Why BlackRock's Former Sustainable Investing Chief Thinks Sustainable Investing Is BS

The Peak spoke with Tariq Fancy, founder of The Rumie Initiative and former Chief Investment Officer for Sustainable Investing at BlackRock, on his work at BlackRock, his view of sustainable investing (hint: he's not a believer), and his work now on The Rumie Initiative.

The Peak: Give us a very quick overview of who you are, what you’re working on now and how you got here? 

Tariq Fancy: I have an unusual career. I first spent over a decade in finance and investing, beginning as an investment banker in Silicon Valley. In my early 30s, after witnessing a close friend leave finance and dedicate himself to charity while fighting Stage 4 cancer, I decided to follow in his footsteps and founded Rumie in 2013, a Toronto-based non-profit that has pioneered mobile-first, microlearning and is now used in over 100 countries.

In late 2017, BlackRock, the world’s largest asset manager, hired me to help lead their work on sustainable investing, which is kind of a merger of the two bottom lines I had worked on independently: as an investment professional focused on maximizing profits, and as a non-profit founder focused purely on social impact. After doing that for nearly two years, I decided to return to my hometown (Toronto) and today I’m back leading Rumie as we continue to grow.

What were you hired to achieve at Blackrock? From the perspective of the organization, why is ESG and sustainable investing important? 

BlackRock hired me as their first ever chief investment officer (CIO) for sustainable investing, a field of investing that aims to both generate competitive financial profits and create social impact at the same time. One of my most important responsibilities was making sure that all of our global investment processes took environmental, social and governance (ESG) considerations into account in their daily work. That was no small task: BlackRock a giant, global firm that manages around $9 trillion (yes, that’s a T for trillion). In many ways it’s a microcosm of how capitalism operates globally today.

BlackRock and all large asset managers are focused on this because the demand for sustainable investing is increasing: society in general is asking that more be done by such firms to address the urgent need for action on climate change, inequality, and other social ills.

Recently, you wrote in The Globe and Mail that sustainable investing is “deadly distraction from the climate change threat.” What led you to come to this realization and can you break down your argument for us? 

In general, a core problem is that the idea that “being a more responsible company creates more profits” is something we all want to believe, but it’s true far less than we need it to be. In many, many cases being irresponsible can be highly profitable for a company, partly because of what are called ‘market failures’. Climate change is caused by a market failure: it’s cheaper to burn fossil fuels than it should be because polluters don’t pay the costs of their pollution, so they emit more carbon into the atmosphere - creating private profit for themselves today at the expense of future generations.

Sustainable investing as practised today doesn’t change any of that: the view from inside the machine is that the system is the same, the rules haven’t changed, but the marketing and talk is much, much better. I left BlackRock on good terms, but had privately concluded that there was no point continuing in that role: if climate change is like a cancer that’s slowly spreading around us, I liken sustainable investing to giving wheatgrass to a cancer patient. It’s a well-marketed idea that will have next to no effect on slowing the spread of the cancer. But it’s ultimately harmless.

After I left, my views began to change. The world was putting a lot of faith in this field. I knew it wouldn’t work, but did they? Working with Ryerson in 2020, we studied and found that the more people hear about business leading the way in building a sustainable society, which lies at the roots of the ‘free market’ thesis and sustainable investing, the more they feel that government action isn’t needed. Basically, they believe ‘green’ marketing so much that they think we’re on the right track, even though we’re wasting valuable time. That’s no longer harmless: the wheatgrass is lulling us into complacency and actively delaying chemotherapy.

You argue that the solution to the threat posed by climate change is strong government action, but that business leaders need to embrace this approach for it to work.  What can emerging leaders do to move this agenda forward? 

Indeed, we’re facing a systemic crisis. This means the solutions we need must also be systemic, which translates into government action, since only governments have the democratic legitimacy and the special system-wide powers to set new rules for our economic system.

To be clear, this doesn’t mean that governments have to actually do and make all the things: I’m definitely not talking about governments replacing Tesla in making electric cars. There’s a difference between government as provider and government as regulator: the latter is a bit like the referee in a competitive sport. Governments already use taxes and regulation to incentivize more of the business activities we want and less of the types we don’t want. Governments can enact system-wide solutions such as a carbon tax, vehicle emissions limits, and other stringent industry standards that give us a proper chance at avoiding dangerous and potentially irreversible global warming scenarios. 

