michael barbaro

From The New York Times, I’m Michael Barbaro. This is “The Daily.”

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Today: Over the past few weeks, several of America’s largest and most profitable companies have unveiled elaborate plans to combat climate change. Andrew Ross Sorkin on why they’re doing it now and just how meaningful the plans really are. Plus, the results of the Nevada caucuses. It’s Monday, February 24.

michael barbaro

Andrew, tell me about this letter.

andrew ross sorkin

So every year, usually the second or third week of January, Larry Fink, who runs BlackRock, which is the largest money manager in the world — they oversee $7 trillion. That’s with a “t.”

michael barbaro

Wow.

andrew ross sorkin

Basically 401(k) plans, pension plans. All of that money lives under BlackRock. And so Larry Fink has huge influence. And he writes a letter every January to the C.E.O.s of the world. So I’ve made it my — I don’t want to say life’s —

michael barbaro

[LAUGHS]

andrew ross sorkin

I’ve made it my job for the past several years to try to get my hands on this letter, because typically what he says changes the conversation.

archived recording And it is the letter that sent shockwaves through corner offices across America yesterday, BlackRock C.E.O. Larry Fink issuing a warning to corporate leaders about the dangers of short-term thinking.

andrew ross sorkin

Back in 2016, he wrote a letter telling C.E.O.s, stop issuing quarterly guidance, stop telling us what you —

michael barbaro

Expect your earnings to be.

andrew ross sorkin

— expect your earnings to be, because then it creates this artificial expectation and then you’re trying to manage to that number. And he wants C.E.O.s to think more long term.

michael barbaro

And what happened?

archived recording (warren buffet) I personally think that’s a very good recommendation.

andrew ross sorkin

Huge companies, like Unilever, stopped issuing quarterly guidance. Warren Buffett publicly came out and said that companies should stop issuing quarterly guidance.

archived recording (warren buffet) It was to give encouragement to companies that really felt uneasy about giving guidance to perhaps have a little more backbone about it.

andrew ross sorkin

But Larry Fink was the first.

michael barbaro

OK.

andrew ross sorkin

In 2018, Larry Fink wrote a letter —

archived recording I’ve now been to a number of dinners where your letter has already been the topic of conversation.

andrew ross sorkin

— saying, you know what, it’s not enough simply to have profits. You have to have purpose.

archived recording (larry fink) I believe the involvement in a community, to have a purpose, is vital for long-term survivability and long-term profitability.

andrew ross sorkin

And then a year and a half later the Business Roundtable, which represents all the big companies in the world, said, you know what, it’s not just about profits anymore either. So his letter really has —

michael barbaro

A kind of biblical quality in the world of business.

andrew ross sorkin

It has weight. Because he genuinely is the largest investor in the world. And as a result, Larry Fink controls huge chunk stakes in these companies. And he, to some degree, can control whether people on that board, the C.E.O., sinks or swims. He can vote that board out if he doesn’t like what they’re doing. In certain cases, he can pull his money from their companies if he doesn’t like what they’re doing.

michael barbaro

Which explains why every year it seems like you go to pretty extraordinary lengths to get your hands on this letter.

andrew ross sorkin

And this year, it’s early January 2020, and I get my hands on a draft of the letter. And two paragraphs in I was stopped cold.

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He writes, “Climate change has become a defining factor in company’s long-term prospects. Last September, when millions of people took to the streets to demand action on climate change, many of them emphasized the significant and lasting impact that it will have on economic growth and prosperity, a risk that markets to date have been slower to reflect. But awareness is rapidly changing, and I believe we’re on the edge of a fundamental reshaping of finance.”

michael barbaro

So what is he really getting at here?

andrew ross sorkin

He’s saying for the very first time, as the largest investor in the world, that climate change has to become an integral part of the investing thesis for companies. And more importantly, that C.E.O.s and companies themselves now have to change and think about climate change. And if they don’t, he’s going to be pulling his money from them.

michael barbaro

Wow.

andrew ross sorkin

You know, and he even says it explicitly in the letter, quote, “We will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.”

