Recently I had the opportunity to interview the CIO of a very successful international investment fund about climate change. The name remains confidential.

How would you characterize the US economic leadership concerning climate change?

To simplify, we have coalesced into three groups: big oil and gas, a status quo group, and supporters of climate improvement.

And where are you?

I moved from the status quo to the supporters' group long ago. The evidence of the change is overwhelming, and the sooner we act, the lower the costs. Congress has passed the Inflation Reduction Act, and locally many states and cities are engaged in mitigation, adaptation, and planning for climate migration.

How would you describe the status quo group?

No intelligent person denies the existence of climate change. The status quo group is the free rider and is willing to let the others do the heavy lifting in the US and abroad. They remain attached to protecting themselves and in particular their model of consumption and wealth creation. They fight the idea of the circular economy, any change in the growth model, and climate disclosure. Their narrative is outdated, and they are losing adherents. I support measures that favor their transition, like training and benefits to fossil fuel workers. Perhaps extra subsidies are appropriate for their investments in solar energy production.

What is your narrative?

We are constructing a new story that is unfolding. It is a battle between two natures, one of the physics of climate change, and the other of humans, which includes a heavy dose of selfishness and short-sightedness. In the US, we achieved the political miracle of the Inflation Reduction Act. However, up to now, the worst side of human nature has triumphed over physics. We lost thirty years or more with the lies and misinformation campaign of big oil and gas. My narrative is that climate change is a change in capitalism. I recognize that we come with all the sins of the past. The bad part is within us, but we can improve and nudge our narrative as well as our actions in the right direction.

This sounds slow, isn’t our house on fire?

Yes, Greta Thunberg is correct, but our narratives do not change overnight; they evolve. Accepting limits is challenging, especially for the alpha male. I believe we need to get our domestic situation on the path to carbon neutrality and agree upon how to help the southern part of the world solve a problem created primarily by the north. And this is within the context of significant economic disparities between and within nations.

How can we speed things up?

In the US, we should do everything to facilitate the investments of the Inflation Reduction Act. I agree with the idea of using state and local policies to unlock the benefits in the electricity sector. This approach involves public utility commissions in planning; state legislatures requiring utilities to increase their use of renewables, establishing transmission authorities; and coordination among state energy offices.

Many of the obstacles to be overcome are at the local level. For example, one needs local awareness campaigns, supporters that go to town meetings, marketers that collaborate in reducing the cost of customer contacts, firms that solicit the interconnect queues with the local utility, citizens that run for posts on zoning boards, and experts to testify at utility and city meetings. Naturally the operating companies require a minimum economy of scale to make bulk orders of equipment.

I also emphasize the rights of investors and consumers. As an investor, I insist on the right to know a company’s GHG emissions and how it manages its climate risks. Known as climate disclosure, this has been operating on a volunteer basis for years. The SEC proposes requiring climate disclosure for companies that trade on the NYSE and NASDAQ. As a consumer, I have the right to be informed of the durability and repairability of my potential purchases. I may choose the product with the lowest lifespan, the more durable one, or the one that can be easily repaired. I have the right to make an informed decision.

What about taxing the rich?

If you can do it, fine, but both parties love their super PACs. Welcome to the plutocracy; we have won the class war. I admit wealth and income inequality have gone too far in the US. Taxing the rich, against my own interests, could be effective. Pickett advocates this. I do not know how likely passing such legislation might be.

What can the financial industry do to help the climate transition?

I like green bonds; they are appropriate for infrastructure and energy efficiency. They can be corporate (for investments inside the company) or federal, state, and municipal (for energy savings and electric infrastructure). America's unique municipal bond market enabled us to build half of our infrastructure. Remember, the Erie Canal and the Golden Gate Bridge were constructed with municipal bonds. And institutional investors, such as pension funds, should be encouraged to invest in green bonds.

Traditional corporate investments in alternative energies will also work. For example, the utility NextEra Energy is doing very well. Generally, the increase in global assets, mostly in real estate, could be deferred to constructing these new resources. We must continue to press for investors’ and consumers’ rights.

At the international level, green bonds also are issued by the World Bank, national governments, and others. They represent an investment opportunity.

Do you see economic problems?

A critical economic difficulty is the possibility of a global recession in 2023. The World Bank reports that as central banks worldwide simultaneously hike interest rates in response to inflation, the world may be edging toward a recession in 2023 with a series of financial crises in emerging markets and developing economies that would do them lasting harm. Global GDP growth could slow to 0.5 percent in 2023. For the US, this could mean that the market bottoms in 2023, although the outlook is unclear. This situation is aggravated by the Ukraine war, resulting in higher prices and a temporary return to a greater use of fossil fuel plants in Europe. It represents a setback for climate improvement.

An essential climate issue, as I mentioned, is how to balance what the northern countries have caused with their historical development and accompanying production of GHGs with what the southern world will experience in terms of climate damage with fewer resources to adapt and mitigate. For the first time in many years, COP27 approved establishing a fund to finance climate losses and damages in developing countries. This breakthrough came after an agreement that no nation would be legally liable for climate damages. Next year COP will discuss how to set up the loss and damages fund.

Do you see other changes coming from COP27?

The Prime Minister of Barbados, Mia Mottley, presented her Bridgetown Initiative that seeks to overhaul how climate finance flows to the south. A key element of the plan, which I favor, is the suspension of debt for countries hit by climate disasters. French President Emmanuel Macron backed this new push that would involve trillions of dollars. This policy begins to unite climate change and development. Treasury Secretary Janet Yellen had previously called on the World Bank to draft a roadmap by the end of the year to then use to push reform efforts at other development banks.

The long-term material needs of the transition fascinate me. With the conversion of fossil fuels to electricity, the growth in photovoltaics and wind turbines, and the increase in electric cars, the demand for all the required materials will soar. Prices have already moved but investing in this long-term trend is an opportunity.

This is encouraging. My last question: do you ever feel that the American dream and greatness are declining?

Well, those are two entirely different matters. The American dream was never completely true. People are not born equal, and the country is not providing equal opportunity. The problems of racism, gender inequality, and exaggerated income differences remain unresolved. Essential sectors such as health care and education cost twice what they should.

Despite the imperfections, our greatness is still alive; who can do without us? Our military budget is equal to that of the next six top countries. Our economic strength is unquestioned, maybe even too muscular. We have a lot of oligopolies out there.

I am old-fashioned and believe in competition.

Thanks for your observations.