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Tom Steyer: If businesses don’t move on climate change, the U.S. will lose its global competitive edge

February 26, 2021, 8:27 PM UTC

Tom Steyer, who made his fortune running his hedge fund Farallon Capital, first rose to political fame by spending millions of dollars in politics to get others to stop spending millions of dollars in politics, to end what he called “the corporate stronghold on democracy.” But that doesn’t mean he thinks business leaders can eschew all political responsibility, especially when it comes to climate change. 

Steyer once profited greatly off investments in various oil companies but had a change of heart in the mid-2000s; now he’s hoping others may do the same. By 2012 he stepped down from his role in the financial world, sold all of his personal fossil fuel assets, and became involved in politics—donating millions to candidates across the country who campaigned on climate change action and opposed fossil fuel development. In 2013, he founded NextGen Climate to register and mobilize voters around climate change. He has since given over $240 million to federal candidates through his organization. 

His 2020 presidential run gave him his largest platform yet, and while he broadened his message significantly, he remained adamant that it was the biggest problem the U.S. faced, reiterating climate change should be the foundation of any policy proposal on any subject.

In a conversation with Fortune, Steyer outlined his concerns about what he calls the American decision to fall behind on green energy and technology instead of leading and innovating in the field. The repercussions, he explained, will have disastrous effects not only on the environment but also on the U.S. economy. 

This conversation has been edited and condensed for clarity. 

Fortune: We’ve seen a number of large corporations move in recent years, without government legislation, to at least outwardly support green policy and to reduce their own emissions. Do you think that will continue without some sort of legal regulation?

Steyer: You know, I don’t think it’s as linear as that, because I think what we’re seeing is an inflection point broadly in society. We’ve seen a political inflection point; I think it’s clear that the Biden-Harris campaign was the most aggressive campaign on climate promises ever. They talked about it, advertised on it, ran on it, and won on it. I could go through chapter and verse about how much more aggressive they were about climate than anyone was in 2016. But you’ve seen the private sector, going through the exact same kind of inflection point, even before November. We saw JPMorgan move, we saw Lloyd’s move, we saw BlackRock move, all before Joe Biden was elected President. So did companies anticipate at some level? The political thing? Sure. But what’s really going on is a broad societal understanding in the political realm and in the corporate realm. And each change makes more clear how irrevocable this change is and adds to the impetus for everybody else to move. 

Do you think that GM was not paying attention to the stock price of Tesla? I assure you they were. Do you think GM was unaware that California won’t allow the purchase of new internal combustion engines after 2035? And then when GM moved, do you think that it had any impact on Ford? I would say yes. Underneath it all there is an increasingly broad base of grassroots awareness by American voters of both parties that we have to respond to this.

We’re behind. Yeah, we moved to the idea that we have to respond to climate change as a society, but we’re the last country on earth to make this decision. It’s embarrassing. Our two biggest domestic car companies decided to go all in on zero-emission vehicles, but they’re way behind the other major automobile manufacturers around the world. 

We have to do what Americans do, which is pull together. We have to innovate. We have to research. We have to lead. 

But without proper legislation, how do we know that these companies are going to actually practice what they’ve been publicly preaching around green policy?

I think that in all of this, the government has to set the rules, and the government has to enforce the rules and create a framework. We should measure the climate impact of corporate behavior rigorously. There’s a move afoot within the Fed to require corporations to measure and make public their climate impacts and their climate risks. It’s really important that people have an apples-to-apples way of measuring it. There are different levels to this; there’s simply transparency, then there’s standards that are enforced by the federal government. 

Well, let’s look at Build Back Better, President Joe Biden’s infrastructure plan. It seems like there will be a lot of positive and monetary incentives to transition to clean energy and go green, but not so much regulation. 

Build Back Better is about rebuilding America in a clean way. If you think about regulation, and business behavior, that’s always done by the agencies that regulate. That’s the EPA, the Treasury. There’s always a carrot and a stick, but incentives in the physical framework make entrepreneurship possible.

But I think the other thing to remember is this: The government is not the story here. It’s part of the story, but ultimately, our success in building a sustainable world is going to come out of the private sector. American prosperity and jobs are going to come out of the private sector. I think there’s a huge overemphasis on electric vehicles.

We also need to focus on transportation, electricity generation, new ways of sustainable manufacturing, and agriculture, the built environment. The change is much broader than the way people describe it, which is basically about GM and investor-owned utilities.

So how does the U.S. move forward on all of this? 

Let’s be clear, when it comes to agriculture, the United States of America has led the way for decades. If you look at manufacturing, we’ve led the way for decades. We are the people who do research and innovate. But now we are behind, and that’s because we’ve chosen to be behind. Let’s think about where that leads, say that we aren’t the people who come up with X green product, or X green company. Will change and innovation still happen? Maybe, but no one will be working on it in Cleveland; they’re going to be working on it in Frankfurt, or they’re going to be working on it in Shanghai.

So winning on this, going green, in the private sector, has an absolutely critical impact on the prosperity and job creation in the United States, from how much American workers get paid to what kind of society we live in. It’s absolutely critical that we compete and win. Yeah. This is a huge move for us as a country, and we have to recognize that and accept it, and then we need to go in and we have to compete.

So how do you convince people of that? 

Republican voters absolutely want clean energy. And I expect that there’s going to be a change in Texas after this horrible experience and the suffering that the people of Texas have recently experienced. Texas has the most wind of any state; Texas has immense infrastructure and expertise in energy. Do I think that they can be a huge force for the good in this? If they choose to go all in tech? Yes. And I think that Republicans will find a way to talk about this differently than the way Democrats talk about it, but I don’t care how they describe it as long as they do the right things. As a friend of mine likes to say, “Can’t you take yes for an answer?” 

What do you think about the prospects of Build Back Better in Congress? 

The infrastructure of the United States needs to be rebuilt; it’s overdue. We need to rebuild it in a way that enables a clean energy economy, no question about it. This is a critical factor to enable all of the entrepreneurship, all of the innovation, to happen in our country. We need it—look, you can’t plug in an electric vehicle to nothing. You can’t plug an electric vehicle into a coal-powered power plant. So we need it, and I think people in the Senate know we need it. That’s what I was campaigning on. I have been across America, and people know it too.

But this will be a tough fight, regardless. It’s a big package. 

This is something that’s got an urgency to it. Let’s talk about the natural world. There’s a strong understanding that we have 10 years left to solve this problem. I believe we’re on a very short time frame here. The world is telling us physically that we’re on a very short time frame. I’m expecting everyone to realize that we’re really negotiating to get to yes. Sure, there will be a lot of politics about what that yes is, but I’m assuming that everyone understands that the only possible answer to this is yes. There will be questions about the size of the bill and what exactly is incorporated, for sure. That’s how they make the sausage.

How do you see private companies exerting their influence in D.C. around green policy? 

The business community has to know that they can’t succeed in a world with this much risk. So I am fully expecting that business people want to see their bread being buttered. The interest of their shareholders is going to be rebuilding America, and so the vast majority of businesses are going to push hard for this legislation.