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Bankers Going Green? ...the UNEP Finance Initiative
Hassan Masum, 10 Jan 06

The UNEP Finance Initiative is a global partnership between banks, investors, and insurers, which aims to understand environmental challenges and the potential trillion-dollar markets they bring. During the recent UN Conference on Climate Change in Montreal, they held a side event on post-Kyoto policy.

In the resulting report, CEO Briefing on the Future of Climate Change Policy: The Financial Sector Perspective, their position is very clear: The evidence is overwhelming – human-induced climate change is real, and the environmental, economic and social costs due to inaction against this threat are already high and are likely to be much higher in future...The Kyoto Protocol is the start of an inevitable transition to a low-carbon economy. There is an urgent need now to extend this framework beyond 2012, as a key part of a global policy regime, in order to foster investments in low and non-carbon technologies.

After some general suggestions for post-Kyoto mechanisms, the report gives four key recommendations:

  • Adopt a clear, precautionary long-term reduction target and pathway. Take into account fully the developing scientific consensus, as articulated by the IPCC, with the objective of preventing the average global surface temperature from rising more than 2°C (3.6°F) above its pre-industrial level...consider the need for investment, innovation and roll out of climate friendly technologies in a scaled-up manner...
  • Provide early, clear guidance on international and national climate policy regulations beyond 2012. Without a clear long-term framework, private financial institutions are unlikely to engage in large volume mid- to long-term climate mitigation/adaptation investments...Under an international regime, all countries should progressively engage in emission reductions activities, using a staged approach, based on an appropriate scale and form of commitment...
  • Foster an appropriate framework for the global carbon market. A liquid and efficient global carbon market is essential for achieving GHG emission reductions at minimum cost...
  • Set clear targets for renewable energy and energy efficiency. The finance sector has a clear interest in renewable energy, and strong national or regional targets with an effective, stable support mechanism will enable more capital to flow into this sector. Industrialised countries should establish renewable energy targets, and remove barriers to investment in clean energy and energy efficiency technologies. End-user efficiency standards should be made progressively more stringent. With the help of the industrialised world, where needed, developing countries can look to adopt higher energy efficiency standards and cleaner energy...

A couple of other selections from their catalogue of publications give an insider perspective on familiar issues:

Generation lost: young financial analysts and environmental, social and governance issues. Young analysts appear unconvinced over the materiality [i.e. relevance] of most environmental, social, and governance issues to business; unable to consider them because of inadequate information, training, or tools; and unwilling to depart from business as usual because of conflicts with remuneration, career advancement, or culture...Sustainability advocates could group environmental, social, and governance issues as intangibles along with reputation, strategic vision, brand equity, and other subjectively-valued, but undeniably material, intangibles. The term non-financial is best avoided, as are moral arguments. To overcome the widespread cynicism over materiality, it will be important to put forth credible, specific examples.

A legal framework for the integration of environmental, social and governance issues into institutional investment. A detailed look at what the law says in countries around the world about considering triple bottom line factors in fund management: In our business, the investment business, ethical conduct extends beyond not breaking the law to properly interpreting what is in the best interests of the savers who are the ultimate beneficiaries of the institutional pools of money we are engaged to oversee or manage. This is where the interesting questions concerning fiduciary responsibility come to the fore: are the best interests of savers only to be defined as their financial interest? If so, in respect to which horizon? Are not the social and environmental interests of savers also to be taken into account? Indeed, many people wonder what good an extra percent or three of patrimony are worth if the society in which they are to enjoy retirement and in which their descendents will live deteriorates. Quality of life and quality of the environment are worth something, even if not, or particularly because, they are not reducible to financial percentages.

It's not just the insurers tackling climate change; scouts are out in force from leading elements of the whole financial world.

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All good and well, as long as the primacy of the State is stressed in this matter which requires global governance, not a strategy of leaving it up to those who created the problem in the first place.

I hope WC is not falling into this heinous trap which is being set up by the US right now, which consists of having the private sector pledging to clean up its act all by itsself, 'voluntarily', without any state interference.

I suspect that part of this (on the surfaca) well-meant drive of commerce and capital to "exploit" climate change as an opportunity, is at least a way to push the wicked and lethal American agenda on this front.

We must resist it at all costs. The time for games is over. Commerce and capital must be subjected to the State once again, else there's no real point in starting the most basic efforts.

Posted by: Lorenzo on 11 Jan 06

So far as I can see the primacy of the state in this matter has mainly resulted in talkfests and blather, or occassionally, as in Kyoto, talkfests and blather followed by weak commitments soon reneged on. If the bankers want to cost out saving the world, and the polluters, finally, want to pump out the tech to help it, they should go for their life. Governments will catch up. That's what they do.

Posted by: Adam Burke on 11 Jan 06

See, on the planet where I live, governments don't catch up, they create the standards and protect human dignity.
When in the 19th century, the industrialist and the capitalist used laborers as slaves and their children as worse, governments took the initiative to change the situation.
On my planet, this has been the case for health care, social protection, environmental standards, security, etc... The result is that my planet is the healthiest, the cleanest and the most prosperous.
I would find it problematic to see aliens ruining our planet and the achievements of our governments.

Posted by: Lorenzo on 12 Jan 06

Governments don't create, they maintain, and they certainly don't create standards of human dignity. Humans create standards of human dignity.

Governments certainly did not take the initiative on labour conditions, or actual slavery for that matter, in the 19th century: activists took the initiative and governments followed their lead. Governments are huge inertial institutions - what else could they do? Where government tries to play sf writer and innovate, they often get it wrong; and when they get it wrong they get it wrong for everyone.

On my planet power doesn't flow down from government to people, people create facts on the ground and governments play catch up football.

Posted by: Adam Burke on 12 Jan 06

Well, Adam, corporations and companies are definitely the last to think of other people. It's the core of what they do (making profit for themselves).
So I agree that governments protect citizens against corporations after citizens have given governments the signal to do so. Where I live, we have parliaments ('the citizens') who produce a government, which implements the demands of the citizens.

But one thing is certain: of all those players, corporations can be least trusted to protect people or to help solve global crises (which they themselves create), since their logic is one of selfish interest. The logic of the State is one of collective interests.
That was the pretty simple observation I was trying to make.

I understand that in the Anglosaxon world governments are often looked upon as something evil and collective wellbeing as taboo, while in Europe they are seen as benign forces for good, who have primacy over selfish interests of corporations.

It's a cultural difference that won't be overcome all that easily.

Posted by: Lorenzo on 13 Jan 06



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