443. A Sneak Peek at Biden’s Top Economist

Episode Summary

Executive Summary: The episode reframes Brian Deese’s rise from Obama climate/economic policymaker to BlackRock sustainability chief and incoming Biden NEC director, using an old interview to explore his view that climate risk is economic risk. It examines ESG/sustainable investing, BlackRock’s market power, the debate over divestment vs. engagement, and how policy, defaults, and consumer behavior may accelerate a shift toward a low-carbon, circular economy.

Main Topics: Brian Deese’s appointment to the Biden NEC (Priority: 5/5): The show opens by contextualizing Deese’s move from BlackRock to the National Economic Council and why his climate expertise matters as Biden links climate policy to economic policy. BlackRock’s scale and influence (Priority: 5/5): The transcript emphasizes BlackRock’s enormous assets under management and the leverage that gives it over corporate behavior, markets, and ESG standards. What sustainable investing means (Priority: 4/5): Deese defines sustainability investing as integrating environmental, social, and governance factors into traditional investing to improve long-term returns rather than creating a separate moralized investment category. Climate risk as financial risk (Priority: 5/5): A major argument is that climate change is a slow-moving, underpriced risk that markets do not fully capture, creating opportunities for investors who account for it earlier. Divestment, engagement, and corporate transition (Priority: 4/5): The discussion contrasts simplistic divestment with a more nuanced strategy of improving companies within sectors, especially fossil fuels, by measuring relative readiness for transition. Circular economy, consumer behavior, and COVID (Priority: 4/5): The interview explores how the pandemic, plastic use, nudges, and circular-economy models may reshape production and consumption and influence future investing and policy.

Key Arguments: Brian Deese’s appointment signals that climate policy is being treated as central economic policy, not a side issue. BlackRock’s scale means its sustainability preferences can influence corporate conduct and capital allocation across markets. Sustainable investing is presented as an enhancement to traditional investing, using ESG data to identify better long-term performers. Climate change is a long-term, slow-moving risk that efficient markets often fail to price promptly. Engagement and default settings can shift capital toward sustainable options without requiring outright divestment. Within industries, investors should distinguish leaders from laggards rather than simply exclude whole sectors. COVID-era disruptions may accelerate interest in circular-economy business models and lower-carbon investment strategies. Consumer nudges, especially among younger investors, may be more durable than heavy-handed regulation in changing behavior.

Data Points: BlackRock assets under management: about $7 trillion - Describing BlackRock’s scale and market influence BlackRock ownership in S&P 500 companies: at least a 5% stake in more than 97% of S&P 500 companies - Illustrating BlackRock’s leverage over corporate governance Share of global stock markets: roughly 8% - Estimated reach of BlackRock’s holdings Directors voted against or withheld from: 4,800 directors - BlackRock’s 2020 climate/sustainability accountability actions Companies affected by those votes: 2,700 companies - BlackRock’s voting activity on sustainability practices Youngest NEC directors: one of the youngest in history - Biden’s description of Brian Deese’s NEC appointment Deese age: 42 years old - Noting his relative youth for the NEC role Obama administration tenure: 8 years - Deese’s service in the Obama White House Auto industry rescue headline: 31-year-old in charge of dismantling GM - Reference to Deese’s role during the financial crisis Sustainable strategies growth base: about $1.08 trillion - Industry-wide assets in sustainable strategies, described as growth from a low base Index funds with sustainable variants outperforming: 94% - In the first quarter of the year, sustainable variants beat traditional benchmarks Plastic bag usage lifetime: 12 minutes - Example used to illustrate disposable consumption patterns Phishing attack increase: almost 100% - Rise in phishing attacks against dispersed office networks in 2020 Recycling share: 15% or some odd - Used to illustrate the low recycling rate in the current consumption model

Pivotal Quotes: "If we're going to tackle the climate challenge, we need to make sure that solutions are woven into every output of our policymaking." — Joe Biden: Biden explaining why Deese was chosen to lead the NEC "Our admonition is that climate risk is investment risk, that markets have not figured out how to effectively incorporate this." — Brian Deese: Explaining BlackRock’s sustainable investing rationale "The typical plastic bag gets used for 12 minutes." — Brian Deese: Discussing disposable consumption and the need to change input economics

Implications: The episode suggests climate expertise is becoming core economic governance, while investors increasingly shape corporate behavior through ESG, defaults, and engagement. Listeners should expect more policy-market integration around decarbonization and circular-economy models.