Towards a New Economy and a New Politics -- by Gus Speth

Gus Speth, retired dean of environmental studies at Yale, is a founder of the Natural Resources Defence Council, World Resources Institute, and author including the recent Bridge at the End of the World (2008). His article is reprinted from Robert Costanza's Solutions Journal 28 May 2010; it was originally a 2010 lecture (recorded on video) to the The New Green Economy conference of the National Council for Science and the Environment (NCSE).

Dawn of a new era -- by Richard Morin

If America’s present system of political economy were performing well, there would be little need to question it or seek fundamental change. But that is not the case. Asked what the key goals of economic life should be, many would reply, “to enhance social well-being while sustaining democratic prospects and environmental quality.” Judged by this standard, today’s political economy is failing. It is a failure that reaches many spheres of national life—economic, social, political, and environmental. Indeed, America can be said to be in crisis in each of these four areas.^{1, 2}

The economic crisis of the Great Recession brought on by Wall Street financial excesses has stripped tens of millions of middle class Americans of their jobs, homes, and retirement assets and plunged many into poverty and despair.

A social crisis of extreme and growing inequality has been unraveling America’s social fabric for several decades. A tiny minority has experienced soaring incomes and accumulated grand fortunes, while wages for working people have stagnated despite rising productivity gains and poverty has risen to a near 30-year high. Social mobility has declined, record numbers of people lack health insurance, schools are failing, prison populations are swelling, employment security is a thing of the past, and American workers put in more hours than workers in other high-income countries.³

An environmental crisis, driven by excessive human consumption and waste and a spate of terrible technologies, is disrupting Earth’s climate, reducing Earth’s capacity to support life, and creating large-scale human displacement that further fuels social breakdown.
And a political crisis is reflected in governmental paralysis and a democracy that is weak, shallow, and corrupted—the best democracy that money can buy.^4-7

The case for fundamental change is underscored especially by the urgency of environmental conditions.¹ Here is one measure of that problem: All that human societies have to do to destroy the planet’s climate and biota and leave a ruined world to future generations is to keep doing exactly what is being done today, with no growth in the human population or the world economy. Just continue to release greenhouse gases at current rates, just continue to impoverish ecosystems and release toxic chemicals at current rates, and the world in the latter part of this century won’t be fit to live in. But, of course, human activities are not holding at current levels—they are accelerating dramatically. It took all of history to build the $7 trillion world economy of 1950; recently, economic activity has grown by that amount every decade. At typical rates of growth, the world economy will now double in size in less than 20 years. We are thus facing the possibility of an enormous increase in environmental deterioration, just when we need to move strongly in the opposite direction.

Accelerating environmental deterioration is most starkly revealed in the global trends—trends in which the U.S. economy and U.S. politics are deeply complicit. About half the world’s wetlands and a third of the mangroves are gone. An estimated 90 percent of the large predatory fish are gone, and 75 percent of marine fisheries are now overfished or fished to capacity. Twenty percent of the corals are gone, and another 20 percent severely threatened. Half the world’s temperate and tropical forests are gone. The rate of deforestation in the tropics continues at about one acre per second. Species are disappearing at rates about 1,000 times faster than normal. The planet has not seen such a spasm of extinction in 65 million years, since the dinosaurs disappeared. Over half the agricultural land in drier regions suffers from some degree of deterioration and desertification. Persistent toxic chemicals can now be found by the dozens in essentially each and every one of us.

Human impacts are now large relative to natural systems. The Earth’s stratospheric ozone layer was severely depleted before the change was discovered. Most importantly, human activities have pushed up atmospheric carbon dioxide by more than a third and increased other greenhouse gases as well, with the result that we have started, in earnest, the dangerous process of warming the planet and disrupting the climate. Everywhere, Earth’s ice fields are melting. Industrial processes are fixing nitrogen, making it biologically active, at the same rate that nature is; one consequence is the development of hundreds of dead zones in the oceans due to over-fertilization. Each year, human actions already consume or destroy about 40 percent of nature’s photosynthetic output, leaving too little for other species.

Freshwater withdrawals doubled globally between 1960 and 2000 and now represent over half of accessible runoff. The Colorado, Yellow, Ganges, and Nile Rivers, among others, no longer reach the oceans in the dry season.

planetary boundaries: Tällberg Foundation

To seek something new and better, a good place to begin is to ask why today’s system of political economy is failing so broadly. Environmentally, the answer is that key features of the system work together to produce a reality that is highly destructive. An unquestioning society-wide commitment to economic growth at almost any cost; powerful corporate interests whose overriding objective is to grow by generating profit, including profit from avoiding the environmental costs they create and from replicating technologies designed with little regard for the environment; markets that systematically fail to recognize environmental costs unless corrected by government; government that is subservient to corporate interests and the growth imperative; rampant consumerism spurred by an addiction to novelty and by sophisticated advertising; economic activity now so large in scale that its impacts alter the fundamental biophysical operations of the planet—all combine to deliver an ever-growing world economy that is undermining the ability of the planet to sustain life.¹

This environmental reality is linked powerfully with growing social inequality and the erosion of democratic governance and popular control. Only a powerful democratic reality can guide and regulate the economy for environmental and social ends, and only a society that is cohesive and fair is likely to rise fully to shared challenges like the environment. Unfortunately, Americans today live and work in a system of political economy that cares profoundly about profits and growth and that cares about society and the natural world mainly to the extent it is required to do so. It is thus up to us as citizens to inject values of fairness, solidarity, and sustainability into this system, and government is the primary vehicle we have for accomplishing this. But typically, we fail at this assignment because our politics is too enfeebled and government is excessively under the thumb of powerful corporations and concentrations of great wealth. Consider the similarity between the recent financial collapse and the ongoing environmental deterioration. Both result from a system in which those with economic power are propelled, and not restrained by government, to take dangerous risks for the sake of great profit.

