In this episode, Chad Reed and Jeff Eckel dive deep with Tariq into the heart of ESG investing and the sustainable capitalism movement. We also speak with Tariq about the mission and initiatives of the education technology nonprofit he now leads—Rumie.
The recent meteoric rise of ESG or sustainable investing is both compelling and undeniable. Today, more than 3,500 asset managers and related organizations representing more than $120 trillion in assets under management subscribe to the United Nations Principles for Responsible Investment (PRI), which are a set of voluntary and aspirational principles that encourage the incorporation of ESG factors into investment decisions.
But as more and more professional investors publicly proclaim their ESG and sustainability bona fides, real questions persist as to both their sincerity and their actual impact on the pressing social and environmental challenges of our day—most notably, climate change.
Tariq Fancy served as the first Chief Investment Officer for Sustainable Investing at BlackRock, the world’s largest asset manager. But since leaving the firm, he has become a prominent critic of the efficacy of ESG investing and the greenwashing efforts of many investment firms and a strong proponent of policy solutions to address climate change.
In this episode, Chad Reed and Jeff Eckel dive deep with Tariq into the heart of ESG investing and the sustainable capitalism movement. We also speak with Tariq about the mission and initiatives of the education technology nonprofit he now leads—Rumie.
Links
The Secret Diary of a Sustainable Investor
United Nations Principles for Responsible Investment (PRI)
Tariq Fancy: Things will move in the right direction. We'll see advances in technology, more capital going in, great stories about things. That's all fine, but it can be distracting unless we step back and remember that it's not about the fact that we're making progress. Obviously, we're making progress. The question is it fast enough?
Chad Reed: Welcome to Climate Positive, a podcast produced by Hannon Armstrong, a leading investor in climate solutions. I'm Chad Reed.
Hilary Langer: I’m Hilary Langer.
Gil Jenkins: I’m Gil Jenkins.
Chad: In this series, we host candid conversations with the leaders, innovators, and changemakers driving our climate positive future.
The recent meteoric rise of ESG or sustainable investing is both compelling and undeniable. Today more than 3,500 asset managers and related organizations representing more than $120 trillion in assets under management subscribed to the United Nations Principles for Responsible Investment or PRI, which are a set of voluntary and aspirational principles that encourage the incorporation of ESG factors into investment decisions.
But as more and more professional investors publicly proclaim their ESG and sustainability bona fides, real questions persist as to both their sincerity and their actual impact on the pressing social and environmental challenges of our day. Most notably, climate change. Tariq Fancy served as the first Chief Investment Officer for Sustainable Investing at BlackRock, the world's largest asset manager, but since leaving the firm, he has become a prominent critic of the efficacy of ESG investing and the greenwashing efforts of many investment firms and a strong proponent of policy solutions to address climate change.
In this episode, Jeff Eckel and I dive deep with Tariq into the heart of ESG investing and the sustainable capitalism movement. We also speak with Tariq about the mission and initiatives of the educational technology nonprofit he now leads: Rumie. We hope you find this discussion as insightful and thought-provoking as we did.
Chad: Tariq, many thanks for joining us today here at Climate Positive.
Tariq: Thanks for having me on.
Chad: Well, we always begin our episodes with a discussion of our guests' individual journey into the climate space. Tariq, you are born and raised in Toronto, Canada. You initially pursued a career in investment banking in Silicon Valley, and then private equity in New York. Why banking and private equity to start your career?
Tariq: I think I probably, like a lot of folks, who I just graduated at the end of undergrad and wasn't totally sure what to do next. I'd set my sights on wanting a big scholarship, post-undergrad, that I missed in the final round, and so I just followed folks that I knew who seemed to be-- A lot of smart kids were going in the direction of banking consulting, and I had no idea what to do. That that's how it all started. I used to be a coder. I did a lot of tech internships and programming, and so I just decided to do tech banking as merging the two interests or disciplines.
Chad: That was during the heady days leading up to the financial crisis. What were the dynamics in the industry like at that period in time?
