Billionaire Tom Steyer recalls a dinner at the U.S. Treasury in Washington with two senior department officials and six money managers. It was August 2012, and the meal was part of an effort by the agency to keep up with what the financial community was worrying about. The diners discussed China’s slowdown, Federal Reserve policy and other trends affecting the U.S. economy.
Steyer says they were overlooking the biggest game changer of all. He told the group the country would have to overhaul its energy policy to address greenhouse gas emissions, Bloomberg Markets magazine will report in its November issue. His fellow guests were skeptical.
“It’s like I was saying that what’s going to make a difference in the economy is unicorns,” says Steyer, 56, the founder of Farallon Capital Management LLC, a San Francisco hedge-fund firm with about $20 billion in assets. He declines to name the other people present because the meeting was off the record but says they control a lot of money. “I thought to myself: These guys need to be made aware of the risks here.”
So in December, Steyer ended his 26-year career as a hedge-fund manager and set out to make an economic case for addressing climate change. He wasn’t the only person from the financial world to have this idea: Henry Paulson, Treasury secretary from 2006 to 2009 and a longtime conservationist, and Michael Bloomberg, the outgoing mayor of New York, which had suffered the costliest hurricane damage in its history, were also plotting how to reframe the issue.
Catalyst for Action
The three men agreed to join forces to persuade investors, policy makers and the public that the consequences of unchecked carbon emissions would eventually blow away whatever short-term costs are involved in curbing the pollution.
They’re funding and co-chairing a study to calculate just how much economic risk American industries and communities face as a warming atmosphere generates more storms, droughts, floods and extreme heat. Robert Rubin, who served as Treasury secretary from 1995 to 1999, and former Secretary of State George Shultz have signed on as advisers.
“Climate change is every bit as big a risk to our economy as it is to the environment,” says Paulson, 67, who was chairman and chief executive officer of Goldman Sachs Group Inc. before he went to Washington. “With any complex issue, we can never know with certainty what the timing and the impact will be, but we know from the data that the climate risk is very real. If we quantify its economic impact, I think that will be a catalyst for action.”
The costs of a warming atmosphere are already mounting as the planet undergoes a geophysical shift so profound it will alter coastlines, rainfall cycles and the productivity of arable land.
Carbon dioxide, the principal gas heating up the atmosphere, hit a 3-million-year high in May, according to data collected at the National Oceanic and Atmospheric Administration monitoring station on the island of Hawaii.