The prioritization of economic growth and economic values is at the root of the systemic failures and resulting crises America is now experiencing. Today, the reigning policy orientation holds that the path to greater well-being is to grow and expand the economy. Productivity, wages, profits, the stock market, employment, and consumption must all go up. This growth imperative trumps all else. It can undermine families, jobs, communities, the environment, and a sense of place and continuity because it is confidently asserted and widely believed that growth is worth the price that must be paid for it. Growth is measured by tallying GDP at the national level and sales and profits at the company level, and pursuit of GDP and profit is the overwhelming priority of national economic and political life.

But an expanding body of evidence is now telling us to think again.^8-18 Economic growth may be the world’s secular religion, but for much of the world it is a god that is failing—underperforming for most of the world’s people and, for those in affluent societies, now creating more problems than it is solving. The never-ending drive to grow the overall U.S. economy undermines communities and the environment. It fuels a ruthless international search for energy and other resources; it fails at generating the needed jobs; and it rests on a manufactured consumerism that is not meeting the deepest human needs. Americans are substituting growth and consumption for dealing with the real issues—for doing things that would truly make the country better off. Psychologists have pointed out, for example, that while economic output per person in the United States has risen sharply in recent decades, there has been no increase in life satisfaction, and levels of distrust and depression have increased substantially.^1,19,20

Writing in Yes! A Journal of Positive Futures, psychologist David Myers sees this pattern of soaring wealth and shrinking spirit as “the American paradox.” He observes that at the beginning of the twenty-first century, Americans found themselves “with big houses and broken homes, high incomes and low morale, secured rights and diminished civility. We were excelling at making a living but too often failing at making a life. We celebrated our prosperity but yearned for purpose. We cherished our freedoms but longed for connection. In an age of plenty, we were feeling spiritual hunger. These facts of life lead us to a startling conclusion: Our becoming better off materially has not made us better off psychologically.”^21,22

Before it is too late, America should begin to move to a post-growth society where working life, the natural environment, our communities, and the public sector are no longer sacrificed for the sake of mere GDP growth; where the illusory promises of continuous growth no longer provide an excuse for neglecting to deal generously with compelling social needs; and where citizen democracy is no longer held hostage to the growth imperative.

For the most part, advocates for change have worked within the current system of political economy, but in the end, this approach will not succeed when what is needed is transformative change in the system itself. The case for immediate action on issues like health care and climate change is compelling, but the social and environmental challenges just reviewed will not yield to problem-solving incrementalism. Environmentalists and other progressives have gone down the path of incremental reform for decades, and the results of that experiment are in. The roots of our environmental and social problems are deeply systemic and thus require transformational change—the shift to a new, sustaining economy ushered in by a new politics. George Bernard Shaw famously said that all progress depends on not being reasonable. It’s time for a large amount of civic unreasonableness.

What circumstances might make transformational change and the birth of a sustaining economy possible? A decline in legitimacy as the system fails to deliver social and environmental well-being, together with a mounting sense of crisis and loss—both occurring at a time of wise leadership and accompanied by the articulation of a new American narrative or story and by the appearance across the landscape of new and appropriate models—were all these to come together, real change would be possible. Most of all, what is needed is a new politics and a new social movement, powerful and inclusive. The best hope for such a new political dynamic is a fusion of those concerned about environment, social justice, and political democracy into one progressive force. They all have a shared fate because they face the same reality: a political economy that does not prioritize sustaining human and natural communities.
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Policies for a New Economy.

Americans are told routinely that the priority must be a strong economy. Yet many now appreciate that of equal or higher importance are a strong society, strong nature, and a strong democracy. Today’s economy offers little help in these regards. We must move beyond it. We need to reinvent the economy, not merely restore it.

Americans now face a great imperative to build a new economy—a sustaining economy. Sustaining people, communities, and nature must henceforth be seen as the core goals of economic activity, not hoped-for byproducts of market success, growth for its own sake, and modest regulation. The watchword of the sustaining economy is caring: caring for each other, for the natural world, and for the future.^23-25

America’s open-ended commitment to aggregate economic growth is consuming environmental and social capital, both now severely diminished. That said, it is also clear that even in a post-growth America, many things do indeed need to grow: growth in good jobs and in the incomes of the poor; growth in the availability of health care and the efficiency of its delivery; growth in education, research, and training; growth in security against the risks of illness, job displacement, old age, and disability; growth in investment in public infrastructure and in environmental protection and amenity; growth in the deployment of climate-friendly and other green technologies; growth in the restoration of both ecosystems and local communities; growth in non-military government spending at the expense of military; and growth in international assistance for sustainable, people-centered development for the half of humanity that lives in poverty, to mention some prominent needs.

