Too Green to Fail

On the Just Transition and the chickens that never came home to roost

‘People are taking the p*ss out of you every day.’

-Banksy

‘Capitalism is about failure.’

-Nassim Nicholas Taleb

I don’t do social media, except for a very infrequently-used LinkedIn account. But LinkedIn is bad enough. Lately, it seems that whenever I log into the site, I find myself being assailed by adverts from Lloyds Bank, which is desperately keen that I should hear about something called the ‘Just Transition’ and Lloyds’ own role in ‘turning vision to action’ in this regard.

What is this ‘Just Transition’? The definition that you see everywhere in global governance circles (such as the website of International Labour Organisation) reads as follows:

A Just Transition means greening the economy in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities and leaving no one behind.

The idea here is that we are to escape from ‘silos in our mind [sic]’ between ‘environmental and climate issues’ and ‘social justice’, and recognise them to be one and the same thing. Anybody who insists that there are trade-offs to be made between going green and economic development for the world’s poor is just being a shortsighted and pedantic ninny. We can in fact have all of our cakes and eat them; we can transition away from using fossil fuels and get equality and get rapid economic development as well. In fact, the implication often goes, the three things are necessarily mutually reinforcing.

Nobody can actually explain in concrete terms exactly how they reinforce one another, of course; apparently it’s supposed to happen through things like ‘new economic models’ and ‘new metrics’. And when one burrows down into the detail concerning what these new economic models and metrics really are, one finds only vapidity: a word salad of statements like ‘broad range of stakeholders’, ‘timely, respectful and active dialogue’ and ‘informed, participatory engagement that doesn't slow the process down, but builds buy-in.’ The idea is to avoid letting on to the general public that there are hard choices to be made when it comes to greening the economy, by insisting at every turn that there are absolutely no conceivable downsides. This gives the ‘Just Transition’ literature a quality that is a bit like old gossamer in a dark attic; when exposed to the slightest puff of wind it dissipates into nothingness, leaving only emptiness behind.

But picking holes in the concept of the Just Transition is like shooting fish in a barrel, and can wait for another day. The point is that, however inane the concept might be, Lloyds, it seems, is going all in on it. The bank has put together a ‘Just Transition Hub’ as well as hosting various conferences on the subject, and seems to be trying to position itself at the forefront of high street banks when it comes to sustainability issues.

On the one hand, this is all pretty guileless; a crass and desperate attempt to co-opt environmentalism and associate a brand with mealy-mouthed and ultimately platitudinous niceness. It is a great shame (and one of the strangest aspects of the generalised death of old left politics in the West) that the No Logo critique of advertising has fallen into such abeyance in the internet age; Naomi Klein ought really to be out there having a field day with all of this, but lately, of course, she is mostly writing about how lockdown sceptics are among ‘the most dangerous men on the planet’ and revealing herself to be intensely relaxed about big corporations making hay so long as the word ‘green’ is in the bumf somewhere.

But there is something more sinister going on here than simple greenwashing. Take a look, for example, at this statement by somebody called Chinyelu Oranefo, the ‘Director, Sustainability & ESG Finance’ at Lloyds:

We have to ensure the next transition is Just, so that all communities and stakeholders not only survive, but also thrive - not just because it’s the right thing to do but because it’s the transition approach which creates the ‘least friction’ and so is the pathway most likely to achieve success.

Apparently, ‘whilst previous energy transitions in the UK – such as the transition from coal to gas in the 1980s - resulted in the UK reducing its emissions by 50%, it also resulted in the disruption of communities, particularly in the north of England.’ (You don’t say.) But don’t worry - Oranefo ‘is certain that a better result can be achieved in the transition to a net zero economy across all regions where communities, workers and supply chains are not left behind.’ So that’s alright then. The details can wait for later.