Tariq: It's interesting. I took the offer to go into banking in 2000, and then actually joined in 2001. This is why, as you can imagine, tech banking seemed really attractive, because I ended accepting an offer around the peak. Then, as I say, I didn't catch the party, I caught the hangover for the most part. Then that led to me actually switching into distressed investing. One of our clients was a buy-side private equity firm working in the space. Again, I had no particular deep passion for it, but I got along really well with those folks, and so I joined them out of the investment bank.
That really gave me a crash course and understanding how markets work, and how you can have a lot of hype that is unsustainable, and being able to differentiate from the winners and the losers when the tide goes out and the capitalism is easy to get. Then that gave me a look into what then became the financial crisis. In 2007 we raised a $3.5 billion fund where the goal was saying-- We didn't even know exactly when things would crash or what would happen, but we knew that it was unsustainable and that something was going to have to change. That was our process in looking at it, and understanding that there was likely to be some kind of a crisis or downturn.
Jeff Eckel: What a fantastic way to get trained, to go through a crisis. I always think our best employees have been through one company blow up, hopefully too, that they didn't start, and then you end up just learning so much more. When everything goes up, you're not learning that much.
Tariq: Absolutely.
Chad: After the crisis or during the crisis, Tariq, I believe you joined the Canada Private Pension Investment Board where you help build new investment strategies, and expand the investment platform. Can you tell us about the cultural differences between investment banking, private equity in the US versus pension fund investing in Canada?
Tariq: There's definitely a difference. It's actually, in some ways, less than some folks would think, because a lot of the Canadian pension plans actually, unlike the American one, started to build in-house investment capabilities, and including in private equity and private investments. I was hired as part of that wave. They were looking for people who were Canadians, who would be open to working in Toronto but had built their experience in the US. I, for a bunch of reasons including family reasons, I'd been gone for close a decade and a half, and so I wanted to come back. It fit really well. It is different, but that being said they weren't as aggressive for sure as the New York vulture investor fund that I worked with, but also were willing to be creative and had the advantage of having lots of capital and the ability to be long-term and patient, which with the right investments can work really well.
Chad: Then shortly thereafter, you left finance and investing just as you were entering your prime earning years to found and lead Rumie, which is an education technology nonprofit seeking to bring free digital learning to those on the wrong side of the digital divide. What did your finance friends say when you decided to make this pretty big career shift?
Tariq: For the most part they didn't understand it. It was like I was jumping off a building, and they thought, "You're in this amazing place. Why would you do it now?" For me, it was really a personal decision. I had worked on investments some years earlier to bring both basic mobile phones into emerging markets. My parents were born and raised in Kenya, and my brother was even born there before immigrating to Canada just before I was born. I had always had a sense for the disparities, had a deep interest in international development, and having worked on bringing mobile funds into emerging markets, saw the power of a leapfrog innovation where you go to a community where they don't even have the basic thing, in that case landlines, and they go straight to the latest best technology. It's a watershed moment in international development.
Rumie was based on a similar idea that as mobile phones not just proliferate, but people get smartphones and they get slightly better ones, you have this ability to bring the free digital learning revolution to the offline world. If you think about it, in the last 20 years everything we've learned has become free in some form online. I had this idea, it was an echo of the mobile phone idea that I'd worked on. I was passionate about the idea of Rumie, I needed a bit of a push. That came because my business school roommate, he and I both had had this passion that we wanted to do something with, frankly, social purpose behind it at some point in our lives. Then we graduated, and went back to finance.
Then he, a few years after graduating, contracted stage four cancer. It was stage four melanoma. At that point, it's less a matter of your chances and more, unfortunately, a matter of time. While he was fighting stage four cancer, this is a blonde-haired, blue-eyed Dutch guy went to Kenya. I had helped advise him and helped them fit through the ideas, and connect with some of the family connections. I saw him firsthand fighting stage four cancer for two and a half years, and realizing at that point that it wasn't someday, it was now or never. You tend to live these things vicariously through friends. He had encouraged me to just go for it at some point, and it all came together. I decided to just go for it by starting Rumie.
Chad: Eventually after a few years with Rumie, BlackRock came knocking. BlackRock, the largest asset management firm in the world, has about 9 trillion in AUM right now at least, that’s assets under management. You decided to join them as a managing director and their first ever chief investment officer of sustainable investing. Why?
