A great Lord Mayor's speech

In his banquet speech last night, the new Lord Mayor called for a re-established social contract between financial institutions and the society they serve.

He suggested that the contract recognise “on the one hand that the UK benefits from financial services, and on the other that we need to do whatever it takes to serve the interests of the individual as well as those of the wider economy”.

The Lord Mayor’s speech also identified that climate change “may be an even greater threat” than the economic crisis. He called for the City to consider, post Copenhagen, how it can build on its leadership in sustainable finance to “do yet more to bring our expertise to bear on building sustainable solutions.”

If this is an early indication, we can expect much from the new Lord Mayor's year in office.

Global Centre Report: A Missed Opportunity for Green Leadership?

Yesterday saw the launch of “Asset management: the UK as a global centre”, a report produced under the joint chairmanship of the Chancellor of the Exchequer and the Chair of the UK’s Investment Management Association.

There is a major missed opportunity in the report. This can be summed up in three words - “carbon”, “climate” and “green”. I searched the PDF for all of them. Each returned “No matches were found”.

So, within a month of the Copenhagen Summit, this significant report on future UK leadership in asset management doesn’t even mention the challenge of redirecting capital towards low carbon industrial and social transformation.

Welcoming the report, Financial Services Secretary Paul Myners said he looked forward to “… the prospect of on-going engagement with the industry on .. the role of markets in society and ethical and moral dimensions to investment”. Lets hope he addresses this!

Capital and Control

The flow of reports and comments in the run-up to both Copenhagen and the final recommendations of the Walker Review continues this week.

“Catalysing low-carbon growth in developing economies: Public Finance Mechanisms to scale up private sector investments in climate solutions” is the latest on “capital” for the low carbon economy. It was launched today by UNEP in partnership with an impressive range of pension, investment and insurance organisations.

Meanwhile, on effective shareholder ownership and “control”, I was struck by this piece “not more regulation, more Responsibility” from Colin Melvin of Hermes in Sunday’s Independent.

Archbishop highlights a shared cultural crisis

Creating a more responsible finance sector requires rebuilding its connection to the wider world and rediscovering a sense of both responsibility for the future of the natural world and joy in making a positive contribution. Or at least that was my conclusion after reading a powerful speech by the Archbishop of Canterbury on climate change delivered last week.

The Archbishop talks about a shared cultural crisis that “could be summed up rather dramatically by saying that it’s a loss of a sense of what life is … a web of interactions, mutual givings and receivings”. He talks about “our calling to nourish” life and secure “a future for all living things”.

He says “a good deal of the talk and activity around the financial collapse has the marks of .. ‘displacement activity’ – precisely because it fails to see where the roots of the problem lie; in our amnesia about the human calling” and “whatever we do to combat the nightmare possibilities of wholesale environmental catastrophe has to be grounded not primarily in the scramble for survival but in the hope of human happiness”.

Even if – like me - you don’t share his religious lens, the speech contains valuable and inspiring insights. Many thanks to UKSIF Vice Chair Helen Wildsmith for pointing me to it.

Green Bonds and a UK Green Investment Bank: New public policy resource

Green Alliance has just launched a useful new section of its website called Green Finance UK. This aims to cover the developing public policy debates on Green Bonds and a UK Green Investment Bank. Worth checking out!

Targets to budgets: bridging the divide between science and finance

Scientists are thinking more about how they communicate to decision-makers on climate change. Prompted by frustration over a lack of action despite compelling evidence, some are calling for a ‘common climate language’.

This is very welcome. The difficulty of translating the possibilities and probabilities of scientific projection to the certainties and time frames used by capital markets is a significant barrier to these markets fully integrating climate change.

A new study published this week may point to one way of tackling this.

The study, led by Myles Allen of Oxford University grimly finds that the world has already burned half the fossil fuels necessary to bring about a 2˚C rise in average global temperatures.

With this research, his team argues for the current range of targets and timetables on climate change to be re-framed as an available budget (‘we can only burn another x tonnes of carbon’).

This got me wondering…

...would a shift of narrative from targets to budgets help investors and their regulators understand the impact (and possibilities) of climate change?

Whilst this might be dismissed as trivial semantics, such shifts – as pointed out in this piece - may be the key to ‘greening our brains’.

Do the multiplying plans address the challenge?

We’re seeing a lot of new plans at the moment, from Nick Stern’s new book to the CBI’s roadmap to a low-carbon economy.

