This week world leaders have been flocking to the United Nations General Assembly, known as UNGA, in New York, keen to do business face to face after years of disruption. The last time they were gathered at the summit in 2019, global politicians were accused by 16-year-old Greta Thunberg of failing the world’s youth with their response to global warming. This time around, a contrasting figure attempted to take the high ground in the climate debate.
On Monday, Andrew “Twiggy” Forrest, a pugnacious Australian mining magnate with an estimated fortune of US$15.6bn, announced that his metals group Fortescue would spend more than $6bn to stop using fossil fuels in the next few years. These would, he said, be replaced with renewable energy sources, such as green hydrogen.
Some are sceptical about the green transformation of a businessman who admits his environmental record is far from blameless. And mining traditionalists might have doubts over whether the still-young technology behind green hydrogen is up to the task. But the plain-speaking Forrest not only insisted that it made sense for companies to become less exposed to the vagaries of global energy markets (and Russia), but that the transition would slash energy costs in the long term. Not to mention boost the fortunes of companies such as Fortescue.
“Disconnecting from the global energy market removes a lot of risk,” he told me. “We are looking at initial returns of 14 per cent, rising to 25 per cent.” Even Warren Buffett would leap out of bed for that, he added.
If this turns out to be true, then hooray for him. But this year it’s striking that relatively few other executives are following Forrest in trumpeting their green commitments.
Back when Thunberg was excoriating sceptical politicians like Donald Trump, corporate leaders were all too eager to proclaim their environmental virtues. A couple of years ago, my colleagues and I were inundated by pitches from hyperactive public relations executives who wanted us to feature their environmentally conscious CEOs. Many of those executives are currently keeping their heads down, talking quietly about their commitments or preferring to act through collective industry groups rather than putting their heads above the parapet.
Forrest partly blames the shift on the Russian invasion of Ukraine. “Everyone is whingeing about inflation not climate change [so] chief executives are going a bit quiet,” he says.
Politics is poisoning the debate too. In the US, Republican leaders such as Mike Pence, the former vice-president, have lambasted pro-green policies as “woke capitalism”, and some Republican-controlled states are introducing new rules that would penalise investment companies with green products, such as BlackRock. With the midterm elections looming, few CEOs want to offend Republican politicians slated to win.
There’s another, subtler factor too: many executives fear that if they boast about their green strategies too loudly, it will prompt activists to become extra-vigilant about scrutinising their companies. This raises the chances that they will be accused of “greenwashing” if the company’s claims do not entirely match their practices. For some, keeping quiet seems the safest bet.
There is an irony here. Even as the political backlash against ESG swells in some quarters, behind the scenes there is a feverish amount of activity being devoted to developing renewable energy sources. On the edge of this year’s UNGA there was much dealmaking and fundraising, as financiers scoured the event looking for the hot new thing, be that hydrogen or lithium.
Moreover, while companies are quieter, there is little evidence that they are abandoning their sustainable strategies. Almost no CEOs today will actually stand up and say that they are opposed to getting greener. Embracing elements of environmental, social and good governance has inexorably become the new norm.
In some senses this shift in the zeitgeist is a victory for activists such as Thunberg; not that they will necessarily celebrate it. Green warriors correctly complain that decarbonisation is still proceeding too slowly to avert damaging climate change; many dislike the fact that it is profit – not just fear – that is motivating those such as Forrest.
The truth is that, if we’re going to fix this problem, both will need to play their part.
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