Tariq: It was really interesting. Rumie had reached a point where we had shown a tremendous amount of potential. Harvard Business School, 30 case study. We had gone through a bunch of really interesting growth, and shown that this can work, that you can bring free digital learning to some of the most remote parts of the world, and increasingly even in rich countries, to address inequalities. That was fantastic. BlackRock at the same time, and all of the financial firms, are starting to get interested in impact investing for a variety of reasons. Their approach to me was that, "Listen, we want someone who understands investing and finance from the ground up, has invested, has built strategies and hired investors, and so on. Someone who understands social bottom lines, from the ground up, and has built them, and also used technology to do it."
I found myself in this position where I'd done both sides of it at a unique moment in time.
That's what led to the conversation starting and eventually deciding to join with the idea that as much as I didn't want to step back from running Rumie day-to-day at that point, it's the largest asset manager in history. In my head I thought if we get this right, it can obviously have an extraordinary amount of impact in potentially reforming how capitalism works. Not at a micro level, which in some levels what we're doing with Rumie, even though the technology scales very rapidly, but at a really macro, systemic level that we really need at this point. All of that thought process led me to believe that this is something that I can't say no to. It's something that's a really interesting opportunity where we can drive significant change.
Chad: In your most recent essay, The Diary of a Sustainable Investor, you give a really effective, I believe, basketball analogy explaining what ESG or sustainable investing is. Could you talk us through that?
Tariq: Yes, definitely. The essay I wrote, The Secret Diary of a Sustainable Investor, it's in three parts. The first, how the system works. The second is why would I call good sportsmanship? Can't really save us. Then number three is the danger of the illusion, or these fairy tales that we can keep the status quo and achieve all our social goals without it costing us anything. In the first part, the basketball analogy is-- The idea is that competitive markets are a bit competitive sports. Which is to say that you have rules and you have referees or regulators who enforce those rules. Within those rules, the goal of the players is to maximize points. If it's basketball and it's the NBA, they've drawn lines on the court, there's a line behind which shots award three points. There's referees to make sure you don't foul people, and do this and that.
Once all those rules are understood, the players have one goal. It's to maximize points on the scoreboard, and that's what wins the game. That structure is important because it allows the players then to understand the guidelines and the guardrails, and then play a competitive game that suits everyone's interest, including the fans, because it's highly competitive and it's rewards quality play and innovation, and creativity, and teamwork, and so on. Capitalism is similar, there's this idea of a free market that somehow seems to get bandied about in 2021, even though it makes no sense at all. There is no such thing as a free market. Ask any lawyer, market is a collection of rules. Those rules, like a competitive sport, govern how the players compete. In capitalism, those rules and regulations are everything from property taxes to intellectual property rights to fines on pollution, and so on. Those govern how companies, who are like players on a field or on a court, compete, and they are focused on creating profits. Their legal and financial structures are built to maximize profits within the rules laid down in the game in front of them. That's the analogy I use to connect the dots between a competitive market and something that everyone gets, which is competitive sports.
Chad: How does ESG fit into this analogy?
Tariq: The way I'd look at it is even pre-ESG, there's this idea of externalities. Since nearly a hundred years where this economist, Arthur Pigou, started talking about the idea of externalities. The idea was that in the pursuit of private profit, firms will sometimes do something that creates a cost or a benefit to society at the same time. If you do something great and you create infrastructure or a bridge or whatever, even if people have to pay in many cases, they get things that are free, or benefits that come out of that that are positive externality. A negative externality is easy, it's pollution or something that is created by that process, for which society has to bear the costs, even if they had no part in it and didn't get any of the profits. Similarly in basketball, you might think of a negative externality as a player who's playing so aggressively that they jump into the sidelines and kick a fan in the face.
Clearly there's a negative externality from their overzealous play. In society, the fans bear the cost of that. ESG is in a sense a measurement mechanism for a number of things. At its core, it's been used as a measurement mechanism for externalities. The idea being that a company has good or bad environmental and social performance, for example, they're contributing to global warming or they're not. That ESG metric is a little bit like measuring good sportsmanship for basketball players. In the absence of any rules to allow or disallow specific activity, you can come up with a measure for good sportsmanship. Alongside that, a thesis that has now evolved in markets around ESG that says ESG is great for your long-term returns, and so we can all rely on the market doing it all by itself, which is like saying good sportsmanship, eventually scores more points on the basketball court. Again, the implication, we can rely on players to be sportsman all by themselves because it's in their own interest to winning the game.
