, the vanguard of this idea. You've got champions like Larry Fink, the CEO of BlackRock, as the poster child. But it's also present in all kinds of European climate governance. The EU’s Green Deal is an archetypal policy program of green capitalism. As is the Inflation Reduction Act (IRA) in the US, which tries to crowd in market actors and find ways to make climate investments desirable for the private sector and its clients. It really is the predominant framework with which most policymakers, at least in the Global North, are forging ahead.

Without getting too conspiratorial, I would say it's a little bit of both. It's a happy marriage of an array of capital's interests. There is a recognition of the threat that the escalating climate crisis poses to capitalism – an unprecedented threat, especially in terms of capitalism’s ability to reproduce itself. But, at the same time, there is also the understanding that this is an incredible new domain for profit making – an understanding that is probably correct given the current systems.

To go back to the kingpins of finance, Larry Fink publishes an annual letter that, each year, presents climate change as an unprecedented opportunity for investors. He often uses some version of that phrase to talk about the crisis. So, that's definitely one side of the coin.

The other side is closer to the Davos scenario. There is a recognition of the threat, but also of the need to maintain capitalism and market-based systems. This to me often seems a more ideological commitment, motivated by the belief that this is the ultimate system for economic governance, the only system that we could possibly have.

But there is also a convenience for policymakers in market-based mechanisms, which, to a certain extent, let them keep their hands clean. This is an incredibly politically divisive issue, but if you can rely on market mechanisms, then you don't need to get bogged down in the messiness of decisive policy decisions that will alienate voter bases you rely on. 

The key to green capitalism is that it's a happy marriage of all of those interests.

The only coherent enemy that emerges is someone who questions the dominance of capitalism as our system for organizing life on Earth. If there is an imagined enemy, it is anyone who resists existing market-based systems, who questions the fundamentals of capitalism in the face of climate and ecological crisis.

That's a quite nebulous description of green capitalism’s enemy. Those who fit under it could be the more anarchistic parts of the climate front, to groups like Extinction Rebellion, to the ecologist who resists putting a price on nature in a romantic or principled sense, to everyone else in between. This is the only sense where there is a degree of coherence.

That said, I'm not even sure that there is a need for an “enemy” in a strict sense. All I get from reading the work or interviews of people I consider leaders of the green capitalist movement is just the utter conviction that their position is inevitable and right. They possess that strident, Thatcherite belief that there is no alternative to the existing system. 

So, in my view, it's less about having an enemy, and more about a genuine conviction that green capitalism and its advocates are the adults in the room. They believe that everyone else is really playing, not understanding how the world works – and how it has to continue to work.

I lean on the work of two people, Jessica Green, who is an academic in Canada, and Cédric Durand, who has written some brilliant pieces about the logical fallacies of carbon markets.

In terms of the actually existing systems and their proven efficacy, Green has published one of the only meta-analyses to look at the actual results of all the carbon pricing systems that have been in place – whether that's taxes, or market-based mechanisms like the emissions trading scheme in the European Union. She finds that despite many soaring claims of the incredible efficacy of these programs, on average, they're bringing reductions of between 0 to 2 percent per year.

That includes the emissions trading scheme in the EU. Its efficacy is limited in part because it covers only a relatively small portion of the EU's actual emissions, but also because a lot of what it does is actually just shifting emissions around. We've seen moves from coal to gas – even if these moves are presented as temporary, it's not exactly an A-plus result for the ability for carbon pricing schemes to do what they say they do. It disproves economists' usual breathless claims about how quickly and fairly they can reduce emissions.

The reason why this happens mainly comes down to political questions. Carbon pricing is meant to be an apolitical, market-based mechanism for addressing the climate crisis. The idea is that anything that emits more will be priced higher, and therefore pushed out of the market; then, the profit motive will ensure they are replaced by innovative solutions that can be offered at a lower cost.

But very quickly, all sorts of political questions enter the chat. Even setting the boundaries of what's covered by a carbon price requires politics. Fossil fuels and carbon emissions are so profoundly embedded in every aspect of our lives, from energy to transport to food, that it's impossible to simply innovate our way out of that in the short term.

