Brian Deese is currently the Global Head of Sustainable Investing at BlackRock, the world’s largest asset manager. Prior to his work at BlackRock, he served as a Senior Advisor to US President Barack Obama. In this role, he had the responsibility for executing the Obama Administration’s energy, climate, and conservation strategies, and advising the President on a range of domestic and international issues. Mr. Deese also played a central role in negotiating the 2015 Paris Climate Agreement and directing the United States’ engagement with China, India, and other major economies on climate issues. Furthermore, he oversaw the Administration’s domestic energy and climate policies including investments in clean energy, and land and water conservation.
However, as the Global Head of Sustainable Investing at BlackRock, Mr. Deese leads the Sustainable Investing team is focused on identifying drivers of long-term return associated with environmental, social and governance issues, integrating them throughout Blackrock’s investment processes, and creating solutions for clients to achieve sustainable investment return.
This blogpost discusses his recent interview with Linsey Grant– a well-known podcast host and editor at the Business Casual Podcast. Deese explains why investing with the climate in mind leads to stronger returns. He also illustrates the importance of big data and the role of federal government in enabling the private sector to prioritizing sustainability.
According to Brian Deese, ESG Investing is not something that is entirely new. It has roots in the value driven divestment movement that saw investors pull investments from entire sectors – such as tobacco, ammunition, and increasingly fossil fuels. This trend has led to what is termed as socially responsible investing, which functions as an exclusionary screen to invest capital in sectors that are value and impact driven – such as sustainable packaging and renewable energy. However, in recent years, the data around environmental , social and governance factors has improved a lot- in both quality and volume and that has resulted in investors being able to apply materiality principles ( which ESG metrics are relevant to a certain business and which are not). This is evident from the fact that since 2012, the portion of S&P 500 companies that report sustainability information has grown from 20% to 90%.
Today, ESG Investing is primarily driven by risk mitigation. According to Deese, if a firm does not consider ESG factors in its performance, it exposes the business to operational risks. These can range from high natural resource intensity (water, raw materials etc.) to threat of litigation over environmental disasters such as chemical spills. Such operational risks manifest themselves in the form of poorer returns for investors over the longer run. In other words, firms that perform better on ESG metrics also outperform on financial returns, are more resilient to climate change, and thus are more attractive to investors such as BlackRock.
The question remains as to how the world’s largest asset manager is relevant to UNFCCC and the Conference of Parties. The Private Sector Initiative under the Nairobi Work Programme (NWP PSI) is designed to help businesses manage risks and adapt to climate change. The PSI also presents organizations with the opportunity to develop knowledge on climate change adaptation, build adaptive capacity and be part of a growing network of organizations taking measures to adapt to the impacts of climate change. Having an investor such as BlackRock on board will unlock value for the PSI as this provides a platform for exchange of ideas where BlackRock can leverage and share vital information regarding measures to encourage sustainable business operations in climate critical sectors around the world such as energy, cement, and automobile transportation.
Such a measure will enable both developing and developed countries to formulate and execute policies to meet their nationally determined contributions and help ensure that global warming is limited to within a 2 degree Celsius over pre-industrial levels. People such as Brian Deese, who have worked at the highest levels of both the government and private sector, are well-placed to make this happen.