Chad: How did BlackRock approach ESG investing?
Tariq: I think at BlackRock we took an honest attempt at trying to understand how we could do this within the confines of fiduciary duty. The idea behind fiduciary duty is this idea that there's a principal agent problem in economics, which is not going to have China to management. It's not BlackRock's findings that Larry takes money. It wasn't my money. It is all managed on behalf of clients who are generally for the most part, it's their retirement savings. Every single person, all of us included, whether or not we have trading accounts, people are investing on our behalf. Whether it's public pension plans or other things. Even the deposits in our checking account or savings account tends to be used and to loan long to issuers. We all have whether we do it ourselves or not in our name, someone investing on our behalf.
The rules say that you can't focus on social values. No, you have to focus on dollar values. Because everybody has different social values. The idea is that if you're investing on my behalf, you're legally obligated to focus on return, and tend to maximize that return. That's how BlackRock works across the board. Its the number one, first operating principles for fiduciary. That's all how all the asset managers work. The idea here is that we were trying to go in there and understand within the confines of what we're doing, which every other asset manager is really focused on performance and maximizing performance, and in line with our financial incentives of all of the people at the firm, as well as the fiduciary and legal obligations, we had to figure out a way to do more around ESG. That's where I came in and started to work on integrating ESG into all of our investment activities globally, as well as look at how we can create new products that align to specifically trying to create some kind of social impact alongside a financial return.
Chad: You eventually decide to leave BlackRock, I think only after two or three years, why? What did you find not meeting your ideals?
Tariq: The time I left, there was a personal thing I had to take care of relating to family business stuff after my father in law passed. I transitioned out over six months all on great terms. I'm still on really good terms with people there. If you deep down, I started to question what we were doing because it started to become clear to me that number one, the thesis underlying all this was incorrect, which is to say that the idea is good sportsmanship leads to more points over time. Financial jargon, that's just ESG is good for investing profits, investing activities. What I was seeing across the board from the vantage point I had was that that generally wasn't true. Most of the time you couldn't really tell if it actually had any value for investing because frankly it's hard to measure ESG the way people want to, especially the gets the social areas get difficult to measure and even it in so far as you could measure it well. It wasn't clear that it was that useful for return.
In other words, I was seeing with a vantage point of the largest asset manager in history and the biggest pool of assets to capitalism, that being responsible all by yourself. Sportsman is not necessarily linked to higher returns as a result. That was number one, number two, I found there was really no social impact being created out of any of it. It seemed to be mostly what one person called green wishing. You can say it was a greenwashing or green wishing, but it certainly seems to be a set of ideas that are hopeful at best.
That was the second piece. Then the third piece is we had a bunch of products we were releasing. For the most part they seemed to have higher fees, but they could not demonstrably show any real world impact. In the end, I looked at it and I thought, "I was bullish about this, because I thought I've done right, this can create the systemic changes and reform. At the end of it, I looked and I said, I don't think there's any real world impact being created out of any of this. At least there's very little of any. It seems to be mainly based on a bunch of narratives that don't actually seem to play out in practice unfortunately. A bunch of alluring, I would say, alluring win-win narratives that we all want to believe. Of course, if I buy a low carbon ETF and fight climate change at the same time, that certainly beats the alternative that economists are telling us, which is a carbon tax, because no one wants the one with the word "tax" in it. The reality is that it struck me as being a fairytale that I wanted to believe. From what I could see it wasn't true
Jeff: Tariq, you and I have had a conversation or two about our investment thesis, which is in a world increasingly defined by climate change, investing on the right side of that climate change line can produce superior risk-adjusted returns. It's a long te-mthesis. No question. You talk in your article about a lot of short-termism we've certainly had to deal with that as a public company.
The times I have met with the six big banks or at BlackRock. I have to remember to turn off my iPhone bullshit detector so that it doesn't go haywire. I continually talk about greenwashing and how nice it would be if it were easy. It's just there's simply nothing easy about it. Certainly you've argued for a price on carbon SF, and yet you also see a lot of progressives not trust markets, not trust a price on carbon. Any thoughts on that?