The pandemic and the climate crisis have one key element in common: they’re both systemic crises. Such crises require a quick and systemic-wide response led by government: think of how we restricted travel, closed high-risk venues, and made masks mandatory indoors in order to flatten the COVID-19 infections curve. Why can’t we take a similar approach to flattening the GHG emissions curve? But because of the difference in the incubation period - COVID-19 takes weeks, climate change takes decades - governments acted on one but continue to ignore the other. Young and emerging leaders need to stand up and demand that we treat all systemic crises the same way, regardless of whether they impact primarily baby boomers or Gen Z.

You make a strong criticism of capitalism in the name of the environment. Critics might say that’s easy for you to do after you’ve built wealth. This is true at the individual level as well as the national level where lower income countries may be prevented from building wealth through carbon based industrialization. How do you handle this? 

Any way you look at it, the global transition to a low-carbon economy is going to be a massive undertaking. For it to be successful, it needs the agreement of most of the largest countries in the world, and for that to occur it really needs to be a just and fair transition. Those who have the ability to pay more, and have benefited most from the ability to avoid paying for pollution up until now, will be rightly expected to foot more of the bill.

At a global level, I think it’s generally agreed at this point that countries that have benefited most from industrialization, such as the US, should pay more than countries that have lower per-capita emissions and are only industrializing now, such as India.

Similarly, at the individual level, this means that more of the tax burden must be paid by people who have the greatest means. This usually means older and wealthier people, who have the greatest ability to pay and have benefited the most in recent decades from an economic system that borrows against the interests of future generations and our natural environment. 

Switching gear to Rumie Initiative how did you prepare yourself for the shift from a for profit career to a non-profit one? What advice would you have for other professionals who want to either start a non-profit or work for one?

I think it’s less about the tax status and more about the product or service you’re offering, and how it improves people’s lives. The tax status definitely matters for fundraising: for some businesses, like those that sell computer hardware, it’s better that they’re for-profit since they raise more capital to sell large volumes of products at solid profit margins. But for some services we need in our society, like shelters for victims of domestic abuse, there’s no business model that really makes sense. But we absolutely need those too, and they’re better funded and operated as non-profit entities.

With that in mind, I founded Rumie as a non-profit because I thought it made more sense for what we’re offering: free, open and accessible learning for all. We wanted people to be able to trust us because our only motive is to help them succeed. As part of that we also listen closely to their needs, which resulted in us evolving to an approach based on microlearning: quick, mobile-first learning courses that we call ‘bytes’ and take 5-7 minutes on average. Replacing some social media time with byte time is a great way to give yourself a mental health diet. (In fact, here’s a byte on how to create healthy boundaries with social media.)

Rumie works “around the world from Syrian refugee camps to the Canadian arctic,” how do you begin to wrap your head around scaling a product for such a range of users in such a range of environments. 

The way we do it - and the only way to do it effectively I think - is to work with and through local partners. We can excel at building technology that is user friendly and scales to millions around the world. But we lack that local understanding, which means not just language barriers but cultural contexts and relevant topics and themes. Local partners we work with generally have the opposite problem: deep knowledge and understanding of the communities and their content needs, but little technology knowledge or ability to build a solution like ours.

Through working with partners, we’re able to use our platform for such diverse topics as discovering your career path and managing your mental health. We’re using that same engine globally, often in different languages and with different content. For example, in partnership with the largest mobile phone operator in Afghanistan, programs we’re doing for girls and women’s education there will soon be available to anyone with a phone for free. (If you read Dari, check out here what the same Rumie Learn platform looks like converted for Afghan users.)

What would be your ideal solution to education inequality?

I think that we need greater investments in free, digital public education. Besides having helped us through the pandemic and the need to socially distance, free digital solutions also level the playing field: anyone with a device, even a low-cost one, can from anywhere receive access to the best, most personalized learning resources.

Of course, access alone is not enough: to truly address educational inequality, we need to address inequality itself. No matter how good a school is, it can’t solve all the issues that arise for someone coming from a difficult neighborhood or domestic situation. But at least we can get one step closer by using technology to put dent in the challenge of access, which is what we’re trying to do at Rumie. And that doesn’t have to mean only a standard classroom education. Learning needs to happen outside the classroom, be quick, easy, lifelong, and relevant. After all, how else will anyone be able to quickly learn what an NFT is? :)