President-elect Joe Biden’s selection of Brian Deese, a senior official from BlackRock, to head the White House National Economic Council, has drawn wide praise from the people who know him.
“Brian will be the most focused on climate change of any top economic official ever,” said Jason Furman, who led the Council of Economic Advisers for President Barack Obama. “He sees it as an integral part of an overall economic strategy.”
Deese and BlackRock have, more than anyone else, popularized the idea that investors should measure environmental, social, and governance performance, or “ESG.”
And yet BlackRock has for years promoted renewables and fossil fuels over nuclear energy. After the 2011 Fukushima nuclear accident in Japan, BlackRock promoted coal-burning and renewables. “One of our bigger positions in BlackRock World Mining Trust and BGF World Mining Fund BGF is in coal,” noted a BlackRock manager in 2011
And in April, BlackRock raised $5 billion for its Global Energy & Power Infrastructure Fund which invested in businesses connected with “renewable energy (solar, wind, hydro and waste-to-energy) and… natural gas.”
BlackRock, which is known as a “shadow bank,” due to its unique institutional arrangement which allows it to avoid the regulations that banks face, has a long history of hiring former government employees, giving them large salaries, and returning them to public service.
“Links to leaders in both parties have enabled BlackRock to successfully fight designation as a systemically important financial institution,” noted The American Prospect, “keeping its trillions outside the Dodd-Frank regulatory perimeter.”
In a video last year Deese highlighted solar panels and batteries as top investment opportunities. “The utility of the future may look very different in an environment where most of the incumbent source of power is coming from solar and intermittent sources.”
What Deese didn’t mention was that all of that additional storage and other costs associated with renewables drive up electricity prices without creating good jobs. Consider the largest new solar farm in the United States. It will create just sixpermanent jobs, each earning $43,000 per year. By contrast, an average two-reactor nuclear plant employs 1,200 people.
Much of of the $1 billion that McDonald’s and others will invest in the solar farm will be sent to China to purchase solar panels. When those Chinese solar panels arrive in the United States they will simply will be unboxed and spread over 300 – 400 times more land than a natural gas or nuclear plant requires.
While the cost of solar panels has declined, thanks to economies of scale in Chinese factories, the cost of electricity coming from renewables, which require significant amounts of new transmission lines and storage, keeps rising. California saw its electricity rates rise 7 times more than the rest of the U.S. between 2011 and 2019, due principally to the deployment of renewables and enabling equipment.
Under ESG criteria, nuclear energy should rank highest, since nuclear plants require just one-quarter of one percent of the land as industrial solar and wind projects, and produce next to no air and water pollution.
By contrast, solar and wind projects should rank very low on ESG criteria. The large land use requirements of solar and wind projects are triggering grassroots resistance around the world, from Mayan Indians in Mexico to birders in Taiwan to conservationists in India.
A human rights group last June documented 197 allegations of human-rights violations, including killings, by renewable energy developers. In 2019 there were at least 47 attacks, violent and legal, against individuals who raised concerns about human rights violations by the renewable energy industry.
As for public subsidies for energy efficiency, a study by an Obama administration economist found that they cost twice as much as they returned in energy savings. But public spending on efficiency is a win for investors, said Deese.
“Retrofitting is uncomfortable, and people live in structures they don’t own,” acknowledged Deese. But, he added, “The ability to use capital-lite technology like software and data to significantly reduce the energy use of the built environment is a huge investment opportunity.”
Today, the Democrats’ “Build Back Better” mantra echoes talking points used by Deese and BlackRock to pitch “climate resilient” infrastructure. “There’s going to be a big urban defense and global defense bill,” said Deese. “It does create enormous opportunity for how do we make those investments smarter and how do we build back in more resilient ways.”
Infrastructure projects return higher yields than bonds or stocks. Fees are often three times higher than from fixed-income investments. In his promotional video, Deese promoted infrastructure investment not just for renewable energy but also for climate adaptation to avoid “climate refugees in the United States.”
And BlackRock is after investments all over the world. “The opportunity for climate resilient infrastructure globally is quite significant,” said Deese. “At Blackrock we’re working on strategies to define an entire category of climate infrastructure in emerging markets as an investable asset class.”
In the past, the World Bank funded infrastructure like roads, flood control, water purification, and power plants in poor nations, with low-cost loans. Today, shadow banks like BlackRock seek to provide that financing — at a far higher cost to taxpayers.
But the ambitions of Deese and BlackRock are larger than just infrastructure. “When you think about the global macro-trend, people traditionally think about that affecting energy,” he said. “but globally that transition to a low-carbon economy across every part of the economy. Transportation. The ability to control everything in your home from your smart phone to reduce resources consumption.”
In his interview with the New York Times, President-elect Biden acknowledged that his climate ambitions may be reduced to putting more money into R&D to experiment with new battery types and nuclear reactor designs — a far cry from the $2 trillion he promised to spend during the campaign.
Even so, the Biden Administration is also expected to seek new climate regulations and infrastructure, areas where Deese can bring the expertise he gained at BlackRock.
“He is very effective at whatever he sets his mind to,” said Fuhrman, “so will help the administration creatively execute using all of its levers even if it cannot get legislation passed.”