Tariq: Actually I think you zeroed in on the fundamental. The reason that there's so much urgency around this. It's not just that obviously the climate threat which is moving so fast and where we know an ounce of prevention is preferable to a pound of cure. It's actually that the system is producing such of optimal outcomes today that I would argue it endangers capitalism itself. Today over 50% of millennials don't believe in capitalism. I don't think that they would fundamentally have distrusted a carbon tax.
If we had done it at the time Obama was talking about it in the beginning or really at a time that economists started going on about it. Have not actually used the levers that we know are the ones that correct an externality. Which is to say there's a pollution, you have to fine people for it, so they have an incentive to do less of it. They find a cleaner, better way to do it. Because we haven't actually done that. I think that young folks today look at capitalism and they say, "This system just doesn't work." This is the issue. I don't think they look at it and think that capitalism can be reformed, and it can look like the post-World War II, where Richard Nixon of all people founded the EPA, they look at it and they think, we don't trust markets at all.
That includes a carbon tax and anything else. I think that it can work, but I think that public trust is being eroded over time such that a real market-based solution, which is correcting the externality to a tax, and then letting the market figure it out is also one they don't trust, because they don't trust the market at all. Everything they've seen from it seems to be based on a decades long thesis. That tells us since the eighties that free markets solve all problems, and wrongly that free markets don't need referees or rules or regulations. They just figure themselves out all by themselves, which is clearly not true.
Jeff: Even Friedman and Hayek didn't agree with that, but that has certainly been the narrative that's been sold by business.
Tariq: Absolutely. I would argue that that's less based on great understanding of capitalism or economics. Unfortunately it's just people talking their book. You're not going to solve a long term problem that’s 20 years out if you're getting paid in the next few years. The system is going to work the way we should expect it to, which is that people are going to go according to their incentives and they're going to try to frankly delay taxes and regulations that are intended to address a long-term threat, because in the near-term, marketing and lobbying to slow that regulation is how you're going to make more money.
Jeff: Is there an ESG bubble?
Tariq: I don't think that there is a bubble in the sense that I think specific companies that are aligned to addressing the climate threat would add actually benefit from greater regulation over time. On the other hand, there are a lot of ESG products that from what I can tell, have little to nothing to do with ESG. They just move stuff around and put a new label on it. In that area there could be because they're really just the same thing with a green label that is getting higher valuation even though they're not really aligned with decarbonization or other bigger social trends.
Chad: I want to move to the topic of policy solutions because we are talking here today in the midst of two very large bills, bipartisan infrastructure bill, a reconciliation bill, an effort by the Biden administration to potentially mandatory ESG-related disclosures. On that topic, the SEC recently collected comments and the SEC chief, Gary Gensler, said that the, upcoming proposal that the SEC is likely to release will call on businesses to provide qualitative and quantitative information to investors. These could include particulars about how executives manage climate-related risk, as well as more granular details about greenhouse gas emissions and the financial impact of global warming. He also signaled that disclosures may appear in the mandatory filings public companies must make to the SEC. As the SEC contemplates these sorts of regulations, and the EU has also already made moves in this direction, what do you think are the right policy steps? What disclosure should companies have to make to address the real concerns that we've discussed on greenwashing and other related concerns?
Tariq: I'd say a few things just on that. I think it's important that we have the disclosure of the type that you just mentioned. I don't think that alone is the answer and that's for a few reasons. I think under any scenario, investors should be able to access information around their investments that are material to those investments, that could have the chance of gaining or losing return. The same way that companies obviously to disclose their financials and it's audited and so on, because you would obviously need that information in order to decide to invest or not, I think that it's important that material ESG information, whether it's climate risks or it's other information in the ESG area is disclosed and done so cleanly, reasonably, regularly and in standardized format. It's not what it is now where ESG data and it's everywhere, and there's a lot of ability to massage and cherry pick.