Jobs and meaningful work top this list because they are so important and unemployment is so devastating. Likely future rates of economic growth, even with further federal stimulus, are only mildly associated with declining unemployment. The availability of jobs, the well-being of people, and the health of communities should not be forced to await the day when overall economic growth might deliver them. It is time to shed the view that government mainly provides safety nets and occasional Keynesian stimuli. Instead, government should have an affirmative responsibility to ensure that those seeking decent jobs find them. And the surest and most cost-effective way to that end is direct government spending, investments and incentives targeted at creating jobs in areas where there is high social benefit. Creating new jobs in areas of democratically determined priority is certainly better than trying to create jobs by pump priming aggregate economic growth, especially in an era when the macho thing to do in much of business is to shed jobs, not create them.

Of particular importance for the new economy are government policies that will temper growth while simultaneously improving social and environmental well-being, policies such as shorter work weeks and longer vacations, with more time for children and families; greater labor protections, job security, and benefits, including generous parental leaves; guarantees to part-time workers; restrictions on advertising; a new design for the twenty-first-century corporation, one that embraces re-chartering, new ownership patterns, and stakeholder, rather than shareholder, primacy; incentives for local production and consumption; strong social and environmental provisions in trade agreements; rigorous environmental, health, and consumer protection, including full incorporation of environmental and social costs in prices; greater economic and social equality, with genuinely progressive taxation of the rich and greater income support for the poor; heavy spending on public services; and initiatives to address population growth at home and abroad. Taken together, these policies would undoubtedly slow GDP growth, but our well-being and quality of life would improve.

If the market is going to work for the betterment of society, environmental and social costs should be incorporated into prices, and wrong-headed government subsidies, a vast empire today, should be eliminated. Honest prices will ensure that people take into account the environmental and social impacts of their purchases, whether they are environmentally conscious or just minding their pocketbooks. High prices are a problem not so much because they are high but because people don’t have the money to pay them and alternatives (such as truly fuel-efficient vehicles) are not readily available. Honest prices would be higher prices for many things, but that does not mean Exxon should pocket the difference or that equity issues should remain unaddressed.

Responsibly high energy prices—driven, for example, by a declining cap on carbon dioxide emissions—will help protect the Earth’s climate, increase demand for efficient vehicles and public transportation, spur new renewable energy industries, decrease the supply vulnerabilities and international entanglements of imported oil, strengthen local communities, and encourage localization rather than globalization. But honest energy prices must be accompanied by measures that make them affordable for those on whom they would otherwise impose a serious hardship. Challenging America’s growth fetish and consumerism will not go far when so many barely get by and are desperate for jobs and greater income security.²⁶ Clearly, addressing social and environmental needs must go hand in hand.

Conventional wisdom on the clash of economy and environment is that we can have it both ways, thanks to new technology and innovation. We do indeed need a revolution in energy, transportation, construction, and agriculture technologies. This ecological modernization can be driven by quantitative restrictions that ensure extractions from the environment do not exceed its regenerative capacities and discharges to the environment do not exceed its assimilative capacities. But the rate of technological change required to deal with environmental challenges in the face of rapid economic growth is extremely high and rarely achieved. If pollution from an industrial facility is cut in half but growth spawns another, similar plant, there is no net gain. Housing, appliances, and transportation can become more energy efficient, but the improvements will be overwhelmed if there are more cars, larger houses, and more new appliances – and there are. There’s a limit to how fast and far new technology can take us; technological change alone is not enough.

Americans are struggling today with the combined impacts of lost financial assets, underwater mortgages, and layoffs. These problems are associated with a slowdown in GDP growth, but they were not caused by a failure of growth, and they will not necessarily be cured by more growth. We have had jobless growth before. As is now appreciated, the current Great Recession and its consequences are the result of government failing to intervene appropriately in the marketplace—in financial markets, in housing markets, in labor markets, and elsewhere. Today we are feeling the effects of misguided policies, including massive deregulation, that have led to deep structural maladies. One lesson is clear: Today’s markets do not function well without strong and effective government intervention.

The economic crisis should also teach us to live more simply and focus more locally. It is time to move beyond consumerism and hyperventilating lifestyles. There has been too little focus on consumption and the mounting environmental and social costs of American “affluenza,” extravagance, and wastefulness. Being less focused on getting and spending (initially, in part, because there is less to spend) can help society rediscover that the truly important things in life are not at the mall nor, indeed, for sale anywhere.

Psychological studies show that materialism is toxic to happiness and that more income and more possessions do not lead to a lasting sense of well-being or satisfaction with life. What makes people happy is warm personal relationships and giving rather than getting, things that are possible at a human scale.^1,27-29

The good news is that more and more people sense that there’s a great misdirection of life’s energy. In one survey, 83 percent of Americans said society is not focused on the right priorities, 81 percent said America is too focused on shopping and spending, 88 percent said American society is too materialistic, and 84 percent want to spend more time with family and friends.³⁰

These numbers, even if half right, suggest that there is a powerful base on which we can build. Indeed, new signposts are emerging: Confront consumption. Practice sufficiency. Create social environments where overconsumption is viewed as silly, wasteful, ostentatious. Establish commercial-free zones. Buy local. Revitalize local economies. Eat slow food. Downshift. Public policy should support these directions, and it should also devise new measures to track improvements in social welfare, a purpose for which GDP is a miserable failure.^31,32

Beyond policy change, another hopeful path into a sustainable and just future is to seed the landscape with innovative models. One of the most remarkable and yet under-noticed things going on in the United States today is the proliferation of innovative models of “local living” economies, sustainable communities and transition towns, and for-benefit businesses that prioritize community and environment over profit and growth. The community-owned Evergreen Cooperative in Cleveland is a wonderful case in point. An impressive array of new-economy businesses has been brought together in the American Sustainable Business Council and the B-Corporation program, and a new Fourth Sector is emerging, bringing together the best of the private sector, the not-for-profit NGOs, and government.^33-41
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A New Politics

The transformation of today’s economy requires far-reaching and effective government action. How else can the market be made to work for the environment rather than against it? How else can corporate behavior be altered or programs built to meet real human and social needs? Government is the principal means available to citizens to collectively exercise their stewardship responsibility to leave the world a better place. Inevitably, then, the drive for transformative change leads to the political arena, where a vital, muscular democracy, steered by an informed and engaged citizenry, is needed.

