The Problem With Putting a BlackRock Alum in Charge of Greening the Economy

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This week, the Biden campaign is expected to announce officially that it’s tapped former Obama adviser and current BlackRock executive Brian Deese to head the National Economic Council. The appointment will make Deese the president’s top economic adviser. And in addition to worrying climate activists, the news has again raised concerns about BlackRock’s outsize influence in U.S. politics. 

Deese has long been on the no-go lists of progressives tracking Biden appointments, thanks to his BlackRock background. New York Communities for Change and the Sunrise Movement protested the rumors of Deese’s appointment outside the company’s Manhattan headquarters last week.* His advocates and defenders, including climate wonks and Obama alums, have praised his character, record on conservation, role in helping negotiate the Paris Agreement, as well as the fact that he joined BlackRock to head the investment management giant’s sustainable investment strategy after his brief stint working on climate issues for Obama. Many are excited by the prospect of having an NEC head who spends time thinking about climate change. 

By all accounts, Deese is indeed a nice guy. But to suggest his record makes him a good fit for a position steering and greening the U.S. economy rests on fundamental misunderstandings of Deese’s climate credentials, BlackRock’s ambitions, and the crisis at hand.

Deese has now spent more time advising BlackRock on climate than the White House. But his governmental record deserves scrutiny, too. Before taking over the climate portfolio from John Podesta, he worked for the NEC and as deputy and then acting director of the Office of Management. He described his role as “showing the American people
how we can do more effectively with less” and preached “fiscal discipline”—a troubling inclination given how desperately the current economy and climate crisis need government spending. He also championed the Trans-Pacific Partnership, which would have doubled U.S. exposure to pernicious investor-state dispute settlements, allowing companies to sue governments that infringe on their profits (for example, through robust climate policy). During his two years as Obama’s climate adviser, Deese defended Arctic drilling and boasted about increases in “both renewable and traditional” energy production, though he did also work to withdraw certain portions of the Arctic Ocean from mineral leasing. 

The Obama administration—not unlike BlackRock itself, which hired other Obama alumsplaced a premium on fiscal responsibility and peaceable relationships between the private and public sectors. That was especially true on climate, where the White House’s “all of the above” approach to climate and energy saw it support clean energy with one hand and aggressively boost fossil fuel drilling with the other, calling out only the most egregiously bad actors on climate. If there was some case to be made for that strategy a decade ago, it’s gone now, as reports about the dangers of continuing to expand fossil fuel extraction mount.

Yet throughout Deese’s tenure as head of sustainable investing, this milquetoast “all of the above” approach is roughly the one BlackRock—one of the world’s largest managers of fossil fuel shares—has taken in its flashy climate commitments. And the company’s recent years of press releases have been an object lesson in greenwashing.

Just before the World Economic Forum convened in Davos this year, BlackRock pledged that its actively managed funds wouldn’t invest in companies that do more than 25 percent of their business in coal. But this wasn’t exactly a sacrifice: Coal is not a particularly attractive investment as the sector collapses. BlackRock has indeed created some more climate-friendly products. Its passive funds, moreover—some 90 percent of the company’s offerings, and its major money maker—aren’t subject to its sustainability screens. 

The company has also partnered with the Rhodium Group on a new tool examining the risks climate change poses to investments—although, tellingly, the tool is framed as evaluating risks like rising water levels as well as the risk to fossil fuel investments as the economy transitions to green energy. It doesn’t seem to focus on how specific investments increase disaster risk by pouring greenhouse gases into the atmosphere. 

BlackRock this year pledged more transparency over how it uses its large stakes in the world’s biggest companies—including in many fossil fuel producers—but in the last few years has used its loud voice in corporate boardrooms to kill shareholder resolutions aimed at making companies more sustainable. After joining the investor coalition Climate Action 100+, the company this year voted down 10 of the 12 climate-related shareholder resolutions that group flagged as important, and voted more often with management than other asset managers; it voted to confirm 98 percent of directors proposed by oil and gas companies.

BlackRock’s role, as Deese has put it, isn’t greening the financial sector but simply providing “more choices and more options” to people who might want to. He defended the having-cake-and-eating-it-too approach to Christiane Amanpour in February:

The most important thing to identify is not necessarily are you going to divest from entire sectors or segments, but instead, where are those companies and where are those business models that are the most prepared for this transition? And so, we spend a lot of time asking the question not necessarily, are you going to exit the entire oil and gas industry or all utilities globally, but instead, within those sectors, which are the companies that are the most prepared that are investing the most in the clean technologies of the future, and which of those companies are less prepared[?]

