Written by David Collins, CEO of First Derivative.
We all love a bad boy turned good story; the very idea that City and Wall Street bankers could be aligned with Greta Thornberg et al would have been laughable even a year ago but that has all changed even if Ms Thornberg doesn’t know it yet.
Environmentalists have an unlikely ally in global finance and through that global capitalism, one that possesses extraordinary power to effect change. That power is immediate and beyond anything impotent governments are prepared to achieve. Posturing politicians will talk a lot and do little but the bankers are the opposite, they say little and are already acting.
The power that global finance can exert is able to create profound change, channelling money away from anything polluting and towards initiatives that are clean and environmentally beneficial. They achieve this simply by changing the cost of money, treating carbon footprints like they do credit ratings. If you are a good credit risk you can borrow money cheaper than those with poor ratings, It will be the same with carbon, low carbon (and Methane) footprint gives you access to cheaper money; poor ratings and your access to money will be made so prohibitively expensive it isn’t worth undertaking the venture.
What about all those ‘dirty’ old firms who can afford to continue funding their own pollution? They still need access to international finance to structure project finance, conduct international trade, manage FX and interest rate risk. They will find they are cut off, banks, keen to protect their own image, will not offer services to polluters bent on non-reform. Banks already employ robust Know-Your-Client processes to protect themselves from nefarious individuals or organisations, carbon and methane footprints will be added to this discovery process that will track deep into the supply chain.
Beyond that the environmental lobby will have access to huge amounts of offset capital. Regardless of how much we restrict our carbon footprints we can’t avoid creating some carbon and as companies strive for carbon neutrality they will put up funding for offset programs. There are already examples of this happening: fisherman in Indonesia are being paid to fish plastic out of the ocean, that plastic is then being processed into bricks that are being used to create low cost and environmentally sustainable local housing. Forestation projects are finding incentives beyond governmental policy, all financed by global capitalism.
This is just the tip of the iceberg, the bankers have only just started and the value of money being poured into environmental projects will become hugely transformative, greater than the wildest dreams of most environmentalists. We could see reforestation on a massive scale, affected by environmentalists, entirely paid for by companies and arranged by the bankers.
For environmental activists this is the time to dream; the power not just to arrest the damage but to reverse it could soon be in your hands thanks to the bankers; perhaps the world’s most unlikely superheroes!