Yet, merely to state the matter this way suggests the enormity of the challenge. The ascendancy of market fundamentalism and anti-regulation, anti-government ideology has been particularly frightening, but even the passing of these extreme ideas would leave deeper, more long-term deficiencies. It is unimaginable that today’s American politics will deliver the transformative changes needed.

There are many reasons why government in Washington today is too often more problem than solution. It is hooked on GDP growth—for its revenues, for its constituencies, and for its influence abroad. Government has been captured by the very corporations and concentration of wealth it should be seeking to regulate and revamp. And it is hobbled by an array of dysfunctional institutional arrangements, beginning with the way presidents are elected.

Building the strength needed for change requires, first of all, a unified agenda among progressives. As mentioned, the best hope for a new political dynamic is a fusion of those concerned about environment, social justice, and political democracy into one progressive force. A unified agenda would embrace a profound commitment to social justice and environmental protection, a sustained challenge to consumerism and commercialism and the lifestyles they offer, a healthy skepticism of growth-mania and a new look at what society should be striving to grow, a challenge to corporate dominance and a redefinition of the corporation and its goals, and a commitment to an array of major pro-democracy reforms.

The new agenda should also incorporate advocacy of human rights as a central concern. For example, though environmental justice has gained a foothold in American environmentalism, it is not yet the priority it should be. Many established environmental issues should be seen as human rights issues—the right to water and sanitation, the right to sustainable development, the right to cultural survival, freedom from climatic disruption and ruin, freedom to live in a non-toxic environment, and the rights of future generations.

The new politics must turn major attention to the urgent need for political reforms in campaign finance, elections, the regulation of lobbying, and much more. In their book Off Center, political scientists Jacob Hacker and Paul Pierson have developed an important and innovative agenda for political reform, including the revitalization of large-scale membership organizations that give citizens more leverage in the political process and measures that could increase voter turnout, open primaries, pursue nonpartisan redistricting, guarantee a minimum free TV and radio time for all federal candidates meeting basic requirements, reduce the perks of incumbency, and bring back the Fairness Doctrine requiring equal air time for competing political views.⁴² Meanwhile, Common Cause, Americans for Campaign Reform, and others have developed a powerful case for clean and fair elections through public financing, a case now even stronger due to the Supreme Court’s decision in Citizens United v. Federal Election Commission.^43-45

Successful political reform will also depend on addressing issues of social justice. In his book On Political Equality, America’s senior political scientist Robert Dahl concludes it is “highly plausible” that “powerful international and domestic forces [could] push us toward an irreversible level of political inequality that so greatly impairs our present democratic institutions as to render the ideals of democracy and political equality virtually irrelevant.”⁴⁶ The authors brought together by political analysts Lawrence Jacobs and Theda Skocpol in Inequality and American Democracy document the emergence of a vicious cycle: Income disparities shift political access and influence to wealthy constituencies and businesses, which further imperils the potential of the democratic process to correct the growing income disparities.⁴⁷

If the first watchword of the new politics is “broaden the agenda,” the second is “get political.” Lawyering and lobbying are important, but what the new politics must build now is a mighty force in electoral politics. Building the necessary muscle will require major efforts at grassroots organizing; strengthening groups working at the state and community levels; and developing messages, appeals, and stories that inspire and motivate because they speak in a language people can understand, resonating with what is best in both the American tradition and the public’s values and presenting compelling visions of a future worth having for families and children.

Our environmental discourse has been dominated thus far by lawyers, scientists, and economists. It has been too wonkish, out of touch with Main Street. Now, we need to hear a lot more from the poets, preachers, philosophers, and psychologists. And indeed, we are. The world’s religions are coming alive to their environmental roles—entering their ecological phase, in the words of religious leader Mary Evelyn Tucker. And just last year, the American Psychological Association devoted its annual gathering to environmental issues. The Earth Charter text and movement are providing a powerful base for a revitalization of the ethical and spiritual grounds of environmental efforts.

The final watchword of the new politics is “build the movement.” Efforts to build strength in America’s electoral process and to bring together a wider array of constituencies embracing a broader agenda should contribute to the emergence of a powerful citizens’ movement for change. The new politics must be broadly inclusive, reaching out to embrace union members and working families, minorities and people of color, religious organizations, environmentalists, the women’s movement, and other communities of complementary interest and shared fate. It is unfortunate, but true, that stronger alliances are still needed to overcome the “silo effect” that separates progressive communities, including those working on environment, domestic political reforms, the liberal social agenda, human rights, international peace, consumer issues, world health and population concerns, and world poverty and underdevelopment.
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An Agenda for Analysis and Action

Building a new economy and a new politics must be an ecumenical endeavor open to many progressive perspectives and ideas. Progress requires concerted efforts from many communities in at least three areas: challenging the current order of things, envisioning a new order and identifying the initiatives needed to realize it, and building capacity to promote change.