That information is useful. I would also say two things where I'd add caveats. Number one, the ESG space is so focused on disclosure and data, and standards, and reporting that they don't actually wonder or ask, does that create any real world impact? It may be useful for an investor looking to invest, but disclosing ESG data in and of itself doesn't create real world impact. Think of it this way. Over decades now, companies have been forced to disclose CEO pay, and they've done that. Yet CEO pay has increased relative to the average industry worker. In New York people disclose calorie counts and all, but it doesn't mean that it's necessarily reduced obesity. Transparency in and of itself doesn't correct the problem unless we subscribe to an idea that the free market will self-correct, all it needs is the right information.
Obviously faced with a market failure where it's cheaper to burn fossil fuels today than we need for it to be as a society absent of carbon tax is some of the corrected externality, that's a problematic thesis because transparency launches won't get us where we need to go. I think the second point that's really important there is that regulation of the financial services industry is not the same as regulation at the real economy level. Most of the financial sector is going to follow profits. I make this joke that if drugs all became legal tomorrow, Goldman Sachs would be on the next plane to Mexico to try to get the deal for the Sinaloa Cartel's IPO. Literally the next day. Right after the IPO, that probably will be turned to them and say, "Now that you're rich, have you met our wealth management division?"
I don't mean that to knock Goldman Sachs specifically, I worked in the sector. It's just to be honest around how it works. The smart folks, they're competitive and they don't leave money on the table. That's how the system works. If there's profits to be made someone will finance it. Which is why I find divestment ridiculous, because who cares if you sell the shares in the fossil fuel company. First of all, someone else will buy them. Second of all, it's not like we're short of examples where-- Porn is an issue in society, and revenge porn, all these other things. It's not like divesting of porn companies has done anything. They're just private, and then they operate with even less scrutiny. Divesting it doesn't really do anything because the market will always find good opportunities. Obviously being a former distressed or vulture investor, I know that very well. We would look for the opportunities that everyone else ran away from because that's where we knew we could get an outsized return.
If the market and the system works such that it's efficient, it doesn't leave money on the table, and profitable opportunities will find capital, which is the way the markets do work and are supposed to work, then I don't think regulating at the financial sector what level of the ESG grade on your fund is a substitute for saying, "Wait a second. If workers are underpaying their employees to the point that like a quarter to half of them need government support to survive, maybe the answer is a minimum wage or something that corrects the problem at the real economy level." Similarly, with climate change again, you just need to tax the externality and then let the market figure it out. Unless you do that, unless you make people pay the costs of their pollution, they're going to be polluting more than we want them to. The system is going to throw more capital in the direction that we want them to.
That's why I think it's really important that all of the talk around ESG reporting doesn't turn into this mess that serves the interest of accounting companies and other ones where you've got a whole Byzantine set of new requirements, but they create little to no social impact because they're not accompanied by the real changes we need. Think of it this way, the sports analogy, this stuff is like saying we have better ways and more standardized ways to measure good sportsmanship. That's fantastic. Unfortunately, the game is such that dirty play is winning games today. Measuring good sportsmanship is great, but you still need a referee sitting there saying, "Thanks for that measurement. Now I'm penalizing the players who are doing poorly.
Jeff: Tariq, good sportsmanship in the form of ESG reporting has its flaws. You've been very eloquent on that. We've clearly got on price externalities and carbon, although maybe that gets fixed in the next couple of weeks, who knows, at least in the beginning here in the US. What about activism? My friend, Andy Karsner, was the controversial nominated director for engine number one to go on Exxon sport. Would any views on how that engagement will work?
Tariq: I am far less optimistic than anyone else about it unfortunately. I don't want to throw cold water and all the excitement, but the reality is that again, if you look at the structure of just described, if you put a bunch of different directors on the board of an oil company, and they then now have a fiduciary duty to maximize returns to shareholders, it's an oil company. Most likely that's going to mean in some way, shape, or form protecting their profit model as long as they can. I think honestly if any first year banking analysts can look at their numbers and figure out pretty quickly that for a company in that situation, what you're probably going to do is to use marketing and lobbying, you're going to have you say all the right things. I want a carbon tax. It's important. We all need it.
