Science Doesn’t Care What The Politicians Are Saying

One of my first articles about climate change adaptation and mitigation investing, published in 2018 and entitled Science Doesn’t Care What the Trading Desks Are Saying, bemoaned the short-sightedness of investors and likened their mindset to that of a driver accelerating toward a wall of brake lights on a morning commute.

Since that time, the ballast in the hold of public opinion has shifted toward concern about the murder-suicide-in-progress wrought by our civilization on our ecosystem.

To the credit of financiers (especially Larry Fink, who writes letters stamped with a few trillion dollars’ worth of postage), the investment world perceived the shift in public opinion ballast sooner than those denizens of Ugly Hollywood did.

Finally, the politicos sensed the change in center of gravity and after a good bit of hemming, hawing, and backroom dealmaking, passed the Inflation Reduction Act of 2022.

The stars in Ugly Hollywood are enjoying seeing their names in the credits while inspiring background music plays and a cast of extras enliven the scene with a flurry of backslaps, high-fives, confetti, and stolen kisses.

Too bad that we live in a world that conforms to physical realities rather than one of canned happy endings.

To be clear, I am happy that the Inflation Reduction Act passed if, for nothing else, its signaling value. While happy, I am also cursed with a mind that insists on reality-based tests, and in this light, the IRA may be necessary but is in no way sufficient.

Let’s take stock.

In the past two years, the Keeling Curve – a daily record of global atmospheric carbon dioxide concentration maintained by Scripps Institution of Oceanography at UC San Diego – has increased by around 5 parts per million, equating to a century-long pace of 250ppm.

The first thing to note is that 250ppm is in the ballpark of the level at which atmospheric CO2 concentrations had peaked each time over the past 800,000 years. The second thing to note is that even without any future increases, the present atmospheric CO2 concentrations are already nearly 70% above prior peak levels.

The CO2 increase over the last two years has occurred even while 9 million tax-incentivized electronic vehicles were sold, US renewable energy capacity increased by nearly 60%, and investors plowed money into ESG funds at an 80%+ compound annual growth rate.

Perhaps the sight of new Tesla sedans on the road and the thought that we are now “sustainably” invested may take our minds off of the new normal daily news of “1,000-year” rain events in places like Kentucky, Las Vegas, and Dallas, a megadrought in the American Southwest*, floods in Pakistan, record heat waves in Europe, and so on. Eventually, though, the realization that dried up rivers and excessive heat are causing bona fide economic damage – closed manufacturing plants in China, stopped commercial river transport in Europe, and failed farms in the country and the threat of blackouts in cities of the desert Southwest – should awaken us to the fact that our best sustainability efforts to date have come up lacking.

The tax breaks and other incentives of the IRA are great, and perhaps they will help on the margins. The problem is that as a civilization, we are 40 years too late to fiddle with marginal improvements.

The fundamental improvement we must make relates to the way our society interacts with our planet’s complex, rich, and intricately interconnected brocade of plant, animal, bacterial, and fungal life.

This fundamental improvement will never arise from clever devices, nor can it be mandated by regulatory action. It relies upon each of us taking moral and philosophical responsibility for what and how we consume and what and how we discard. It relies upon each of us recognizing the complex set of relationships and dependencies that allow us to live in such great comfort and ease and by acting on that recognition by properly valuing the systems and organisms that makes this comfort possible.

The only way to avoid slamming into the wall of brake lights towards which we are now rushing is not to tap lightly on the brakes as the IRA has done, it is to find a better, more responsible path forward.

For those of you interested in this train of thought, I recommend reading and digesting Wendell Berry’s 1977 book, The Unsettling of America: Culture and Agriculture. Writing 45 years ago, Berry was disconcertingly prescient in his description of the enormous spiritual, political, and health costs inherent in the industrialization of agriculture and the damage caused by the colonial treatment of rural areas by a disconnected urban elite.

Intelligent investors take note.

NOTES

* The drought’s bullseye is the Central Valley of California, where the USGS reports that a quarter of all US food supplies are derived and 40% of “…the Nation’s fruits, nuts, and other table foods.”