Challenging the current order. A great many Americans remain enthralled by a reigning mythology now deeply embedded in the national consciousness: GDP growth is an unalloyed good. Government regulation and other interference in the economy must meet the test of economic benefit. America is a land of economic opportunity and consumer sovereignty. The poor are poor because they deserve to be. We are well on our way to solving our environmental problems. America is the most democratic nation on Earth, and also the most generous, with the best health care.
The reality, of course, is far from these propositions. It is important that this mythology be dethroned and that accurate information about actual conditions and trends be brought to an ever wider audience. Real life in America too often sharply conflicts with the country’s best values and highest aspirations.

Envisioning a new order. Envisioning the new economy and a new politics involves three linked projects:

1. The Values Project. What are the core values to be prioritized and harmonized?
2. The Transformations Project. What transformations are needed in order to realize core values? What measures would best characterize and carry forward these transitions? It is not difficult to identify areas where transformative change is essential:
• The market: from laissez-faire to regulation and governance in the public interest;
• The corporation: from shareholder primacy to stakeholder primacy, from one ownership and motivation model to many;
• Social conditions: from economic insecurity to security, from vast inequities to fundamental fairness;
• Economic growth: from growth fetish to post-growth society, from mere GDP growth to growth in human welfare and democratically determined priorities;
• Indicators: from GDP to accurate measures of social and environmental health and quality of life;
• Consumerism: from consumerism and “affluenza” to sufficiency and mindful consumption;
• Communities: from ruthless runaway enterprise to vital local economies, from rootlessness to rootedness and solidarity;
• Dominant cultural values: from having to being, from getting to giving, from richer to better, from separate to connected, from apart from nature to part of nature, from transcendent to interdependent, from now to forever;
• Politics: from weak democracy to strong, from corporatocracy to true popular sovereignty;
• Global vision: from economic globalization to planetary civilization worthy of the name, from invidious division to global citizenship;
• Foreign policy and the military: from exceptionalism to interdependence, from hard power to soft, from war economy to peace economy.
3. The Synthesis Project. Presenting a positive, integrated vision of life in a world transformed is a powerful motivator of change. Narrative is important—telling a new American story and forging a new American dream.

Building capacity to promote change. Much needs to be done to strengthen capacities for transformative change. Areas needing attention include:

• “Progressive fusion” in politics: overcoming silos, forging a common progressive agenda, and uniting unexpected allies with shared values;
• Social movements: building a powerful movement for transformative change;
• Community actions: seeding the landscape with innovative “new economy” models;
• Key institutions: engaging religions, local governments, youth, colleges and universities, and others;
• International solidarity: building ties to those abroad with common concerns;
• Crisis anticipation: getting ready for crises that will surely come;
• Ideas, research, and writing: building think-tank capacities and linking ideas to action.

An important initial step is to identify and elaborate on early initiatives and objectives that are plausible and not seemingly utopian, but that create momentum towards long-term goals and shape future paths.
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Conclusion

Historian Richard Hofstadter made the following interesting observation in The American Political Tradition:⁴⁸
“Although it has been said repeatedly that we need a new conception of the world to replace the ideology of self-help, free enterprise, competition, and beneficent cupidity upon which Americans have been nourished since the foundation of the Republic, no new conceptions of comparable strength have taken root and no statesman with a great mass following has arisen to propound them...."
"Almost the entire span of American history under the present Constitution has coincided with the rise and spread of modern industrial capitalism. In material power and productivity the United States has been a flourishing success. Societies that are in such good working order have a kind of mute organic consistency. They do not foster ideas that are hostile to their fundamental working arrangements. Such ideas may appear, but they are slowly and persistently insulated, as an oyster deposits nacre around an irritant. They are confined to small groups of dissenters and alienated intellectuals, and except in revolutionary times they do not circulate among practical politicians.”

Times change. It is now clear that American society is no longer in “good working order.” It is time to foster ideas that challenge the “fundamental working arrangements.”

See also Speth's vision part II
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47. Jacobs, LR & Skocpol, T, eds. Inequality and American Democracy (Russell Sage Foundation, New York, 2005).
48. Hofstadter, R. The American Political Tradition and the Men Who Made It vii–ix (Vintage Books, New York, 1948).

El movimiento "Buen vivir"

Pintura: servindi, texto: ecologia.blog el 04 junio 2009

Las comunidades indígenas del Abya Yala o América defienden el concepto de el buen vivir, en oposición al “vivir mejor”, como un modelo de vida o de desarrollo más justo, más sostenible o sustentable, más ecológico. Se abre con especial fuerza en América Latina, hasta el punto que, recientemente, Ecuador y Bolivia han incluido el buen vivir en sus respectivas constituciones como el objetivo social a ser perseguido por el Estado y por toda la sociedad.

En oposición al vivir mejor occidental, al siempre vivir mejor de la lógica neoliberal, el buen vivir propone un modelo de vida mucho más justo para todos. Para que unos pocos vivan mejor, que es lo que sucede ahora en el Primer Mundo, para asegurar esas desmedidas demandas de consumo y despilfarro, tiene que existir un Tercer Mundo que provea de materias primas y mano de obra baratas. Muchos, en definitiva, tienen que “vivir mal” para que unos pocos “vivan bien”.