For carbon pricing mechanisms to actually be effective, they’d have to take force at a level that would be politically toxic. That's why it has never happened. Immediately, you're engaging with massive injustices and inequalities that often fall unfairly on those who are least able to afford a carbon price.

This is why we have seen major political resistance quickly emerge to carbon markets. Whether that's been in Canada, around Trudeau's efforts to impose a carbon price; or more recently in the Netherlands, with agriculture workers’ opposition to climate goals. There's good reason for that resistance. Because it inherently resists planning and making overtly political decisions, green capitalism fails to engage with the inherent politics of these questions.

Partly, it's about what carbon markets cover. One reason that the EU-ETS is comparatively less controversial is that it focuses on sectors of the economy like heavy industry, which has played a role in softening its impact on the average person and, consequently, on political resistance. But I think this tells us less about whether it's a capitalist or socialist issue, and more about the role of authoritarianism.

It is arguably necessary to have more authoritarian forms of governance to make these kinds of market mechanisms work. Unless they’re very carefully articulated or implemented at such a low level that they’re much too slow or ineffective at reducing emissions – these systems have the potential to cause significant economic injustices and inequalities. So I think it's fair to assume that, in China, the absence of real avenues for democratic dissent has played a significant role in the perceived political success of its carbon trading scheme.

To zoom out, there is a very obvious first point. Whether your perspective on the economy is capitalist or otherwise, there needs to be a massive reallocation of capital in this transition – away from brown, polluting technologies and towards green ones. And ESG has been the primary answer of private finance and the corporate sector to this obvious necessity.

The E stands for environment, the other two letters for social and governance. ESG offers a tidy framework for investors to appraise where their capital is going; in practice it's broadly a box-ticking exercise. It can tell you whether a company in which you're looking to invest adheres to various sets of criteria, which can be related to climate or to issues like having gender-balanced boardrooms. 

But, what it also does is take the place of planning. It prevents us from having more exact targets for how we want to reallocate capital. ESG has proven to be an effective way to lessen the pressure for firmer regulations that prohibit the allocation of capital in certain things, or that require it to be allocated for more material green investment, by creating the impression that something is being done without requiring much, if anything, of firms.

It's also been hugely successful as a marketing tool. For a long time, finance understood that it had an image issue when it came to the climate and environment. ESG has been an incredibly popular product for retail investors and pension funds alike – for everyone who puts their assets into that system believing that you can still do well by doing good, that you can indeed maximize your financial returns by taking ESG criteria into account.

Whether or not that's true is a different question, but that's broadly how it's been sold. And there's a lot of triumphalism in the finance sector around how well this is working, around how perfectly investor returns are aligned with questions of sustainability or human rights or labor laws.

The woke capital backlash has been my favorite political trend of the past 24 months. It's been fascinating to see the striking degree of political honesty from the right in this instance. 

ESG, again, is sold as something that is apolitical, as though it is based on neutral facts and technical decisions that have nothing to do with subjective beliefs about what is sustainable, what is fair, or what is a legitimate way to invest. It's presented as if it all comes from a bunch of nerds sitting in offices working for MSCI. But none of that is neutral or naturally given or inevitable in any sense. So, the woke capital backlash has reintroduced the honest fact that these decisions are inherently political and subjective.

Whether or not it will have a massive impact on capital allocation remains to be seen. People were up in arms around South Carolina and Utah's pension funds withdrawing from BlackRock in protest, and Texas banning them from its state funds. Ultimately, BlackRock is so vast that the actual impact on their net inflows has been relatively trivial; it's pocket change from their perspective. 

But there is an impact on the narrative the sector is putting out, including in Larry Fink's annual letter, which is one of the biggest events on Wall Street. In that sense it has definitely been palpable. There has been a rollback in this commitment to being a climate champion, and a really interesting return to a framing of client choice. They are now emphasizing how they maximize their clients’ freedom to choose where their money goes.