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Part of the Fink assessment is not simply that he is some kind of tree hugger do-gooder and wants to change the world — though I think he may on a personal basis. But that he thinks that the world has shifted in a way, and the climate risk is now so real that it actually will have an economic impact in a way where as a fiduciary for pensioners and investors, that he needs to now push this in a way that he didn’t think he had to before.

michael barbaro

So it’s not an act of advocacy. It’s an act of kind of wise business.

andrew ross sorkin

I think that he would say this is not driven by ideology. It’s not driven by politics. It’s driven frankly by money. He thinks that there’s now a genuine business risk and cost —

michael barbaro

To not doing anything.

andrew ross sorkin

— to not doing anything.

michael barbaro

And maybe even to these businesses, and therefore to these investors, these retirees.

andrew ross sorkin

Exactly.

michael barbaro

So right. A tipping point to reach where you have to do something.

andrew ross sorkin

Exactly. This is the first time that a major investor has genuinely taken on the issue of climate change and said, you know what, corporate America, I know you guys have been talking about this, thinking about this maybe, but now you actually have to do something about it. And if you don’t do something about it, investors like me are going to do something about it ourselves. Which means that we’re either going to vote you out of your job, or we’re going to pull our money from you. He’s throwing down the gauntlet.

michael barbaro

And what are you thinking when you finish reading this letter?

andrew ross sorkin

So I’ll you something funny. I know when the letter is going to come out. It’s about a week beforehand and I go to a meeting with Satya Nadella, the C.E.O. of Microsoft.

michael barbaro

As one does.

andrew ross sorkin

As one does if you’re a business reporter who covers companies like this.

michael barbaro

[LAUGHS] And he says that the company is about to reveal a sweeping climate change plan. Now of course, I’m thinking in my head, this letter that Larry Fink is about to come out with, are they connected? What’s going on here? And I later find out, in fact, that Larry Fink had been talking to Microsoft. And I start to think to myself, you know what, I think something big is about to happen here. So what happens when this letter is actually delivered to all these C.E.O.s?

andrew ross sorkin

Headlines are everywhere.

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archived recording Consumer news now, one of the biggest airlines in the world has committed to going carbon neutral starting next month.

andrew ross sorkin

And literally within the next 21 days —

archived recording (satya nadella) This is the decade for urgent action, for Microsoft and for all of us.

andrew ross sorkin

— company after company —

archived recording The tech giant said it has created a climate innovation fund which will invest $1 billion over the next four years.

andrew ross sorkin

— starts announcing new initiatives around climate.

archived recording Jeff Bezos out with his next big idea.

andrew ross sorkin

And then you have Jeff Bezos, the world’s richest man who runs Amazon, pledging $10 billion towards combating climate change.

archived recording This global initiative will fund scientists, activists, NGOs, any effort that offers a real possibility to help preserve and protect the natural world.

michael barbaro

And presumably these are all companies in which BlackRock, run by Larry Fink, is an investor.

andrew ross sorkin

In some cases, he may be the biggest investor.

michael barbaro

So you’re seeing all these major corporations fall in line. But —

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andrew ross sorkin

I’m thinking to myself, how much of this is about really just placating investors like Larry Fink and frankly the public? Is it spin? Is it marketing? Is it greenwashing? Or is it genuinely going to have an impact on the climate? So I start to go through the plans individually one by one. And the answer is pretty interesting. Some of these pledges may have huge real impact. Others, not so much. And seeing which is which was fascinating.

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michael barbaro

We’ll be right back. Andrew, tell me about these corporate climate plans that you looked at.

andrew ross sorkin

So I went back to look at Microsoft’s plan and Amazon’s plan and Delta’s plan. These are all big household brands that people know.

archived recording Welcome aboard, and thanks for flying with Delta.

andrew ross sorkin

Let’s start with Delta because in many ways, it was the most surprising. Here is an airline. The entire business is based on fossil fuels.

michael barbaro

Right. It just is a carbon emitter.

andrew ross sorkin

That’s what it is. That’s what it’s going to be for a very long time.

archived recording And we are announcing that starting March 1, Delta Airlines will become the first airline to go fully carbon neutral on a global basis.