You can't be seeing this to be saying the opposite now. One, they're in the room, their financial incentives are probably going to be to slow it down as long as they possibly can, to water it down so it kicks in years later, it has all kinds of exceptions to certain industries, certain timelines. It's an oil company. Imagine tomorrow if I want to do gun control, and I said, "You know what, the answer is not outlawing guns, which New Zealand and Australia did, or at least have better gun control, which New Zealand and Australia did, and work to prevent mass shootings. The idea is you should put me on the board of a gun company." That's a great idea. What am I going to do when I get there, tell them to stop selling guns?
At some point, my concern with that is that as a fiduciary they're forced to maximize returns, and I'm not convinced they can do that much more than another set of directors who also have fiduciary duty besides maybe having a slightly different view around the urgency of the need for change or other things. My bigger concern would be that the noise that's created around all of that is so loud that it seems to-- This is what some of the research that I've worked on and others done last few years have shown, is it actually crowds out the ability of government to intervene.
Jeff: Your points have been very well expressed in your essays. Great, completely. Tom Friedman once talked about the green revolution. He said, "I sat in a bathtub in Beirut when there was an actual revolution going on with bullets flying. Revolutions are painful." Not to steal your story, but every time there's a good news article, it diminishes the urgency with which serious efforts can get accelerated.
Tariq: It serves as a distraction. If you look at the last five years of ESG stories, I was in the middle of the machine during a lot of them. they all sound wonderful and nice, and ESG talk is growing, and ESG reporting and data's growing, and ESG assets are growing. They're growing alongside carbon emissions and inequality, and all of the things that they're meant to address, because for the most part, having seen the mechanics up close, there's no link between the things. The concern I have is a lot of these stories are just a continuing trend to feel good things that enable us to think that we're creating systemic reforms. Systemic reforms can't be created on a one-by-one basis. The idea of going proxy fight by the proxy fight, oil company to oil company, as a way to fight climate change, it's ludicrous if you actually stop and think about it.
It's like playing whack-a-mole against the markets where there's thousands of moles. Obviously a systemic reform needs to come from the government. If you have stories like this that I think are heavily oversold and over-hyped, then you run the risk that you actually destroy the political foundation upon which you would build real government reform. Again, it's selling people a win-win fantasy, no one wants a carbon tax. Let's be honest, who wants anything with the word tax in it? We all claim to believe the science. Somehow we're ignoring that our own experts societal, economists, and others are saying, no, the only solution is systemic because it has to be led by the government. It has to be a carbon tax, it has to be other things like that. Engine number one versus Exxon is a really nice story. I fear that over the long-term it will be viewed more as a distraction from the real change we need in anything else.
Jeff: I think I generally agree with you. The only aspect that I'm interested in learning more about is the engineering capability of an Exxon or a Chevron. If we're actually going to get serious about carbon capture and storage, which has its justified reservations. I think in any scenario we do have to sequester carbon. There aren't spare engineering companies that can solve those deep geological problems. I'm hopeful that one, there's a profit for oil companies to participate in sequestration of carbon. I'm hopeful that some activism will help. Neither of us is very optimistic about any of these things until we get price signals that work.
Tariq: I think that's right. Things will move in the right direction. We'll see advances in technology, more capital going in, great stories about things. That's all fine, but it can be distracting unless we step back and remember that it's not about the fact that we're making progress. Obviously, we're making progress. The question is it fast enough? We know the numbers that we're not going as fast as we need to. We need to do something. I think that has to come as a push at a systemic level, both to hold down carbon emissions by a whole set of measures that look a little bit like flattening the COVID-19 infections curve. They have to come through government. Just like with COVID-19, a very aggressive effort to find new technologies.
We saw with Operation Warp Speed, what can be done if the government focuses an entire sector with direct R&D funding, with expedited approval processes, with pre-orders. Then you get the ingenuity of the private sector focused especially on the challenges we need, but that requires the economics to make sense. To do that for the climate in a way that addresses the problem that we need addressed, it's going to require a push that looks very similar to what we did with COVID-19.
Chad: Before we moved to the hot seat, I'd like to return to Rumie because you're back leading Rumie now, has been for the last few years. That's your education technology non-profit. What initiatives are you most excited about right now?
