President Trump’s first director of the National Economic Council, Goldman Sachs alum Gary Cohn, was a top Wall Street proponent of cutting taxes, especially the corporate rate. Sure enough, by the end of Trump’s first year in office, Congress passed and Trump signed a sweeping set of tax cuts.
Incoming President Joe Biden’s choice to lead the NEC, Brian Deese, may also reveal the next president’s economic priorities. Deese is a managing director at investing firm BlackRock, responsible for overseeing the giant money manager’s “sustainable” investing strategy. That suggests climate policy will be a top Biden priority, and he’s likely to pursue market-based solutions. That would be a letdown to more liberal Democrats who support the Green New Deal, which calls for extensive government intervention in the energy and transportation sectors. But it would also fit with Biden’s description of himself as a moderate unbeholden to liberal Dems such as Senators Bernie Sanders and Elizabeth Warren and Rep. Alexandria Ocasio-Cortez.
Biden promises a “clean energy revolution” aimed at zero net carbon emissions from the U.S. economy by 2050. That comports with a pledge by Deese’s boss, BlackRock CEO Larry Fink, earlier this year to make sustainability a top priority at the world’s largest investing firm, which manages $7 trillion in assets. Deese, who worked on climate issues in the Obama administration, is the top BlackRock executive responsible for putting Fink’s plan into action.
Amundi CEO Yves Perrier (L), chairman and CEO of BlackRock, Larry Fink (C) sit alongside French President Emmanuel Macron as they attend a meeting between the French President and representatives of investment funds and sovereign wealth funds to fight climate change at the Elysee Palace in Paris on July 10, 2019. (Photo credit should read MICHEL EULER/AFP via Getty Images)
Fink’s sustainability focus includes divesting from or avoiding making investments in companies that get more than 25% of their revenue from coal, and using its ownership stake in hundreds of big companies to push them toward more climate-friendly practices. The BlackRock (BLK) plan is controversial. It only applies to actively managed assets at the company, which are about one-third of the total. The rest are passively managed assets built around indexes or other benchmarks, which wouldn’t be passive if BlackRock selectively pruned certain stocks from the portfolio. And some critics think BlackRock is talking up sustainability as a form of “greenwashing” to atone for past indifference to global warming and climate change.
‘Reallocation of capital’
Deese has described sustainable investing as a way to make money for clients, by spotting possible risks before other investors do, and by identifying technologies and other solutions that will increasingly help solve the problem. He talks of capitalizing on the transition from carbon energy to cleaner forms. “Climate change is going to drive a very significant reallocation of capital,” he said on Yahoo Finance in January, shortly after Fink announced the BlackRock policy change. “We think markets are not recognizing the magnitude at which that’s going to happen. Whether you’re a tech company, an ag company or a food company, you can no longer operate without having a view on this issue.”
Deese gives the example of insurance companies raising the cost of policies for commercial and residential real estate, as climate change raises the likelihood of damaging floods, fires or other disasters. Many companies have a stake in coal, oil and gas production, including some not in the energy business, such as banks that finance energy firms. Tech firms can be large energy consumers because of the vast amount of power needed to run server farms.
So how might all this affect policymaking at the White House? Deese gave a clue during a February interview with Bloomberg contributor Barry Ritholtz. Many climate policies focus on replacing carbon energy with cleaner forms, such as wind, solar, hydro and nuclear, or “decarbonizing” the economy. That’s important, Deese said, but his top environmental priority was improving the efficiency of existing infrastructure to reduce overall use of energy. To that end, a big part of Biden’s climate plan involves weatherization and other types of efficiency upgrades to millions of commercial and residential buildings. That might require some government funding, but many improvements would partly or fully pay for themselves through lower energy costs. So it could be relatively cheap.
Another priority Deese highlighted was “electrifying everything in transport,” from the smallest economy cars to the largest shipping vehicles. During the Obama administration, Deese worked for a while on the auto bailout involving General Motors and Chrysler, along with the large stimulus bill Congress passed in 2009, during the Great Recession. That funding included $90 billion in clean energy research, which Deese credits for sharply lowering the cost of wind and solar power during the last decade. “The biggest mistake,” he said, “is we did it once and we didn’t sustain it.”
FILE - In this April 17, 2012 file photo, National Economic Council Deputy Director Brian Deese speaks during the daily news briefing at the White House in Washington. On Monday, the White House announced that President Barack Obama will nominate Deese as deputy budget director. (AP Photo/Carolyn Kaster, File)
The NEC chair doesn’t require Senate approval, so Deese will have no trouble moving into the job. Yet there’s still some opposition. The liberal American Prospect website called Deese a “corporate friendly” candidate “disfavored by progressive activists,” while accusing BlackRock of a “long and heinous history of reckless exploitation.” The Revolving Door Project, a watchdog group focused on corporate power over government policy, said Deese was unqualified for the White House job because of a record of “furthering dangerously concentrated private financial power... tolerating and abetting climate change, and generally refusing to stand up to powerful interests when the situation demands it.”
Biden is fully aware there will be left-wing opposition to some of his appointments. He also knows that appointees unpopular with the left could boost his credential with voters in the center. The trick on climate is getting something done without infuriating everybody.
