10 years after the Lehman crisis, we still cannot trust private finance with Earth

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Lehman Brothers filed for bankruptcy on September 15, 2008. The investment banking collapse was the straw that spilled the bucket of global finance, triggering a decade of foreclosures, bailouts and austerity.

The resulting tsunami hit the world economy and public sector, discredit finance and its attempts to extract large rents from all aspects of the economy, including housing and food. An alternative was urgent.

Ten years later, private finance and large investors will play a central role at COP24 in Katowice, Poland, and in the full implementation of the Paris Agreement 2015.

Representatives from pension funds, insurance funds, asset managers and major banks will attend the meeting and lobby governments, cities and other banks to encourage investment in infrastructure, production energy, agriculture and the transition to a low-carbon economy.

Has finance cleaned up its act?

There is a $ 2.5 trillion gap in development assistance which must be met if poor countries can adequately mitigate the effects of climate change. With little enthusiasm among rich countries to put it off, the role of private finance is inevitable. Policymakers trust financial capital as our best hope for securing investments to avoid catastrophic warming above 1.5 ° C.

This has been the case for some time – the first announcement came in United Nations Climate Summit in 2014, when a press release posted on the UN website said the investment community and financial institutions would “raise hundreds of billions of dollars to finance low-carbon, climate-resilient pathways “.

Since then, networks that emphasize the role of private finance in saving the planet have multiplied, including the Climate Finance Session at the Sustainable Innovation Forum, which will also be held in Katowice, on December 9 and 10, 2018.

It’s hard to ignore that a heavy reliance on private finance means putting Earth’s future in the hands of the individuals and institutions that have brought the global economy to the brink of collapse. It may be partly true that some are opting out of fossil fuels and spending their money on better projects. But before placing our hopes in finance to solve climate change, there are some things we need to ask ourselves.

Tough questions for COP24 negotiators

How did we get to a point in history where it is taken for granted that public money alone can never be enough to finance our transition from fossil fuels? Is it an objective condition with no clear causation or liability, or something else?

What about the fact that global military spending in 2017 reached US $ 1.7 trillion while poor countries pledged funding for climate change adaptation and mitigation in 2015 still waiting? What about the cost of financial sector bailouts, which in the UK alone has been estimated to be 850 billion US dollars? As Michael Lewis noted in his boomerang theory, states that have supported financiers with public money are now asking those same financiers to step in and do the job that states should be doing.

And this leads to the second consideration.

Climate change is historically, politically and socially complex. If sustainable finance is not presented as the only solution, the analysis of its role produces a series of strategic short circuits.

It oversimplifies and depoliticizes the response to climate change. It legitimizes the idea that sustainability can be achieved in continuous growth and expansion, which are essential to the survival of the financial sector.

He rewrites our outlook on our planet in the vocabulary of finance and his obsession with return on investment. It marginalizes any claim to fight climate change on the basis of present and historical injustices, redistribution and bottom-up projects organized by ordinary people.

It accepts that the financial way of defining sustainability and its achievements is intrinsically aligned with the rights, interests and needs of people and the planet.

Finance may be a partner in the fight against climate change, but it is certainly not a partner driven by altruism. He is motivated by the generation of benefits from the transition. It is therefore not surprising that power generation, railways, water management and other forms of climate change mitigation have been identified as priorities for sustainable finance.

Tackling Climate Change on Wall Street Terms

Wall street can find big returns by investing in the transition to “greener” infrastructures, including less green ones Chinese Green Belt and Road and dams like the Belo Monte, a project that initially requested carbon credits and was labeled as a sustainable investment. Green bonds can help cities finance projects aimed at reducing their environmental impact or adapting to climate change.

However, if money is the engine, then private investors should not be expected to be interested in projects that will not generate sufficient returns, but which would benefit people or cities that cannot. not pay service or debt, or that would protect vulnerable people in the face of climate change. If climate change is tackled by Wall Street rules, people and projects will only be supported on the basis of their profitability.

Ten years ago, the world saw that finance permeates all aspects of the global economy. At the time, it was clear that financial interests could not build a better and different world. Ten years later, the COP24 must not legitimize the big financial investors as the architects of a transition where sustainability rhymes with profitability.


Tomaso Ferrando, Senior Lecturer in Law, Bristol University

This article is republished from The conversation under a Creative Commons license. Read it original article. The conversation


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