Does it not strike you as odd (perhaps a better way of putting it would be: does it not strike you as odd that nobody else seems to think it odd?) to hear a Director of a large bank talking in this way - as though she is a politician? What earthly business is it of Lloyds whether or not we make a 'Just’ (I am being a good boy and using the capital letter) transition, whether this is the ‘transition approach…most likely to achieve success’, and whether indeed we make any transition at all in the first place? We have become used to business leaders behaving in this way, like po-faced sixth-formers lecturing their parents about the political issues of the day, but sometimes it is important to take stock and remind oneself exactly how impudent it all is. Lloyds is a high street bank; its Directors are nothing but a bunch of 21st century Captain Mainwarings; they should be sitting in their offices eating currant buns and drinking Earl Grey tea; they are the last people on earth that anybody should listen to about anything except perhaps financial management.

And the punchline, as UK citizens will recall, is that even on the financial management side, that ‘perhaps’ is a very big one. This is the same Lloyds Bank, lest anyone forget, that had to be bailed-out to the tune of £20.3 billion by the UK taxpayer in 2009 as a result of its elementary failure to do the bare minimum expected of a large financial institution and keep itself adequately capitalised. We UK citizens are still down by around £3 billion on that bail-out (which really makes it a bail-in for average Joes like you or I); and yet here we are 15 years later being hectored by the descendants of the Directors who oversaw that debacle, and being told by them that the entire economy should be rebuilt from the ground up - and with their input.

It would be funny were it not so galling. But we shouldn’t lose sight of what is going on, here. The public may all now have forgotten about the financial crisis of 2007-2008 and its aftermath. (‘The struggle of man against power is the struggle of memory against forgetting,’ as Milan Kundera once, Cassandra-like, warned us.) But I’m not sure that the banks have. In fact, while there seem to have been few, if any, lessons learned at all by the populace of the West from the experience of that period (the major exception perhaps being that the house always wins), the banks will have noted down a ‘key takeaway’. And it is this: if you can plausibly bill your own importance as being ‘systemic’, then it turns out you’ll be seen as too big to fail and will be very nicely insulated by the taxpayer from the slings and arrows of outrageous fortune - not to mention your own incompetence. The idea that if banks like RBS or Lloyds went bust the financial system would be blasted to smithereens and we would end up having to haggle with each other using seashells and hacksilver was always utter bunk, but it proved to be remarkably convincing in practice. And, it seems, ‘financing the Just Transition’ is another whizzo way of presenting oneself as being much more integral to everything than one actually us.

Hence, Oranefo is keen to remind us that ‘Corporates have a key role to play in facilitating a Just Transition.’ And not just ‘corporates’ - finance, which will be the very ‘enabler’ of the entire project. But what is striking about the material produced by Lloyds and other financial institutions in this regard is the way it marries together the worlds of finance and government. Hence, Ingrid Holmes, Executive Director of the Green Finance Initiative, tells us that a Just Transition will require not just private capital but ‘a smarter use of government money, clever use of incentives and a whole suite of new products from banks and other providers that enable people to be part of the green transition.’

It’s all about the public-private partnerships, in other words, which handily often seem to end up meaning that public money provides the safety net when things go awry. ‘If we accept that there are Just Transition goals that today’s market won’t support on their own, then we need to find mechanisms to ensure they are supported,’ Holmes blithely goes on. (Read: taxpayer money.) She continues: ‘We also need to see more innovation in the use of public finance so that the UK Infrastructure Bank, for example, might provide a first loss guarantee to enable the rollout of property-linked finance to people with a range of income levels.’ Ah yes, government intervention to enable the rollout of property-linked finance to people with a range of income levels - we know how that turns out. David Hickey, a sustainability something or other at BlackRock, makes it all charmingly explicit:

‘Clearly, there are challenges…For institutional investors, a project has to have a competitive risk/return profile because they have a fiduciary responsibility…That won’t always be the case with projects that prioritise Just Transition goals. But that’s where philanthropists, retail investors or government support [emphasis added] can play a role.’

One suspects the role that is envisaged is a pretty big one.