An easy way to start checking whether these reflect our need to "shift our cultural assumptions to fit our circumstances and move into a more fulfilling, lower-energy world" is to keep the Transition Timeline scenarios in mind. These scenarios look at what might happen if we DO recognise the science of climate change, but DON’T change our culture, and the economic and other institutions that reflect it (Hitting the Wall) and vice versa (The Impossible Dream).

A historic but limited contribution

Today’s UK Budget Day was a historic occasion as the Chancellor announced the first ever carbon budget figures. It was even held on Earth Day. And it is good news that the HM Treasury budget web site includes a section on “building a low carbon recovery”.

Green Alliance was cautiously optimistic, calling it “Only a small step for mankind, but a big leap for HM Treasury” but the BBC asked “Green tinge or blue rinse?”.

BWEA seemed happiest, particularly due to the announcement of a deal offering up to £4 billion of European Investment Bank funding for renewables. The Renewable Energy Association offered a more restrained welcome highlighting that the proportion of stimulus funding allocated to green investment remained below the 20% recommended by Lord Stern on the information available.

The general reaction? Still a long way to go. And personally, however hard I try, I still feel under-whelmed by the announcements compared with the scale of the challenge.

Investors call for 'green' focus in economic recovery measures

A group of major investors, representing over £400bn in funds under management, has today written to Gordon Brown, as Chair of the London Summit, supporting a strong ‘green’ element in programmes of fiscal stimulus undertaken by government.

The initiative was convened by UKSIF and Tomorrow’s Company.

Robustness and Revival

Key points in the article “Revival requires a broad spread of demand” in last Monday’s Financial Times might have come from a member of the Network for Sustainable Financial Markets, the Marathon Club or indeed UKSIF. Instead, the piece was by Kemal Derviş, until recently head of UNDP and a former Turkish government minister.

The points were:

“A central problem in many markets has been short-termism and herd behaviour.”

“Part of the fundamental rebalancing will have to involve a regulatory framework and corporate governance that ties rewards to longer-term performance.”

“The crisis should teach us … not to underestimate the potential damage from events deemed unlikely or hard to predict. The costs of the financial crisis may pale in comparison to some of the long-term risks attached to irreversible global climate change, pandemic diseases and nuclear weapons proliferation.”

“A crisis can also be an opportunity for fundamental improvement. If this one teaches us that robustness is as important as efficiency in human affairs, it will have been such an opportunity.”

Yes, Yes, Yes and Yes!

Would dethroning GDP help build public support for the changes ahead?

As the Financial Times reported recently the Kingdom of Bhutan focuses on Gross National Happiness (GNH) instead of GDP: "the theory behind GNH is simple – economic growth is not the end in itself but a means to achieve other aims, such as peace, security, greater well-being and happiness". The article goes on to describe similar initiatives that are underway across the world, from France to the USA to within the OECD.

In fact research shows that although GDP has grown in the developed world over the last few decades, well-being has stagnated. In "Happiness: Lessons from a New Science" Richard Layard (the UK government’s happiness tsar) argues that money is only one driver of well-being, the others being work, private life, community, health, freedom, and a philosophy of life. I’ve found that this list rings true for most people: there seems to be a growing recognition that "earn more, consume more" is a false god. Even climate and resource crunch sceptics are often interested in finding more effective ways to increase their families’ well-being than consuming to keep up with the Joneses.

There is growing cross party support for well-being to replace wealth as the aim of policy making in the UK, and bottom-up initiatives like Transition Towns that resonate with both the well-being and sustainability agendas are spreading rapidly. Perhaps these are the first signs that shifts in public opinion will support the action governments will need to take to simultaneously improve quality of life and maintain a viable environment for human existence.

Can we transform our economy from a forward-moving aeroplane to a hovering helicopter without crashing?

This question is from a series of articles about the troubles that lie ahead for the global economy published in the New Scientist last October. The graphic image it conjures up seems to capture the challenge humanity faces this century. Avoiding a crash will be tricky!

The New Scientist elegantly shows that despite technological advances we’re rapidly overshooting our planet’s carrying capacity: the average person is still consuming more of the planet’s resources every decade and we are currently increasing our global population by over 200,000 people a day. Ecologists know that if this continues our population will collapse.

However, the New Scientist offers its readers an optimistic scenario for 2020 based on a "steady-state" economy that is thriving within ecological and political limits set by science and society. There are clues in the scenario about how we’ll get from here to there, but not about how the social and political will to change developed so quickly.

Will the leaders of the G20 nations focus on patching up and redesigning the aeroplane? Or will they take the opportunity the current crisis provides and create genuinely sustainable recovery? As Prince Charles said recently "any difficulties which the world faces today will be as nothing compared to the full effects which global warming will have on the world-wide economy".