Green or greedy? How the financial sector could save the planet

How corporations hide their environmental impact and how investors can hold them to account.

Giant multinational corporations have a bad name when it comes to the environment. While they would prefer us to remember their "responsibility" schemes, those of us with more than half an eye on the news are more likely to think of coal-fired power stations, oil-funded "scientists" and government lobbying. Yet when it comes to climate change, it is remarkable how little we know about what the world's largest companies are doing.

Less than half of Europe's 300 largest companies actually disclose complete verified data on their greenhouse-gas emissions, according to areport released this week by the UK-based independent non-profit research body the Environmental Investment Organisation (EIO). Moreover, over one in ten gives no information at all.

While the general trend is to greater corporate transparency, it is clear that there is a great deal of work to be done. The EIO hopes that by publicly ranking companies by their emissions and transparency, it will put pressure on the worst offending corporate giants.

However, public awareness alone is unlikely to make corporations clean up their act. Despite the hard work and success of groups such as Greenpeace and Friends of the Earth, we are still pumping greenhouse gases into the atmosphere at a rate that, if continued, will bring untold harm to society.

Co-ordinate your response

This is where the financial sector could help save the day. Time after time, governments fail to reach binding international agreements on emissions. Moreoever, even if all the relevant countries met the targets set by the (non-binding) Copenhagen Accord, this would still imply a dangerous temperature rise of between 2.5° and 5°C before the end of the century.

If governments cannot take the rapid action we need to avoid dangerous climate change, a co-ordinated private-sector response is needed. What better way to do this than through stock markets, operating across borders and without the need for lethargic governmental mandate?

Much of what the world's listed companies do is controlled ultimately by the stock market and those who invest in it. These companies also produce many of the environmentally damaging goods and services we consume. The EIO is aiming to use its emissions rankings to create new types of financial products that harness the western model of shareholder capitalism to drive emissions reductions.

The idea is simple: subtly modify where large, mainstream investors put their money to alter the supply and demand for different companies' shares according to their carbon emissions. The EIO's forthcoming Environmental Tracking Index series will be based on a conventional index fund, tracking stock-market performance to attract enough investors, but reweighted according to each company's emissions and transparency to give it clear incentives to reduce its footprint and be open to public scrutiny.

If the past 25 years have taught us anything, it is the power of financial markets. To many, particularly on the left, this is reason enough to distrust them. However, given that they exist, we can use them to our advantage, to hold corporations to account and build a greener, more open society.

We need to take hold of whatever resources are available to refashion our present, unsustainable means of production. The tools we need are right before our eyes.

Oliver Willmott is an analyst at the Environmental Investment Organisation and co-author of the ET Europe 300 Carbon Rankings Report 2011.

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Leader: Trump and an age of disorder

Mr Trump’s disregard for domestic and international norms represents an unprecedented challenge to established institutions.

The US presidency has not always been held by men of distinction and honour, but Donald Trump is by some distance its least qualified occupant. The leader of the world’s sole superpower has no record of political or military service and is ignorant of foreign affairs. Throughout his campaign, he repeatedly showed himself to be a racist, a misogynist, a braggart and a narcissist.

The naive hope that Mr Trump’s victory would herald a great moderation was dispelled by his conduct during the transition. He compared his country’s intelligence services to those of Nazi Germany and repeatedly denied Russian interference in the election. He derided Nato as “obsolete” and predicted the demise of the European Union. He reaffirmed his commitment to dismantling Obamacare and to overturning Roe v Wade. He doled out jobs to white nationalists, protectionists and family members. He denounced US citizens for demonstrating against him. Asked whether he regretted any part of his vulgar campaign, he replied: “No, I won.”

Of all his predilections, Mr Trump’s affection for Vladimir Putin is perhaps the most troubling. When the 2012 Republican presidential nominee, Mitt Romney, warned that Russia was the “number one geopolitical foe” of the US, he was mocked by Barack Obama. Yet his remark proved prescient. Rather than regarding Mr Putin as a foe, however, Mr Trump fetes him as a friend. The Russian president aims to use the US president’s goodwill to secure the removal of American sanctions, recognition of Russia’s annexation of Crimea and respect for the murderous reign of the Syrian president, Bashar al-Assad. He has a worryingly high chance of success.

Whether or not Mr Trump has personal motives for his fealty (as a lurid security dossier alleges), he and Mr Putin share a political outlook. Both men desire a world in which “strongmen” are free to abuse their citizens’ human rights without fear of external rebuke. Mr Trump’s refusal to commit to Nato’s principle of collective defence provides Mr Putin with every incentive to pursue his expansionist desires. The historic achievement of peace and stability in eastern Europe is in danger.

As he seeks reconciliation with Russia, Mr Trump is simultaneously pursuing conflict with China. He broke with precedent by speaking on the telephone with the Taiwanese president, Tsai Ing-wen, and used Twitter to berate the Chinese government. Rex Tillerson, Mr Trump’s secretary of state nominee, has threatened an American blockade of the South China Sea islands.

Mr Trump’s disregard for domestic and international norms represents an unprecedented challenge to established institutions. The US constitution, with its separation of powers, was designed to restrain autocrats such as the new president. Yet, in addition to the White House, the Republicans also control Congress and two-thirds of governorships and state houses. Mr Trump’s first Supreme Court appointment will ensure a conservative judicial majority. The decline of established print titles and the growth of “fake news” weaken another source of accountability.

In these circumstances, there is a heightened responsibility on the US’s allies to challenge, rather than to indulge, Mr Trump. Angela Merkel’s warning that co-operation was conditional on his respect for liberal and democratic values was a model of the former. Michael Gove’s obsequious interview with Mr Trump was a dismal example of the latter.

Theresa May has rightly rebuked the president for his treatment of women and has toughened Britain’s stance against Russian revanchism. Yet, although the UK must maintain working relations with the US, she should not allow the prospect of a future trade deal to skew her attitude towards Mr Trump. Any agreement is years away and the president’s protectionist proclivities could yet thwart British hopes of a beneficial outcome.

The diplomatic and political conventions embodied by the “special relationship” have endured for more than seven decades. However, Mr Trump’s election may necessitate their demise. It was the belief that the UK must stand “shoulder to shoulder” with the US that led Tony Blair into the ruinous Iraq War. In this new age of disorder, Western leaders must avoid being willing accomplices to Mr Trump’s agenda. Intense scepticism, rather than sycophancy, should define their response.

This article first appeared in the 19 January 2016 issue of the New Statesman, The Trump era