El buen vivir es, en cambio, muchísimo más equitativo. En vez de propugnar el crecimiento contínuo, busca lograr un sistema que esté en equilibrio. En lugar de atenerse casi exclusivamente en datos referentes al Producto Interior Bruto u otros indicadores económicos, el buen vivir se guía por conseguir y asegurar los mínimos indispensables, lo suficiente, para que la población pueda llevar una vida simple y modesta, pero digna y feliz.

***

Ver tambien Fernando Huanacuni Mamani: Buen Vivir/Vivir Bien - Filosofía, polítiacas, estrategias y experiencias regionales andinas. Lima 2010: Coordinadora Andina de Organizaciones Indígenas.

Et en français, Mines et changement climatique en Amérique Latine, « un cocktail explosif » !
 sur le Foro de las pueblos indigenas de Lima, nov 2010.

Rights: the crime of Tal Mallohy

Arrested two years ago at the age of 17 and held incommunicado, Tal Mallohi has just been sentenced to 5 years on phony “spy” charges by the Syrian dictatorship. Her crime? Writing poems in praise of peace, freedom and justice. Here are three of the offending poems from her blog, just before she was taken. My apologies for clumsy translation. If you read Arabic, see the original.

The first message to mankind

Rights, my brother:

To every one of the people, to you who outlive this 


to the universe – where love meets hate and guns – you're like me 


I would love to see you smile, living in peace, security and safety 


a shining smile filling the universe with love, as joy fills the soul. 


Rights: where there's a culture of love, as Allah commands 


a brotherly culture of fraternity and solidarity. 


Why is there hunger everywhere? 

why is disease spreading, and no medicine ?

why do men deal death and destruction? 


why do innocents suffer and abusers live? 


why do some die stuffed while others starve? 


Imagine another world: open your hearts to compassion and love. 


You alone can bring back the fear of God, balance to His universe. 


Give us peace and security in our hearts.

(Do not say goodbye, rights, for I am with you always.)

The second message to mankind


Brother wherever you, we are twins, modern souls. 
To you all love, with all my heart (kisses)


To innocent child, caring mother, loving sister (kisses)

I read of human rights that I am not allowed.

But God created me: I have the right to life, not a threat,

I have the right to take care of my family, I have the right to a house, I have the right to food, I have the right to clothing, to science and knowledge.

We look to a future in which women and men and children are free, where there is work, and hope for a better tomorrow, and all are are free.


(Do not say goodbye, rights, for I am with you always.)

The third message to mankind

Rights: ye dwell in the depths of my mind

Why this terrorism in the world why this murder of those who ride bus or train? Why this evil?

Rights: if I disagree with you on ideas, principles, beliefs -- am I not a human being?

All and Ali, respect each other, with all your differences, let others live with their “errors”, avoid hot-blooded contempt, bear their views in patience, take thought before answering opinions that contradict your own.

Rights: may friendship reign, despite differences in food or drink or doctrine,

and compassion for all people on this earth should prevail among us.

(Do not say goodbye, rights, for I am with you always.)

The fourth message to mankind (excerpt)

...In the fall of 1789, the tenth meeting of the US Congress approved the First Amendment of the Constitution

“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.”

So why this Clash of Civilizations?

Why not tell of the Consensus of Civilizations, of intermarriage?

If we look at civilizations impartially

the elements of agreement outweigh the elements of difference.

Rights: let me meet you and you meet me, without prejudging,

meet and build a civilization of mankind, of all.

(Do not say goodbye, rights, for I am with you always.)

Reawakening of indigenous theologies and implications for Christian theology – by Jean-François Roussel

translated by D. Millar from the group blog rapdakar.blogspot.com ;">8 Feb 2011.

We attended an FMTL workshop given by Aboriginal people across the Americas who are participating in the World Forum on Theology and Liberation. They are from a Christian position but of primarily Aboriginal origins: Eleazar López Hernández (Zapotec, Mexico); Marcus Briggs-Cloud (Muskogee, Oklahoma); Maria Chávez (Bolivia), Mario Perez Perez (Nahuatl, Mexico) and Abraham Colque (Bolivia). With them, Roberto Bosch, who is a Brazilian non-indigenous member of WFTL, a defender of the rights of the Guarani of Paraguay.

To account fully for a workshop is not as rich. Here are the points that have most interested me. Lopez initially called for going beyond compassion for injustices suffered by indigenous people, to recognizing that indigenous voices are emerging globally, and that indigenous voices, collectively, are ready to make their contribution to the whole of humanity, to the prospect of a "fair globalization". This is based on various comments by the participants, with questions and potential for Christian theology as a whole -- as long as it welcomes these openings!

In this sense, said Maria Chavez, if crisis is inescapable in indigenous theology, it also expresses celebration. Indigenous theology is lived in the fiesta. In addition to assuming all the connotations of  community, joy, dance, party, or celebration, it also has a one of risk (riesgo). The unexpected can occur there. But the risk is to recover and restore the balance of things. Is it possible to live our crises in a spirit of celebration, hope, and commonality? To seek in fiesta a rebalancing of community?

Internationalization

The indigenous struggle, like worldviews to which it relates, is currently characterized by its internationalization. Abraham Colque pointed to the link between our visit to [the historic slave fort on] Goree Island and the issues that mobilize natives. What began at Goree shows how globalization began, with the theft of resources from the South.