I don't know if that will necessarily change BlackRock's plans. BlackRock, and the finance sector more broadly, sees climate risk as material and will therefore invest according to that principle. But this has always been the case; this has never been about championing climate causes. For them, it's always been about addressing financial risk, and about minimizing their clients’ exposure to that risk. Sometimes that aligns with investing in green infrastructure projects, but it no way needs to.

That's why the greenwash critique for me is a bit of a damp squib. Because yes, greenwashing is a problem – “Oh no, there's an oil company in a green fund!" – but the much bigger problem is that, just because a green fund has no oil companies in it, there’s no guarantee it’s doing anything to contribute to decarbonization or to meaningfully address ecological decline. Most of these green funds are just chock full of Big Tech, Big Pharma. The top holdings in most of Vanguard's ESG funds are companies like Amazon, Meta, Google, Microsoft; maybe Tesla sneaks in to grab position number five, but they'll be the only remotely green company in there. And that's a feature rather than a bug of the logic.

That problem is still under the radar of critiques from both the left and the right. But it's something that a progressive critique of ESG needs to see. ESG really has nothing to do with allocating our capital to what we would consider necessary infrastructural overhauls, and everything to do with ensuring that investors have tweaked their risk-reward profile to maximize financial returns.

It's a question that I go back and forth on a lot. In the long term, it depends on how far you're setting your horizon for the outcomes you want to see. In the short term, it's valuable to keep BlackRock feeling as though there's public demand for sustainability and decarbonization. There is some reallocation, particularly in fixed income; the bond spaces can make a material difference on companies' access to capital. And that is valuable in and of itself.

But I agree that it shouldn't be the core focus for many reasons, one of which is because it would not only cement BlackRock's position as the kingpin of the global economy – which is true, whether we like it or not, and whether we focus on them or not – but also set them up as the savior of the climate movement. 

That would put us in a very dangerous position. We would be relying on a massive institution that at bottom has little interest in any of the left climate goals. So, I would absolutely be resistant to making BlackRock the exclusive, make-or-break focus. The goal should be to highlight, in a more systemic sense, how the finance industry is able to allocate capital. It's a boring answer that focuses on demanding policy and legislative change, but I do ultimately believe that's where it has to come from.

I'd say the same about people campaigning to have their pension funds or university endowments divest. Symbolically, it's quite important. The narrative shift caused by bringing these questions to the forefront is valuable in and of itself. But to rely on greening your pension fund or university endowment as the method by which to address climate and ecological crisis is, I think, a dead end. 

Fundamentally, we don’t want to be relying on institutions whose overriding goal is to maximize their returns and minimize risks to certain factors like climate. Sometimes that goal will align with the material outcomes that we wish to see. But it is in no way necessary. And more often than not, it's unlikely that our interests will be aligned.

That's already been the case. The justification for the Texas legislative move – which boycotted BlackRock along with nine other firms and something like 350 different ESG funds for state money, including pensions – was that these firms and funds were boycotting energy, and specifically Texas energy. These ping-ponging boycotts are already on the move.

Bad companies will continue to be bundled into sin stock ETFs, but one thing to keep in mind is that we've moved away from the Wolf of Wall Street imaginary, where you've got a bunch of dudes in a room picking stocks. At least in the US, we're now in the era of passive investing, and the trend is growing around the world. Every asset class – whether it’s the big corporations we're talking about, or the sovereign debt of emerging markets – is becoming increasingly passive. 

When passive funds are dominant, it means investors are required to replicate global markets as their investment strategy. This banishes sin stock ETFs to the fringe, or at least dooms them to reflect the finite size of the pool of firms available to them. It's difficult to disrupt the forces of passive investing by bringing a bunch of investors into some baddies, because there's already a ton of investment available to those baddies under the current system we have. So, it'll be interesting to see how the right tries to reckon with this beast.

