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Financing Change

Financial markets have a reputation for being the playground of the greedy and self-serving.

However, this attitude towards financial markets is slowly changing as this sector seeks to become a stakeholder in the fight against global warming. In what may be said to be the development of conscious capitalism.

International instruments such as the Kyoto protocol have developed a framework for financial services providers to assume a role in the fight against climate change by facilitating carbon trading, and financing climate adaptation.

Furthermore, the financial sector seems to be enthusiastically involved in the fight against global warming. The involvement of the financial sector must however be taken with a pinch of salt, after all the purpose of even having financial markets is to achieve the bottom line, i.e. make money and lose none.

As it is, any attempt made at getting the financial sector to refrain from pumping money into commodities such as oil, coal and other traded metals would be futile.

Companies trading in these articles have long been financed by the markets and will for some time continue to be financed by markets.

The only way in which financial markets are going to play a role is by financing climate change mitigation and adaptation, however, not to the exclusion of projects which still have a great quantifiable adverse effect on the environment.

What must be borne in mind is that environmental laws and policy seek to mitigate human induced negative environmental impact, but environmental laws compete with corporate laws which include the duties corporate management has to the company and its shareholders.

One of which is the duty to keep the business of the company and not to deliberately engage in activity that would occasion a foreseeable loss. Financial services providers may not view financing research into alternative fuel (for instance) relative to mining coal, which is almost always a lucrative venture.

The balance between capitalism and socialism is a hard one to realise.

This may also be aggravated by the fact that corporations have social corporate responsibility programmes to hide behind. It is submitted that genuine climate finance will be realised when less money is poured into green projects and much less into projects with adverse impact on climate change.

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