andrew ross sorkin

Delta just came out and said they’re going to become carbon neutral.

archived recording And a lot of people are going to do a double take. An airline becoming carbon neutral is —

michael barbaro

Just to explain that term.

andrew ross sorkin

It effectively means that they’re going to neutralize all of their carbon emissions. So their carbon emissions are going to somehow become zero. And I’m thinking to myself, how is that going to happen?

michael barbaro

And what’s the answer?

andrew ross sorkin

Well, the answer is that when they say we’re going to become carbon neutral, it’s not that they’re going to stop flying and it’s not that they’re going to stop using fossil fuels. What it really means is buying carbon offsets. What does that mean? Well, you could invest in planting trees, which naturally stores carbon. Or you could invest in a wind farm. And so Delta says they’re going to spend a billion over 10 years. That’s real money — $100 million a year. What are they going to buy? One of the things they’re going to try to do is invest in new biofuels. They’re going to try to make their planes more fuel efficient. They’re hoping to use some of that money to invest in technological innovations. But in the short run, given that that technology for the most part doesn’t really exist, they’re basically going to be having to buy these offsets.

michael barbaro

So they’re not going to be making the carbon problem any better.

andrew ross sorkin

They’re not making it any better.

michael barbaro

But they’re not going to be making it any worse by offsetting it.

andrew ross sorkin

At least theoretically, philosophically, that’s the concept.

michael barbaro

OK.

andrew ross sorkin

But they’re going to be flying just as many planes as they ever were.

michael barbaro

But given how much airplanes emit —

andrew ross sorkin

It’s a huge amount.

michael barbaro

It’s a huge amount.

andrew ross sorkin

Huge amount.

michael barbaro

That’s potentially a huge plus just to go neutral from where we are today. But it sounds like Delta is not fundamentally changing the central source of emissions at the core of its business, which I’m sure many people who care about climate think is what a company like Delta should do.

andrew ross sorkin

Exactly. And by the way, what Delta’s doing — they’re the only airline in America that’s announced anything like this. Now the real question is whether these offsets are real. When you really get deep into the world of carbon offsets, it’s like the Wild West. Sometimes companies are paying money genuinely to build a wind farm or plant a forest. But sometimes that forest is getting razed a year later, and some of the time they’re actually just paying money to prevent a forest from getting razed.

michael barbaro

Raising the question of whether it means anything at all when you say you have offset your carbon emissions.

andrew ross sorkin

Exactly.

michael barbaro

So it sounds like carbon offsets, which is what Delta is relying on, may not be everything that we think it is.

andrew ross sorkin

It’s a financial construct in many ways. It’s not a fundamental change.

michael barbaro

OK, so that is Delta. Which company is next?

andrew ross sorkin

Let’s talk about Amazon.

archived recording The world’s richest man, Jeff Bezos, is jumping into the battle to address climate change. Let’s take a look at his new effort by the numbers.

andrew ross sorkin

Because Jeff Bezos just announced this massive $10 billion pledge to combat climate change. And we don’t know completely about what that program is ultimately going to look like. But we do know what Amazon itself has pledged to do. And they have two big goals. One is to have 50 percent of all their shipments be carbon neutral by 2030, so 10 years from now.

michael barbaro

And presumably, that might involve things like what Delta did — offsets.

andrew ross sorkin

Well, they plan to do it a bit differently. What Amazon wants to do is change how much fossil fuels they actually use. And so they’re investing in 100,000 electric trucks, for example. So when you get your Amazon Prime package, instead of a truck coming up to the outside of your house that’s powered by fuel, it’ll be battery powered.

michael barbaro

Got it.

andrew ross sorkin

They’re also investing in wind and solar so that their massive cloud computing operation, which involves tens of thousands of computer servers, is going to be powered by the sun and by wind.

michael barbaro

So, the way in which this is different from what Delta is doing, is rather than paying somebody else as Delta did to offset the airline’s carbon emissions, Amazon is saying, we will meaningfully reduce carbon emissions by changing our own operations.