Colque's comment is relevant for Quebec and for Canada as a whole, among other regions. From the 17th century, indigenous economies were deconstructed along with entire nations, starting when the European market for fur turned to the huge reservoir that was the American Northeast. From then on, the indigenous subsistence economy was integrated into the European market economy, leading the Iroquois "to deplete the resource," as they say in Quebec, and thrusting north for more in the Canadian Shield at the expense of the Anishinabeh and Huron-Wendat. But they did not escape economic integration, and lost themselves in the exchange. Aboriginal people and products were underpaid, often treated as objects of low value.

It's the same drama as that facing Africa. And according to the United Nations Programme for Development, the Human Development Index of all Aboriginal communities in Canada is exactly comparable to that of many African countries.

Chavez worked in the World Council of Churches, in the indigenous program. This program is international and everyone relates to indigenous peoples, whether of America, Africa, Asia, Oceania and Europe. And here we touch a very current native condition: linkages between indigenes, relatively isolated from each other until recently. There is a growing alliance of indigenous peoples around the world to fight an unjust globalization.

And churches? And theology? How does this relate to native globalization? Several ways.

"In the worst cases, churches have murdered our souls. In the best case, we were treated in a paternalistic way. "The place of indigenous traditions in the churches is still generally limited to the pageantry of traditional costumes. An example of this is the fact that we considered the native peoples as receiving Christianity, but never as producers of theologies. Even today, we do not take seriously the capacity of indigenous theologians.

The divine mystery is understood differently in the Aboriginal world, which does not mention God in the sense of the personal divinity, transcendent and purely masculine, that colors Christian theology. I acknowledge here the "Great Mystery" of the Lakota, the "Great Power" of Anishinaabeh, the Oki Huron-Wendat: immanent mystery, diffuse, non-localizable Because as encompassing as the air we breathe.

What is an indigenous theology like? Impossible to relate here all the ideas that were presented here in abundance. According to Mario Perez Perez, it proceeds by looking for a full understanding of reality. The holistic approach mentioned here is to find a multiplicity of perspectives on reality, which requires the balance of the four dimensions of life (physical, spiritual, mental and emotional), and by encountering opportunities in a community: it can not be accomplished individually.

In addition, it extends far beyond writing, and actually begins at a deeper, even symbolic level. It is grounded in the vision, colors, smells, tastes, perceptions of reality of the body.

An indigenous feminist theology

Maria Chavez calls on churches, and indigenous theologians themselves, to develop indigenous feminist theology, a double critique of churches and native male-patriarchal theology. This patriarchal view was reinforced by colonialism and liberalism. While indigenous theology is communal, it must take more seriously the female half of the community. For example, developing a consistent position on the roles of women in the community. This does not mean for her, abandonment of the male-female complementarity that characterizes indigenous worldviews, but the rejection of conflict-causing dualism: we never say "this" or "that." This goes beyond heterosexual dualism, which is the foundation of patriarchy. Marcus Briggs-Cloud, in a presentation of Muskogee language, developed a more positive view of homosexuality.

Lopez began the workshop by mentioning the contribution that indigenous theology is willing to make to Christian theology in general. After the workshop, we asked ourselves, can the dominant culture open itself to that insight now?

Three WSF workshops

We are attending the 2011 World Social Forum. This is an excerpt from our bilingual group blog Rapports de Dakar where there are other postings and photos.

(picture below) Water rights in Africa / Droit à l'eau en Afrique

(RITMO, Fondation Daniel Mitterand, Blue Planet Project, Pambazuka and others)

Discussion of the impact of water shortage privatization in Africa accompanied the launch of L’eau, un bien public à reconquérir, édition française de Reclaiming Public Water (2005) by Transnational Institute & Corporate Europe Observatory.

Privatization is still a major threat, as many African groups reported. In their traditional cultures, theft of community water is a crime. Like pasturage, air and fire, it cannot be privately held but is a commons to be shared. Water concerns are linked with state weakness, human security, sustainability, wellbeing, law, access, health, disease risk, drought and starvation (currently ravaging Casamance), economics, multiple use, fishing, crops, and hydro.

RITMO, ong-ngo.org, and Mitterand Foundation were thanked for helping prepare for Le Forum Alternatif Mondial sur l'Eau (FAME) in Marseilles. A simultaneous World Water Walk for Life is planned for 19-22 March. From the Phillipines came a cry to make it a priority in action strategies, to make it an issue of people power.

Purified and potable water were repeated mentioned as essential needs. J-C Koenig of Eau Île de France pointed out that these needs are equally felt in Paris, but people are unaware of what is behind turning on the tap. Education is vital. A Senegalaise spoke from the heart: we are born from water, water is life, for women it is a crucial means to wash, cook, clean their family and home. A Bangladeshi told of living with recurring floods, a natural rhythm -- and contrasted it with the unnatural problem of agro-industrial pollution. A Caritas worker from Mali called for conservation, cleansing and sharing.

Virtually everyone spoke of water as a basic right, that should be inscribed in UN human rights and the Millenium Development Goals. Many distrust the UN Water Forum because it concedes too easily to corporate lobbies.

