The Economist February 12th 2022 Leaders 9mining outfits, are selling their most polluting assets in order to
please esg investors and meet their carbonreduction targets.
But those oil wells and coal mines are not being shut down.
Instead they are being bought by private companies and
funds that have alternative sources of capital and stay out of the
limelight. Little wonder: owning dirty assets may require a thick
skin, but it is likely to be profitable. Privateequity firms have
snapped up $60bnworth of fossilfuellinked assets in the past
two years alone, from shale fields to pipelines. Their appetite
may grow as turmoil around Ukraine sends oil prices back up
over $90 a barrel.
This retreat to private ownership is part of a
broader global trend. More opaque institutions
are taking over dirty assets. Stateowned oil
giants such as Saudi Aramco do not have to wor
ry overmuch what ethical investors think. Nor
do the governmentrun firms and banks that
own or finance a vast archipelago of coalpower
projects across Asia.
The shift to the shadows is problematic for
two main reasons. First, the claims being made by listed firms
(and esgfunds) that they are helping to decarbonise the planet
are questionable. Selling a polluting asset does not, in itself, re
duce emissions at all, if it keeps pumping oil or digging up coal.
Second, as dirty assets pass into private hands, it becomes hard
er to tell if their owners plan to reduce their output over time, or
expand it. All that has been created is a system of arbitrage, in
which dirty assets change hands to misplaced applause.
What to do? First, impose more carbon taxes or carbon prices.
Such tools are the best ways to align the profit motive with the
imperative to cut emissions, and so unleash the power of markets to reallocate capital quickly and efficiently. And they can
apply across the whole economy, not just to particular indus
tries or forms of legal ownership. Long dismissed as politically
impractical, they are gradually being introduced, at least in plac
es. Almost half of all energyrelated carbon emissions in g 20
economies are covered by a carbon price, up from 37% in 2018,
according to the oecd, a club of mostly rich countries. Still, cov
erage needs to expand further, and the price of carbon needs to
be higher, to curb emissions more effectively.
The other answer lies with institutional investors, such as
pension funds, endowments and insurers. Some are the proud
beneficiaries of virtuous esg funds whose port
folio companies are dumping dirty assets, and
simultaneously the partners of privateequity
funds that are eagerly buying them. If institu
tional investors are serious about being green,
they should consider the entire carbon foot
print of their portfolios. The task of measuring
these footprints, and avoiding doublecount
ing, is onerous but crucial.
Finally, investors should question the idea that the best way
to make polluters pollute less is to dump their shares. Such
dumping is supposed to raise the cost of capital for polluters,
and thereby impede new investment by them. But this does not
work if there is an abundance of alternative private cash willing
to buy up those shares—which there is. Larry Fink, the boss of
BlackRock, the world’s largest asset manager, has suggested a
different approach. Sincere green investors—and there are plen
ty of them—should hold on to dirty shares and work with man
agers to reduce emissions. He is right. To betrulygreen, invest
ment strategies must be less black and white.nT
he phrase “state election” does not do it justice. Over 150m
people have registered to take part. They will throng to
174,351 polling stations in the course of seven rounds of voting
spread over a month. There will be thousands of candidates and
hundreds of parties. There are even 39,598 voters aged 100 or
more, for whom special provision will be made. And all this is
just in the biggest state—Uttar Pradesh—of the five that are hold
ing elections in India in the coming weeks (see Briefing).
There will be lots of talk of a “festival of democracy”—and so
it will be. Every caste, every sect, every view will be catered for.
The candidates include film stars, holy men, feminists and
entrepreneurs. Three different sorts of communists are compet
ing: Marxist, MarxistLeninist and the garden variety. And al
though the Bharatiya Janata Party (bjp), which runs both the na
tional government and those of many states, is favoured to win
in Uttar Pradesh and elsewhere, its victory is by no means guar
anteed. Uttar Pradesh may be as poor as Mali, and deeply divided
by caste and religion, but it is also a genuine democracy. Its vot
ers have a meaningful choice, and often confound the pundits.
Just because Indian democracy is full of life, however, does
not mean that it is healthy. Its most commonly lamented ail
ment is growing sectarianism, stoked by the Hindu nationalists
of the bjp. In Uttar Pradesh the party chose as chief minister Yogi
Adityanath, a Hindu cleric who casts politics as a struggle to
overturn the legacy of 1,000 years of Muslim invasions and re
turn power and pride to the Hindu majority. Such talk leads to
frequent discrimination and violence against Muslims and
could one day fuel a conflagration.
But Hindu chauvinism is far from India’s only political mal
aise, and the bjpis not the only party tainted by it. In fact, the
bjp’s antiMuslim rhetoric has been such a hit with voters that
other parties, too, have become ever less willing to speak up for
minorities. Few are fielding many Muslim candidates in Uttar
Pradesh, for example, although 19% of the voters are Muslim.
Other vices are shared by all the big parties. Take another
worrying aspect of the selection of candidates: many of them are
criminals. A shocking 43% of those who won seats in the nation
al parliament at the most recent general election, in 2019, had
been charged with crimes of some sort. For 29% the charges in
volved grave offences such as rape or murder (see Asia section).
Perhaps unsurprisingly, when these lawmakers arrive in of
fice, they do not devote themselves diligently to the minutiae of
drafting laws. Uttar Pradesh’s legislature used to meet for about
three months a year back in the 1950s. Last year it managed onlyIt is not only sectarianism that is eating away at Indian politicsFestive but fraying
Democracy in India