The same also goes for the left. The ultimate get out of jail free card for big finance is that they can always say, “Our hands are tied, we have no ability to change where we're putting our money because it's based on neutral, objective indexes that our funds need to track." But there have been some disruptions to this depoliticization. In February of last year, BlackRock quietly suspended all new purchases of Russian securities, including in its passive and index funds. Whereas after the Sandy Hook shooting, for example, they refused to divest from major arms companies. So, there might be some leeway here. But broadly, in terms of where capital is allocated, that power has basically been handed over to index providers – a very quiet, very powerful industry in and of themselves.

The concepts of “natural capital" and “ecosystem services" put us between a rock and a hard place. I think the valuation of nature is the incorrect tool. It regularly serves as an immediate door to marketization, at least under current economic systems, because the only way that we know how to engage with valuations and prices is through the market.

But I do also identify with, and probably fall within, the pragmatist camp. At the moment, we have no system for managing this loss and for tracking it. So, while it is a crude instrument, so long as it does mitigate some of that rapid loss in the immediate term – while we are living under actually existing capitalism – it can be valuable.

The roots of natural capital accounting have been carefully traced by people like John Bellamy Foster. There are arguments about exactly who did it first; some even say it's a Marxist concept. One of the leading pioneers back in the ’80s and ’90s was the late, great Herman Daly, who believed natural capital was critical for reflecting the harms done by colonial and neocolonial legacies. Since the massive degradation of the environments and communities in the Global South enriched companies and people in the Global North, Daly proposed natural capital as a way to record that harm in a ledger, and to really understand how the depleting stock of natural assets in some places is the underlying force of GDP growth in others.

I find those kinds of ideas compelling. I do think there should be a way to record and measure that loss. Along those terms, it's interesting to see the Biden administration proposing to put natural capital accounting in the national accounts alongside GDP.

I still have two strong hesitations. First and foremost is that – as has been and will probably continue to be the case – the people leading the charge to value nature aren't necessarily those with the goal of genuinely protecting ecosystems. A lot of the advancement has come from a desire to create new markets in these areas. Carbon offsets through tree planting are one obvious example. They reflect a thirst on the part of investors to have investment vehicles for biodiversity, or ways to offset their businesses by investing in natural capital rather than just depleting it.

The second issue is that this marketization quickly causes a lot of harms. When it comes to the complexity of ecosystems, the price mechanism is so blunt an instrument that it tends to create worse outcomes than if it had not been brought in at all. At least under the market systems that we've seen.

There is a dearth of robust studies into these schemes, partly because many of them are so new. Evidence has yet to come out in massive datasets. However, the early studies do tend to show that offset schemes for biodiversity in nature have absolutely catastrophic outcomes. The same goes for carbon offsetting through tree plantations, which threaten the viability of ecosystems by making them less resistant to disease and wildfires.

So, when you try to condense and disaggregate the complexity of ecosystems and biodiversity into something the market can understand – a price – you very quickly run into serious ecological questions. This is the case even if what you've done looks elegant on a balance sheet. It can look like you've maintained a steady stock of assets while in reality, you have caused harm to an ecosystem.

A lot of this harm comes down to another fact: these valuations are based not on ecological value, but on things that the economy values. The early Biden administration plans consulted existing systems for valuing different forms of land use and land cover. In these systems, beaches and dunes are astronomically higher in value than wetlands or peat bogs or even boreal forest, because they reflect valuations based on property prices. Since beachfront properties are worth more than properties by a bog, they are a more valuable natural asset according to this calculus. The same goes for many other economic categories that often have little to do with ecological questions.

If we're talking about technology in the form of Silicon Valley, as opposed to carbon capture and storage type tech, I would broadly align with your stance. A lot of the time, these are trap doors to the marketization and privatization of authority – even when questions of democracy seem to inform at least the branding and ideology behind the technological approaches.

GameStop and Robinhood, for example, were hailed as an attempt to democratize finance. Similar mechanisms can be seen in the climate space. Carbon markets give rise to platforms for trading carbon offsets, which are another trap door to increased marketization. The talk of democracy as the mechanism through which things are arbitrated in these systems is a facade, particularly when it involves money exchange.