Similarly, a white paper co-authored by Deese and his colleagues this year suggested differentiating between “lower GHG-emitting fossil fuels versus higher GHG-emitting fossil fuels,” opening the door for new “transitional” fossil fuel investments to be included in officially sanctioned ESG (environmental, social, and governance) investment products of the kind Deese oversees. Following its publication, BlackRock was tapped by the European Union to consult on what constitutes sustainable investment for the bloc’s banking regulations. Just last week, European ombudsman Emily O’Reilly reported that the EU’s executive arm didn’t properly consider conflict of interests in hiring the firm, noting that “there is a clear risk that those interests may influence the outcome of its work in its own favour.”

In the odd world of Democratic Party politics, getting a lucrative consulting gig or Wall Street job still makes someone a more attractive prospect for future Cabinet posts than going to work for an environmental nonprofit or center-left think tank. But, contrary to straw man interpretations of leftist talking points, the problem with letting Deese run the NEC isn’t simply that he worked in the private sector or that his company was insufficiently committed to its declared principles.

Companies exist to make money for their shareholders. They will strive toward that goal through any means available, regardless of the consequences, until constraints are placed on their ability to do so. Sometimes those constraints come from market dynamics or changes in public opinion that make seemingly standard practices—like investing in companies with business in apartheid South Africa—start to pose a threat to their social license to operate (i.e., that could start to drive away customers).

Usually, though, it’s up to governments to impose those constraints rather than leaving them up to corporate discretion. In the United States and the EU, BlackRock’s apparent strategy has been to have as much of a voice as possible in that process and chip away at such constraints—in part by hiring government alums like Deese (and, for that matter, Adewale Adeyemo, an Obama alum turned BlackRock senior adviser who the Biden team has announced will be the new deputy Treasury secretary). 

That’s not to say everyone who goes through the revolving door is either a hapless dupe or a moral monster. But it seems unlikely that, in the aggregate, they would tend to rein in their former employer as aggressively as those who didn’t work there. As David Dayen has pointed out, too, Deese was already a fan of loosening financial regulations before his time on Wall Street. At the very least, connections between former work friends might give BlackRock a leg up in terms of information and access to a Biden administration, even if all appropriate protocols are technically followed. Corporate impunity and climate action historically don’t mix—even less so when it comes to one of the planet’s biggest fossil fuel investors; there’s no reason to let the fox guard the henhouse. And beyond his BlackRock ties, the fundamental issue is that Deese has consistently been a spokesman for “all of the above” approaches, whether or not he’s worked on Wall Street. He’s yet to show any signs he wants to part with that approach.

Those who think Deese being a stand-up guy makes up for the inherent dubiousness of his appointment fail to appreciate the stakes of this moment and this position: “All of the above” is a logical stance for a Wall Street executive eager to protect profits sourced to polluters, and an indefensible one for an administration that claims to be committed to tackling the climate crisis. The 2019 U.N. Production Gap Report found that countries plan to produce 50 percent more coal, oil, and gas than is consistent with capping warming at two degrees Celsius (3.6 degrees Fahrenheit), and 120 percent more than is consistent with 1.5 degrees Celsius. Currently, the U.S. spends tens of billions of dollars a year subsidizing fossil fuels, and it expended ample diplomatic resources during the Obama administration boosting gas development abroad. 

If he’s confirmed, a major part of Deese’s job will be navigating the country out of a recession that, so far, the U.S. has responded to (in part) by pouring billions of dollars into propping up fossil fuel, in line with other G20 countries. As researchers with the Roosevelt Institute and elsewhere have argued, there’s no such thing as a “climate-neutral” stimulus. Using fiscal policy to simply provide “more choices and more options”—the strategy Deese has vocally supported for at least a decade—won’t scale back fossil fuel production at the necessary rate if all the many other incentives spurring fossil fuel production remain in place, even if it does manage to produce a bunch of solar panels and electric cars. His hawkish instincts on deficit spending won’t be much help spurring on that clean energy revolution, either. 

Politically, the Obama era should be a cautionary tale rather than a blueprint for policy and personnel. Letting Wall Street allies run key economic posts led to a sluggish and unequal recovery from the Great Recession that ultimately helped cost Democrats all three branches of government. Then–incoming NEC head Larry Summers and Treasury Secretary Tim Geithner were more concerned with reassuring investors than getting people back to work, which came at the cost not only of an adequate stimulus but ambitious green spending, too.  

BlackRock has succeeded in recent years at painting itself as a kinder, gentler, and greener voice of Wall Street that—as its top lobbyists forcefully argue—doesn’t need to be regulated like Goldman Sachs or Citigroup. Its enormous and largely unchecked sway over the global economy is a testament to that strategy. So, too, is the fact that its executives—and not Goldman’s—are now in line for top White House economic posts. But a decade on from the Great Recession, Democrats should know better than to let executives from industries that helped create a crisis determine how the government responds to it.

*This piece has been updated to note NYCC’s involvement in the protests.

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