Tariq: One of the things that we pioneered during the pandemic that has done really well is something called micro-learning. The idea is that anyone can learn on their phone or on their computer, but people don't learn in a digital manner the way they learn in the real world. In the real world, you're a captive audience and you're stuck in a classroom. If the lecture is boring, you're stuck in the lecture. If you're watching that same lecture on your smartphone, in your bedroom, and you're a kid, you're going to switch to TikTok in five seconds if that lecture's boring. If you're not thinking of it, I guarantee TikTok will send you a notification at exactly the right time, because they're effectively good at hacking your attention.
We had been working for years in a market where people can only use basic mobile phones. We had figured out that you need to build it for that form factor. We evolved towards five or six-minute micro-learning courses that are all mobile-first, and that have between 20% to 40% improvement in learning retention, which is incredible, but also is just more byte-sized, and that people use more. A lot of the data in the US shows that people are actually taking time away from social media to use micro-learning or bytes as we call them at rumie.org, which is great. The second thing is that we're actually using it globally and so today in local languages, Dari and Pashto, we actually have been running, we started the program in 2017 and now we're scaling them up rapidly, programs in Afghanistan for girls and women's education.
It's extraordinary that if you have a country that has very little infrastructure, and on top of that you have a situation on the ground now where culturally it's harder for women, it was already difficult for them, girls and women to learn, but you have an apparatus of mobile phones, and today over 80% of Afghanistan's have access to a mobile phone. You have an ability to bring free learning to the people who most vulnerable in a way that is safe, it works from anywhere, it's free. That's what we've been doing in Afghanistan, and our growing program's now for hundreds of thousands of women and girls whose options to learn have suddenly been rapidly curtailed. Because we're working with the large mobile operator in the country, we're just basically now fundraising to grow content and distribution so that we can address a need that has spiked since the country unfortunately fell apart over summer.
Chad: Absolutely. That sounds amazing. I really hope your technology solution can overcome the significant challenges that women and girls face in Afghanistan. Well, we're almost done. We have this tradition here at Climate Positive where we like to ask our guests a series of rapid-fire lightning round questions. We call this the hot seat. The best feedback I ever rejected is?
Tariq: To blindly follow your passion. If I didn't follow that, I'd be trying out to play for Manchester United right now and failing. Passion alone sadly isn't always enough.
Chad: You're a pragmatic idealist, right?
Tariq: Exactly.
Chad: Success is?
Tariq: I think it's around personal fulfillment and happiness. I think, to be honest, that's always someone has to decide it for themselves. I found myself living someone else's dream for years. I think it's very personal.
Chad: I will never?
Tariq: Compromise values and integrity. I think we have to have something that we believe in and focus on. You can live comfortably while doing that.
Chad: The most insightful book or article I read over the last month is?
Tariq: I'll say a recent book, because I'm not sure if I've had a chance to read a full book in the last month, would probably be Bob Shiller, the economist's Narrative economics, which I read not long ago. I felt like influencing some sense of me trying to spark a debate around the narratives that underlie our economic system.
Chad: Tupac or Biggie?
Tariq: I actually would go for Nas. If I had to pick between those two, I would go for Tupac. I have a strong preference for-- Rappers do have a deep social or political viewpoint to share.
Chad: Toronto, Silicon valley, or New York?
Tariq: It's a tough one. I'm gonna have to go with Toronto because I'm from the Sixth. I'm loyal even though I've spent time living in all of them.
Chad: Then, to me climate positive means?
Tariq: I think climate positive means that you're actually helping the climate, which means that you're net negative in the sense that you've been actually sucking carbon out of the atmosphere. I'm not sure if that's what everybody means. Again, this is the challenge with all of these green terms, right? Anyone can say whatever they want. You do the smallest thing, you're climate positive. I think it ought to mean that you're actually contributing to reducing the problem rather than just not adding to it.
Chad: Excellent. I think we definitely agree on that point.
Jeff: We do indeed. Tariq, you're an inspiration. Thank you.
Chad: Thank you for joining us today, Tariq. It's been a really great discussion.
Tariq: Likewise, great chatting with you both.
Chad: Climate Positive is produced by Hannon Armstrong and David Benjamin Sound. If you like what you heard today, please share the show with friend and leave us a comment and a rating on our show page.
You can send us show and guest suggestions by tweeting at us @HannonArmstrong or reach us via email at climatepositive@hannonarmstrong.com
I'm Chad Reed
And this is Climate Positive.