The Staggers

The New Statesman’s rolling politics blog

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.

By Oliver Willmott Published 29 April 2011 17:08

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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Fri, 2011-04-29 23:32 — Keri (not verified)

Do you really believe that a multinational company would even try. Just hang the lot.

Tue, 2011-05-17 02:39 — Gideon Polya

The remorseless, Gadarene capitalists are not going to cease feathering their nests at the expense of Humanity until forced to do so.

Indeed Sir Nicholas Stern (former Chief Economist to the World Bank and key climate change economist) has famously stated: ""The problem of climate change involves a fundamental failure of markets: those who damage others by emitting greenhouse gases generally do not pay. Climate change is a result of the greatest market failure the world has seen. The evidence on the seriousness of the risks from inaction or delayed action is now overwhelming. We risk damages on a scale larger than the two world wars of the last century. The problem is global and the response must be a collaboration on a global scale" (see: http://www.guardian.co.uk/environment/2007/nov/29/climatechange.carbonem... ).

One way of making the polluters pay is via Sanctions and Boycotts. However a very potent market approach is via investment and especially superannuation funds.

Thus there are 3 Ds for Older people and Climate Change Action: Devaluation (of pensions, investments, superannuation and savings in a non-sustainable carbon economy yet continued growth is possible with renewable energy); Death (older people frailer, more susceptible to heat stress through deficient signalling); and Descendants (they will hate us for what we have done to their Planet) (see "Climate Crisis facts and required actions": https://sites.google.com/site/yarravalleyclimateactiongroup/climate-cris... ).

Thus in a recent report on climate change risk, leading investment analyst Mercer has recommended that institutions shift up to 40 per cent of their investments into “climate friendly ” assets (see: http://www.thefifthestate.com.au/archives/20420).

Sat, 2011-04-30 00:21 — BOP (not verified)

What has happened to the New Statesman. Coverage of the happy day and promotion of the financial sector to aid societies ills.

If i want capitalist utopianism i'll read the Times....i'll read Indymedia in future.
Bloody Hell

Thu, 2011-05-19 09:32 — pig (not verified)

"The remorseless, Gadarene capitalists are not going to cease feathering their nests at the expense of Humanity until forced to do so."

....indeed, and sadly very true... unleashing more merchants is not a solution (the world has a market place but it is not such only) and to expect profit motivated minds to provide compassionate solutions is yet another shirking of individual responsibility, each individual must act as he or she sees fit and have the courage to accept the consequence/s...

Tue, 2011-05-17 12:52 — G (not verified)

I dont see why such a market would work, what incentive is there for large institutional investors looking for a reliable regular return bother buying from environmentaly indexed stocks?

This is the trouble that has always nagged "shareholder democracy", it works on the basis of one share one vote, meaning that large institutional investors; legally bound to pursue the highest return for their shareholders will almost always out number and out vote small ethical investors. a green market would at best be a very minor lifestyle offering with nothing like the power of the real market dominated by the big investment beasts.

Sat, 2011-04-30 12:14 — zsremrxc

Green or greedy? How the financial sector could save the planet... yes of course they could wash the feet of the poor as well... !

Mon, 2011-05-02 05:59 — Captain Sensible (not verified)

Grow up you daft bitch tell your readers that is the new born babies and the ordinary worker who produces lots of shit, not fabled dark conspiracy companies, who provide for the consumer!

Thu, 2011-06-02 14:26 — zsremrxc

"Green or greedy? How the financial sector could save the planet"...there is more chance that they will share with us the money that they have stolen from our accounts... rotten bastards talk,rotten bastards listen. !