Financial giants can have a pivotal role for climate stability


Banks, pension funds and other institutional investors have a key role to play in efforts to avoid dangerous climate change. A limited number of these investors have considerable influence over the Amazon rainforest and boreal forests that are known ‘tipping elements’ in the climate system. Protecting these ‘tipping elements’ should be a priority for investors to help reduce both climate change and systemic financial risks created by it.

Source

Many people believe that the market and/or capitalism are the enemy of sustainability. They see the massive damage wreaked in the name of business and thus label big business as the source of the problem. Naomi Klein’s book “This Changes Everything: Capitalism vs. The Climate” is a prime example of this thinking. 

What I have so often seen as unrecognized is that the consumer is the other side of the equation in this picture. The role of the consumer and the blame they share is too often ignored or downplayed. It is not that often acknowledged that in our “evil” capitalistic society, big business, for all its seeming woes, is driven by consumer demand. Consumers are often portrayed as a victim of big business; they are forced into such unsustainable choices by marketing manipulation and so forth. Thus, they are victims and the market is really to blame.

But the truth is this: if big business is wreaking havoc, then consumers are mindlessly playing along — all in the sake of saving one or two more of the almighty dollars. If big business is driven by the almighty dollar — so are consumers. Heaven forbid making more sustainable purchases might mean one less night out of the town or one fewer big screen TVs.

To see evidence that big business can work in favor of sustainability, we need look no further than corporate giants. Facebook recently announced that their new data center would be entirely powered by wind. They are either doing so because they care (a hard pill for anti-capitalists to swallow), because they are catering to consumer demand (another hard pill), or because wind power is more economical (in which case government gets all of the credit and the market gets none).

More examples include McDonald’s which sources 100% of their fish from Marine Steward Council certified fisheries, and much of their coffee from Rainforest Alliance certified sources. While these certifications are not perfect, they are substantial and do not appear to be mere cases of greenwashing. Again, McDonald’s is either doing this out of the goodness of their heart, or to cater to consumer demand (i.e. to gain more of the almighty dollar).

Another prime example not directly related to sustainability is the fact that almost all  milk produced in the U.S. is rGBT free. You will find this on virtually every carton of milk in the United States. This is not because of governemnt; the FDA states there is no difference between rGBT milk and non-rGBT milk. This was purely a result of consumer demand.

Consumers can play a vital role by choosing to make sustainable purchases. A simple example would be to purchase effective yet environmentally friendly detergent such as Seventh Generation products. I’ve used them; they work great. The downside is that you will spend a couple more bucks. 

These purchases have three important effects. One, they directly impact the environment by displacing more polluting conventional options. Though small, this effect adds up. Two, they support the company which, if its values are really aligned with sustainable practices, is a good thing. This support helps them grow and produce more cost-competitive products. Third and most importantly, the more dollars are spent on these companies, the stronger a signal to business people that sustainability is in demand. Business people cannot read minds;  they must look to market signals to see what consumers are demanding. This is in part, where companies such as McDonald’s get their information from.

Imagine if a million customers boycotted fast food restaurants and wrote to McDonalds telling them that they would not buy another burger until McDonald’s made a similar commitment to sustainably raised food, in the similar vein as Chipoltle. Would they respond? You damn well bet they would. As a former department manager for McDonald’s, I can tell you that the corporate people take customer feedback very seriously. As an amateur wanna-be economist, I will say that the drive for the almighty dollar means that McDonald’s could not afford to ignore such an event — were it to happen.

The moral of the story is that the drive for the almighty dollar is a double-edged sword. It is up to consumers to make it swing in the right direction. Rhetoric that portrays capitalism as the evil menace and government (lol) as the knight in shining armor is all too damaging. Pulitzer prize winning journalist Thomas Friedman has the right attitude towards markets in his book “Hot, Flat and Crowded”, where he asserts that markets are the only force that can respond quickly and powerfully enough to produce the true green revolution we need.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Financial giants can have a pivotal role for climate stability


Banks, pension funds and other institutional investors have a key role to play in efforts to avoid dangerous climate change. A limited number of these investors have considerable influence over the Amazon rainforest and boreal forests that are known ‘tipping elements’ in the climate system. Protecting these ‘tipping elements’ should be a priority for investors to help reduce both climate change and systemic financial risks created by it.

Continue reading “Financial giants can have a pivotal role for climate stability”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.