John Kerry has spent a lifetime fighting climate change, but until recently he’s done it almost exclusively from a perch in government. Now the former Massachusetts senator and US secretary of state is taking the battle to Wall Street.
Kerry has become an investor in and adviser to a fund launched over the summer on the New York Stock Exchange that is attempting to set a global price for carbon emissions. Economists have long believed that if the actual cost of pollution can be established, it will incentivize the market to manage climate risk and fund innovation to reduce global warming.
“It’s a groundbreaking initiative,” said Kerry, 76, who spent more than three decades in public office. “It was important to try to translate some of what I did in public policy into the marketplace.”
Kerry, an architect of the landmark 2015 Paris climate accord with 196 countries to reduce greenhouse gases, said he has long held that government alone can’t solve the climate crisis and that the private sector has to play a big role.
“The next Bill Gates, the next Sergey Brin, the next Elon Musk — there are plenty of people out there pushing the curve on hydrogen fuel, pushing the curve on turbines and wind, pushing the curve on even better, cheaper solar panels,” he said.
The exchange-traded fund, operating under the ticker symbol KRBN, is the brainchild of Climate Finance Partners, a New York investment firm with deep Boston connections. On Monday, Kerry is scheduled to ring the closing bell on the New York Stock Exchange to mark the beginning of Climate Week NYC, as well as to bring attention to the fund.
Kerry serves as chairman of Climate Finance’s advisory board. David Thorne, the former ambassador to Italy and Kerry State Department adviser who lives in Brookline, is also a board member. Climate Finance cofounder and partner Rick Mayo-Smith is a Beacon Hill neighbor of Kerry’s, but their professional relationship spans more than two decades ― the two worked together to normalize relations between Vietnam and the United States when Mayo-Smith was founding chairman of the American Chamber of Commerce in Ho Chi Minh City and Kerry was in the Senate.
The KRBN fund began trading at the end of July, making it possible for the first time for individual and institutional investors to gain exposure to carbon allowances. Energy traders and power companies typically have dominated this commodities market, scooping up the credits to offset their carbon footprints.
Climate Finance worked with investment firm KraneShares to develop the ETF and IHS Markit to create a Global Carbon Index based on the three major cap-and-trade programs: European Union Allowances, California Carbon Allowances, and the Regional Greenhouse Gas Initiative in the Northeast known as RGGI.
Opening up the market to more investors eventually drives up demand and causes the price of carbon to go up. The idea is that if carbon is more expensive, it will force companies and consumers to produce less of the pollutant.
“Capitalism is guilty. The industrial revolution was the cause of a lot of this," said Mayo-Smith of global warming.
The World Bank and other organizations have estimated that the price of carbon emissions needs to reach more than $100 a ton over the next decade to meet the targets of the Paris climate agreement. There’s a ways to go to meet that goal: According to the Global Carbon Index and KRBN, they now trade at about $22 a ton.
But country to country, the price of carbon can vary wildly, from under $1 in Mexico and Ukraine to $119 in Sweden, according to World Bank data. The fund also aims to help establish a global benchmark for companies and investors on the cost of their carbon footprints.
KRBN arrives as investors this year are pouring money at a record pace into sustainable investments, including $10.4 billion in the second quarter alone, according to Morningstar. One reason: The coronavirus pandemic has awakened investors to the potential for seismic unforeseen risks, such as climate change, and the need to take them seriously.
Natasha Lamb, managing partner of Arjuna Capital, an impact investment firm in the Boston area, called Kerry’s new fund an important mechanism in helping investors place a “hedge” against the impact of climate change. Some investors, including Arjuna, avoid fossil fuel investments, but the negative impacts of global warming are becoming too pervasive ― passive resistance isn’t nearly enough.
“The fact is that climate change is going to lead to economywide risks, which will end up affecting your entire portfolio,” Lamb said.
After leaving the State Department in 2017, with the arrival of the Trump administration, Kerry returned to Boston, where he has a longtime home on Beacon Hill’s Louisburg Square with wife, Teresa Heinz Kerry.
He has remained focused on climate, perhaps even more so since President Trump pulled the United States out of the Paris climate accord, a move that takes effect in November.
Last year, Kerry cofounded World War Zero, a bipartisan coalition that brings together world leaders (former presidents Bill Clinton and Jimmy Carter) and celebrities (Leonardo DiCaprio and Sting) to drive public policy change on climate. This year, Kerry worked alongside New York congresswoman Alexandria Ocasio-Cortez to cochair a climate task force for Joe Biden.
“Joe has the most forward-leaning and exciting climate plan that has been put forward in any presidential race ever,” Kerry said. “It’s not command and control. It is incentive-based and significantly oriented toward innovation, research and development, and creating these new possibilities.”
Kerry — who was the Democrats' 2004 presidential nominee and lost to incumbent President George W. Bush — has been busy trying to boost the Biden campaign.
“I do what I’m asked,” Kerry said. “That’s why I’ve been Zooming my life away over the past two months.”
Asked about the former vice president’s chances of defeating Trump, Kerry said: “If the election were today, Joe Biden would win. But it’s not today. Nobody knows better than I do what happens in the last couple of weeks [of a campaign.] You have to work your butts off."
Shirley Leung is a Business columnist. She can be reached at email@example.com.