andrew ross sorkin

They’re genuinely trying to reduce their carbon emissions, the actual emissions in the air. By the way, some people will tell you that they’re not doing this fast enough.

michael barbaro

And, of course, Amazon is so big. It is so profitable. It touches so many different lives, carries so many different products that there will be people who ask, why isn’t every component of that company changing to deal with climate?

andrew ross sorkin

Absolutely. Look, there are people who are going to say, why doesn’t Jeff Bezos take every dollar of profit that this company makes for the next two decades and use it to invest strictly in climate if this is really the single most important issue in the world?

michael barbaro

OK, so that leaves us with Microsoft.

archived recording The scientific consensus is clear. The world has a huge carbon problem.

andrew ross sorkin

And they have perhaps the most ambitious plan of all. They are carbon neutral today.

michael barbaro

Interesting. So Microsoft is already where Delta is hoping it’s going to be in 10 years.

andrew ross sorkin

Exactly. But their big plan is to be carbon negative by 2030.

archived recording Meaning that we’ll reduce our emissions by half and remove from the atmosphere more carbon than we emit.

michael barbaro

Wow.

andrew ross sorkin

Think of it a little bit like going on a diet or exercising, burning more calories than you take in.

michael barbaro

So that goes well beyond being carbon neutral, which is just basically zeroing out the amount you put in the world.

andrew ross sorkin

Carbon neutral is stasis. Carbon negative is removing the carbon from the air. And even more ambitious, by 2050, they say they want to be carbon negative for their entire history starting in 1975.

michael barbaro

Well, how does that work?

andrew ross sorkin

So they want to remove all the carbon that the company has put into the atmosphere since 1975.

michael barbaro

Wow.

andrew ross sorkin

How are they going to do that?

michael barbaro

[LAUGHS] I’m going to ask you how are they going to do that?

andrew ross sorkin

They’re going to invest a ton of money in forest, in wind, in solar. But really, what they’re hoping to do is invest in a breakthrough shoot-the-moon technology.

michael barbaro

Like what?

andrew ross sorkin

What’s called carbon capture, the idea of removing carbon from the atmosphere and building machines that do this, that do what trees do naturally. And there are a number of efforts that are taking place around the world that are trying to build technology like this. But if we’re being honest, it’s not there yet. And that’s what all of these companies are ultimately going to be after. That’s what the Jeff Bezos $10 billion investment is going to be about. It’s going to be about trying to invent a technology that’s going to change the game.

michael barbaro

I’m shocked that the company that is promising the biggest transformation and the most ambitious plan, Microsoft, probably has the smallest carbon footprint, almost assuredly. I mean, if you compare Microsoft, a maker of computers and software, to a company that delivers millions of packages, or an airline company that has 1,000 planes in the air with all their emissions. So what does it tell you that the biggest polluters in this list seem to be doing the least ambitious climate plans?

andrew ross sorkin

It tells me that it’s hard. In many ways for Microsoft, it’s easier. And if you really think about it, Microsoft has the biggest balance sheet. It has more money than these other companies. And, in fact —

michael barbaro

More than Amazon?

andrew ross sorkin

Yes, in terms of profits, absolutely. And in terms of thinking about all three of these companies, all of these are the market leaders, if you will. These are all very healthy companies. So in some ways, they can afford to experiment. They can afford to try to do this. Think about all of the other companies that don’t have —

michael barbaro

Billions of dollars in profit.

andrew ross sorkin

— billions of dollars in profits that they can even think about this. It’s going to be a lot harder for them to catch up.

michael barbaro

So if the biggest companies in the economy, the ones with the money to experiment in this world, are doing kind of modest things when it comes to maybe Delta or Amazon, you’re saying that should make us reflect on what less profitable companies are not even bothering to do. In other words, it’s only the very, very top of corporate America that’s even —

andrew ross sorkin

It’s only the top —

michael barbaro

— playing here.

andrew ross sorkin

— tier of corporate America that can afford to really go down this road right now. And the question is whether what they do forces the issue for everybody else. Whether their quote-unquote leadership — unless you’re cynical enough to believe this is all marketing, and there are a lot of people who do — but to the extent that they go down this road, whether everybody else decides they have to follow.

