Divestment from oil & gas will slow clean-energy transition: State Street CEO
STATE Street Corp chief executive officer (CEO) Ron O’Hanley said the push for large asset managers to divest from polluting companies will stoke political debates without doing anything to help the earth.
To curb carbon emissions and transition to cleaner forms of energy, polluting industries need investments so they can start to change, O’Hanley said, speaking at the Milken Institute Global Conference on Monday (May 1). State Street, one of the world’s largest asset managers, has been criticised by environmentalists calling for large financial companies to sell their holdings of oil and gas producers.
That pressure will slow down the energy transition, O’Hanley said. “There’s been enormous pressure put on the financial institutions to actually divest – and to me there is not a dumber thing in the world than to put pressure on an investment manager, or for that matter an asset owner, to divest.”
An acrimonious debate is bubbling over between green energy advocates and Republican politicians, who lament “woke” policies and the rise of environmental, social and governance-related (ESG) investments.
“What gets accomplished out of it? The portfolio gets decarbonised. Does the air we breathe change? Not at all. This is the problem with having this kind of investment debate,” O’Hanley said. “It’s really not being constructive.”
Environmentalists have targeted State Street, which has US$3.6 trillion in assets under management, and its larger competitors Vanguard Group and BlackRock, for their investments in oil and gas companies – many of which come from index-tethered investments. O’Hanley said that calls for divestment are counterproductive.
Navigate Asia in
a new global order
Get the insights delivered to your inbox.
BlackRock CEO Larry Fink, who has drawn criticism from both sides over the issue, has lamented the politicised nature of ESG debates.
“Let’s be clear – the narrative is ugly, the narrative is creating this huge polarisation,” Fink said at Bloomberg’s The Year Ahead event in Davos earlier this year. “If you really read the CEO letters that I’ve written in the past, I talk about a transition.” BLOOMBERG
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Copyright SPH Media. All rights reserved.