There is a word for all of this, and it isn’t ‘capitalism’, but ‘corporatism’. (We might also try ‘cronyism’ for size.) And so it is that we find people who are ostensibly supposed to be the epigones of capitalism almost clamouring for more government intervention and regulation. Oranefo, for example, calls out for ‘checks and balances around how capital is provided’ for environmental projects, while Sam Gardner, Head of Climate Change & Sustainability for ScottishPower, welcomes the setting of rules on company reporting by HM Treasury’s new Transition Plan Taskforce. Mike Emmerich, Founding Director of a company called Metro Dynamics (which works with Lloyds ‘on green infrastructure’) meanwhile tells us that ‘the government needs to ensure the right frameworks and policies are in place’ and that ‘we need government to be present at the table’.

A couple of the key messages of the Lloyds Bank Just Transition Conference (disclaimer: not necessarily the views of Lloyds itself) summarise all of this quite neatly:

Government policy will do much to set the terms of debate, but companies, investors and other stakeholders must embrace the Just Transition and consider what it means for how they operate….A Just Transition is aligned with large corporates’ growing sense of purpose, as well as offering attractive business opportunities.

From ‘government policy’ to ‘attractive business opportunities’ in just a few short sentences; that is the name of the game, of course, and one is immediately reminded, reading all of this guff, of Adam Smith’s old saw: ‘People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public.’ Everybody in the world of finance, it seems, is busily identifying brilliant wheezes through which to present themselves as ‘systemic’ in this new and special way: as the ‘enablers’ of net zero and as integral elements of the only means through which to fund the gigantic upheaval in the economy which it will necessarily require. Once they were too big to fail - ideally now they will also be too green to fail - and will be able to go on identifying ‘attractive business opportunities’ in perpetuity.¹

All of this, of course, serves to remind us that we have not yet even begun to reckon with what happened in the financial crisis of 2007/2008 and its aftermath, or the change in culture to which it gave rise - both on what one might call the demand side of finance and the supply side of government. On the one hand, financial institutions learned two very important lessons during that period - that government was terrified of bank runs, and that politicians would be able to find vast sums from behind sofas to fund almost any amount of ‘recapitalisation’. On the other hand, government learned to stop worrying and love a good splurge; in 1996, President Clinton had fretted about spending $25 billion bailing out the Mexican government during the peso crisis, but that was mere pocket change in comparison to the sums spent during the aftermath of the Great Financial Crisis: $800 billion of stimulus in 2008 and then another $800 billion or so a year later. (In the UK, the sums were just as eye watering for all that they were of a smaller scale - some £137 billion on bank rescue packages alone.)

This, to deploy an overused word, created a truly toxic mixture of incentives, with both banks and governments necessarily drawing the conclusions that: a) one doesn’t really have to be all that careful about investment decisions, and b) national debt is a notional concept that, at the very worst, can be dealt with by some other unlucky people who haven’t been born yet, and long after you are dead.

This is the world which we now inhabit - as the up to £410 billion which the UK government alone spent on financing lockdowns in 2020-21 aptly demonstrates - and it is a world which lacks any sensible way to process what exactly is wrong with the entire Just Transition concept. To a people who have been trained into thinking that government can simply conjure up money to solve problems and to a financial sector who increasingly sees its future chiefly in suckling at the teat of the State, the whole thing will obviously make perfect sense - just like it makes perfect sense for the UK DWP’s disability benefits caseload to reach 7 million in 2027/28 (up from 3 million in 1995/96), and for benefit expenditure in the UK overall to have roughly trebled since 1978. All that the rest of us can do, watching in dismay from the sidelines and wondering who is going to be putting bread on the table in thirty years’ time, is to console ourselves with another old economist’s line: ‘if something cannot go on forever, it will stop’. And when you eat enough cakes, eventually you will find out you don’t have any left.

1. I leave to one side the obvious point that ‘attractive business opportunities’ don’t normally need complex financial innovations created in dialogue with government in order to find investment - and if they do, it’s probably a sign that they’re not actually very attractive for the people who have to ultimately foot the bill. But nobody in the Just Transition literature mentions this, because it would mean admitting that the entire edifice is built on cakeism.