There's this idea that market participants are automatically participating in democracy. But this conveniently ignores the huge inequalities in power within the system, the huge differences in the assets and money that people have to spend.

I understand ecomodernism to be compatible with a wide range of perspectives on what the ideal governance and economic systems should be. You could, in theory, be a communist ecomodernist. But, more often, I associate ecomodernism with the people who are voicing it most loudly. And they see little issue with the way we organize our existing systems.

Ecomodernism is mostly put forward as a way to minimize societal disruption, while still finding a way to replace everything we have now with decarbonized versions. The goal is to make life easier and more efficient, without taking up the questions of who owns and governs those technologies, or how they are used to perpetrate harms against certain groups and benefits for others. In that sense, green capitalism is very compatible with what we would call ecomodernist positions. There's no reason those two can't be comfortable bedfellows.

It's been quite diverse. The invasion and its impact on global gas prices prompted a substantial reaction on the part of finance. This goes back to the change in tone, to how finance is presenting itself as the provider of choice. It also reflects that natural gas is once again the darling of policymakers the world over. The idea of energy security through fossil fuel security has been launched back onto the table, and with it has come a palpable scaling back of the triumphant green rhetoric from the finance system.

That said, the IRA does something very different, yet I wouldn't say that it's in any way a rollback of the underlying green capitalist perspective, which has two components.

The first is the sanctity of the market. Yes, the bill provides a lot of incentives – rules around domestic supply chains and labor, a major public investment commitment – which is a big departure from more purely market-based, small state approaches. But, at the same time, the idea of crowding in private investment is making this a profitable opportunity for the private sector, which gets to champion the role of markets and innovation and technology throughout the transition. And the market, not least BlackRock, is recognizing and celebrating this.

The second is the predominance of de-risking. It's still present, even if the IRA is couching it in lip service to social justice questions for the first time. So, the IRA does mark a break with all preceding American climate politics – which only ever focused on carbon markets, and was obsessed with carbon pricing – but it remains well within the confines of green capitalist logic.

There's two big trends I'm watching in that space. One is this source of resistance you pinpoint. It's effectively only available to these newly elected, left-leaning governments in South America. I think their progressive resource nationalism will prove the strongest resistance to the Anglo-American form of green capitalism.

The other trend is in the opposite direction within the Global South. This is the dual disciplining of many sovereign governments by, first, the massive extension of lending from China and the discipline it imposes on governments, particularly when it comes to infrastructural investment, whether climate related or not; and, second, through the gradual but ongoing shift towards private markets as another significant lending source. 

China's lending, together with the extension of market-based finance, to sovereign governments in so-called emerging markets are creating very troubling new dynamics. These are spaces into which passive investing and big institutional investors are also moving. More than ever, they are wielding their ability to discipline sovereign governments. This trend will be quite important to watch.

The passive funds, in particular, have already created increased volatility for the lowest-income countries, and volatility in their sovereign debt costs. Massive swings in times of crisis have been exacerbated by these forms of investment, which I can see becoming an increasingly regular occurrence. The ongoing climate crisis will surely be punctuated by consistent crises that trigger these fluctuations in harmful, feedforward ways. It might have very negative impacts on what countries are able to do.

Oh, God. A big question. To avoid a long laundry list of ideas, I'll focus on one perspective that has also recurred throughout this interview: democracy as the question of how we govern our economic systems.

Under capitalism, our economies are profoundly undemocratic. Only some people have voice over how they operate, how resources are allocated, how we organize the incredible wealth we have – that power is incredibly unequally distributed. It is deeply undemocratic.

And that, I think, is the core nugget that needs to change. Then we can begin the much thornier process of how we completely reorient our economic systems and energy systems. We need that first change before we can transform the fundamental units of the systems we live within. 

That's why at Common Wealth we have been focusing on questions around democratic planning. We want to democratize the core institutions of capitalism, whether that's the corporate form or some new forms of enterprise and governance, in order to reclaim them for more socialist ends.