michael barbaro

And we’ve talked about this in the past. This is a moment where governments are not exactly leaning on climate. They are looked to for leadership, but they don’t seem to have their acts together.

andrew ross sorkin

Look, in the United States, clearly, when it comes to climate change, we have an administration that doesn’t believe that carbon emissions matter. But in the end, and I hate to say this, but all of these individual corporate efforts are on the margins. Because the reality is that China is emitting more carbon than the United States and Europe combined. And so Microsoft can do all it wants. Amazon can do what it’s doing. Delta can do what it’s doing. But none of these things on their own can change the game.

michael barbaro

Until big governments do things.

andrew ross sorkin

Either until big governments literally dictate how everybody across the world is going to do it. Or, somehow every business decides that they’re going all in.

michael barbaro

It’s interesting. In some ways, at this moment, corporations seem to be responding more lowercase “d” democratically to the problem of climate than perhaps some governments. Because they’re actually responding to what their consumers want.

andrew ross sorkin

These companies aren’t dumb. If Microsoft, Amazon and Delta all know that what they’re going to do on a very individual basis can’t fundamentally change the game, right — we know that they can’t change the game by themselves — what are they really doing this for?

michael barbaro

And what’s the answer, a little bit of altruism a little bit of marketing?

andrew ross sorkin

Probably all of the above. There’s probably a little bit of marketing. There’s probably a little bit of maybe the investors are going look at me differently. I think there are executives that want to be leaders in this space. There’s no question that when Larry Fink wrote his letter or any of these companies thought about their policies, they were responding to consumers. They were responding to their employees. They were responding to investors. But the real question is whether a group of companies unto themselves can actually change the game. Whether their leadership is going to force every other company to follow them, or whether ultimately you need governments across the globe to create rules that every company follows. And until and unless that happens, I think there’s going to be a lot of fair skepticism about what these companies are doing and why they’re doing it.

michael barbaro

And whether it matters.

andrew ross sorkin

And whether it ultimately matters.

michael barbaro

Well, Andrew, thank you once again.

andrew ross sorkin

Thank you, Michael.

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michael barbaro

We’ll be right back.

archived recording (bernie sanders) [CHEERING] And now I’m delighted to bring you some pretty good news.

michael barbaro

Here’s what else you need to know today.

archived recording (bernie sanders) I think all of you know we won the popular vote in Iowa. [CHEERING] We won the New Hampshire primary. [CHEERING] And according to three networks and the A.P., we have now won the Nevada caucus. [CHEERING]

michael barbaro

Senator Bernie Sanders has won the Nevada caucuses by a wide margin —

archived recording (crowd) Bernie, Bernie, Bernie!

michael barbaro

— positioning himself as the clear front-runner in the race for the Democratic nomination.

archived recording (bernie sanders) In Nevada, we have just put together a multigenerational, multiracial coalition, which is going to not only win in Nevada, it’s going to sweep this country. [CHEERING]

michael barbaro

With 60 percent of precincts reporting, Sanders’s lead was more than double his nearest competitor. Joe Biden was in second place, followed by Pete Buttigieg, then Elizabeth Warren. The Times reports that given the large number of moderate candidates left in the race, it appears increasingly unclear whether any single one of them can catch up with Sanders.

archived recording (bernie sanders) Which is another reason why we’re going to win this election. [CHEERING] archived recording (pete buttigieg) And I congratulate Senator Sanders on a strong showing today, knowing that we celebrate many of the same ideals. But before we rush to nominate Senator Sanders in our one shot to take on this president, let us take a sober look at what is at stake.

michael barbaro

In a speech from Las Vegas, one of those moderates, Pete Buttigieg, cautioned Democratic voters about what he said was the risk of nominating Sanders.

archived recording (pete buttigieg) Senator Sanders believes in an inflexible, ideological revolution that leaves out most Democrats not to mention most Americans. [CHEERING]

michael barbaro

That’s it for “The Daily.” I’m Michael Barbaro. See you tomorrow.

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