IIf the future remembers a corporate villain from 2022, it will be Stuart Kirk. The head of the satirical title of “responsible investment” at HSBC looks the part: shaved head, well-trimmed beard, hard and piercing eyes. Like all the best villains, the banker’s arguments are insidiously seductive. He speaks out loud what his audience thinks, cutting through the pious bullshit of polite society to reveal his selfish desires.
“There is always a crazy person who talks to me about the end of the world” he told the FinancialTimesit’s moral money conference – and I didn’t invent that title either. “Who cares if Miami is six meters under water in 100 years? Amsterdam has been six meters under water for ages and it really is a beautiful place.
Notice the two neat steps it performs. On the one hand, only the ‘crackpots’ talk about catastrophe, even though the ranks of the crackpots include the UN and all serious climate scientists. But when crazy jobs turn out to be anything but crazy, Kirk changes his mind and assures you that we’ll appreciate climate change, just as Amsterdammers enjoy their canalside cafes. What if we can’t? We’ll all be dead in 100 years anyway, so who cares.
I salute Kirk’s rant as he articulated what most governments must be unconsciously thinking. No country has honored promises made at COP26 last year summit in Glasgow. Alok Sharma, a cabinet minister and chairman of Cop26, did his best to stir them up the other day by speak of “a monstrous act of self-harm” and “chronic danger”. In vain. Like Covid lockdowns and the fads of 2021, climate change is yesterday’s news.
Last week the government launched a quarter housing initiative, which almost certainly won’t happen, and will only drive up sky-high house prices if it does. Not once did he mention the insulation of British homes. The omission was part of a pattern. In no recent statement has the government committed to improving our energy resilience. Our dependence on oil and gas funds despotic regimes from Russia to Saudi Arabia. Their emissions contribute to catastrophic climate change. Rising fuel prices are crushing the incomes of millions of people. And yet nothing happens.
So many plans to achieve net zero strike my cynical mind as either utopian – the technology isn’t there – or too costly for voters to bear. Home insulation, on the other hand, is genuinely popular. This would cut heating bills in half and bring tangible benefits to citizens. The Treasury’s fear of the short-term cost partly explains the political paralysis. But there’s a deeper intellectual confusion, not just here but across the world, that’s closer to Kirk’s arrogant complacency than fear.
Most studies of ignorance focus on voters that intellectuals oppose: Brexiters, Trump supporters, etc. But climate change poses difficult questions about the inadequate thinking of highly educated technocrats in wealthy societies.
Green economists attempt to explain why the US Federal Reserve, European Central Bank (ECB) and Bank of England refuse to treat climate change as a systemic risk to the financial system. They wanted central banks to introduce individual capital requirements for loans to fossil fuel companies. The more risk capital a bank is required to hold, the less profit it makes on a loan. Faced with a penalizing regulatory burden, banks would deprive polluting companies of resources by choosing to lend elsewhere.
It’s not that the project was dismissed as too radical. The Bank of England and the Federal Reserve have taken the danger of a climatic “Lehman moment” seriously. ECB Executive Board Member Isabel Schnabel wrote that climate change causes inflation, adds to monetary risk and amplifies volatility as extreme weather and mass suffering have their inevitable economic consequences. Yet all actions dismissed. The Bank of England has raised the Democratic objection that “how to tackle the causes of climate change is a decision for governments and parliaments, not financial regulators”. But he only managed to raise the obvious follow-up question: Why then don’t democratically accountable governments order banks to fight climate change?
James Vaccaro of the Climate Safe Lending Network argues that even the most intellectually gifted central bankers do not understand the difference between a crisis and a collapse. Or if they do it in theory, they are too constrained by established ways of thinking to act on their knowledge.
An economic crisis caused by inflation, Russian militarism or Covid can be devastating. The world will suffer loss and damage. But from an economic point of view, there is an “other side” to reach once the crisis has passed and we have returned to a kind of normalcy.
There is no other face to a collapse. The Intergovernmental Panel on Climate Change (IPCC) speaks of the rapid acceleration towards collapse. You can see it coming in the monstrous heat wave in India and the wildfires in Siberia. Once average global temperatures increase beyond 1.5°C, “tree death, peatland drying, permafrost thaw and other self-reinforcing feedback loops [will] release additional carbon emissions, further amplify the warming”. Climate change will soar “beyond humanity’s ability to influence it”.
There are no climate equivalents of interest rate hikes or furlough payments to bring us back to a tolerable balance.
Economists, like many of us, can be slaves to the past. We think we can look to the future. What happened the last time there was a ground war in Eastern Europe? How did former Tory prime ministers fare after a bloody vote of confidence? At the best of times, the past is an unreliable guide, but it offers no clues about our environmental future. Risk managers point out that when, for example, the European Banking Authority says evidence of climate change causing economic chaos is sparse, it didn’t ask what evidence he expected to find in the retrospective data.
If there ever was a case for vigorous banking regulation, Stuart Kirk has it. In his speech at FTTo make moral money, he said the average length of a loan was six years. “What’s happening to the planet in year seven actually has nothing to do with our loan portfolio.”
HSBC suspended him for telling stories outside of school. But governments, central bankers and business leaders who think that what happens when they retire in six or more years is “irrelevant” are still, I’m afraid, quite with us.