(workshop) Pour définir les biens communs / Defining the global commons

(Boell Foundation – research arm of the German Green Party)

Discussion was led by Silbe Heifrich, co-author of Strengthen the Commons - Now and Biens Communs - La Prospérite par le partage were available. We explored conflicting definitions of the commons: essentials of life, possession vs property, group ownership vs continuous defence and maintenance, analogies with internet "open source". We concluded that to substitute a sharing society for privatizing greed was a key goal, that to define the commons was a necessary but slippery task.

Adama Denbale summarized Peter Linebaugh's history The Magna Carta Manifesto: Liberties and Commons for All, pointing out that the commons were always socially defined, involving an economic claim to life-saving forest food and resources -- not just a political milestone. The tragedy of the commons is not over-exploitation by peasant communities (as Elinor Ostrom shows in Governing the Commons, 1991) but the land grabs of Enclosure that accompanied the capitalist-industrial revolution. And other grabs are still occurring: air, energy, water. How can society be restored? Much debate ensued, but the consensus was that a peoples' mobilization, or a new social contract, or both, were required. The commons is not no-man's land, open to everybody for everything for free. It is a sacred trust that must be defined, democratically debated, given rules, and respected by external forces -- and if necessary fiercely and eternally defended.

(workshop) climate justice campaign for G20, CSD and Rio+20

(Madre Tierre - Bolivia). This is the first of at least eight such workshops by various climate justice groups on shortcomings of the UN "green economy" plan and its complicity with the Copenhagen-Cancun deal.

Bolivia's UN ambassador Pablo Solon led a lively discussion, with trilingual handouts, on Bolivia's opposition to the US-backed Copenhagen Accord and Cancun Deal. He underlined the dangers of the UN “green economy” plan tied to the US-backed Accord – a carbon trading bubble with polluter offsets denominated in CDM, REDD, PES credits, neither real money nor real action.

Why did Bolivia stand alone against the Cancun deal? Because emission cuts fall woefully short of science-based targets. Current emissions promises (even if met) will lead to 4°C climate change, storm floods, increased deserts and massive glacier melt (in the Andes as well as Himalayas), droughts, the drowning of islands, mass extinctions, climate refugees and food crop loss. 300,000 people now die yearly – natural disasters would increase this to a million yearly. Mainstream media at Cancun largely ignored these facts, in order to proclaim a diplomatic success. Bolivia was portrayed as a deal-breaking maverick.

His stand was supported by many: Brazilians, Kenyans, Germans, Italians and others. I didn't catch all the whispered translations. David Boyd proposed combining with an access-to-energy campaign in the global South (ex: 6 hours of electricity per day in Nigeria). Jose Rico of Via Campesina (France) said REDD was a major issue, and the dangers of Cancun and green-capitalist economy must be emphasized – of which the public remains ignorant, young Americans and Canadians agreed. A major awareness campaign is needed. Italians also said we must link to local issues.

Tom Goldtooth of IEN spoke of land grabs and impacts on indigenous peoples worldwide. He suggested No REDD - A Reader and his own organization's What is REDD? Silbe Helfrich of the Boell Foundation said its publications on climate equity and the global commons might help. Some were handed out at the Boell workshop. Theologian Alex Zanotelli, with years in Sudan and Kenya, reminded us of the complexity of African issues and focused on the idea of popular referenda to defeat water privatization.

A Senegalese youth sport organizer pointed to the recent disappearance of parks and lakes. Other African delegates spoke of extreme poverty, land & food issues, the weakness of state action, the need to educate youth about climate issues. In Kenya many of the IDP refugees were promised forest land for food and shelter – evicted to make way for nature-conservation schemes of the World Bank and UN. Bolivians too admit contradictions: new highways would threaten valley erosion.

Hervé Crosnier of WF on Science and Democracy is calling on scientists to attend Rio+20. Its life-and-death political decisions must be science-based.

Clearly, a very wide range of civil society groups including churches, unions, women's and human rights groups are willing to help, but much analysis of local needs, careful planning and cultural sensitivity will be needed.

Strong sustainability and CSR -- by Robert Howell

Dr Robert Howell is CEO, Council for Socially Responsible Investment, Auckland 1024, New Zealand (email available on request). His full text with citations, "The Challenge of Sustainability for the Financial Sector" will appear in the International Journal of Environmental, Cultural, Economic and Social Sustainability.

Any significant shift to a sustainable world safe for human life will require foundational changes to the current international economic model, with investment, and large and rapid shifts to low carbon and sustainable products and services, being important components.

Current investment vehicles include sovereign wealth funds, asset management funds, and banks. There are substantial problems with all three. Some case studies (Generation Investment Management, Highwater Global Fund, Banco Bradesco, and Westpac Bank) are described that illustrate these problems and point to some solutions. Generation Investment Management was set up by Al Gore and David Blood. It has good principles but the availability of information about its application of these policies is poor. What information is available raises some questions. Highwater Global Fund was established by Michael Baldwin and Paul Hawken. It does follow through on its principles, but it is not as transparent as Portfolio21. Banco Bradesco and Westpac Bank do not have sustainability policies. HSBC is the leading international mainstream bank, but many of its policies are not sustainable.

While the case studies provide insights into how to invest sustainably, the sector as a whole will not provide the means for the shift to sustainability without government intervention. The market can not require adequate principles and standards, direct change through incentives and taxes, and establish funds to counterbalance market failures. The market can neither assist developing countries to prepare and cope with the inequities nor provide the assets needed to adequately adapt to the consequences of ecological degradation and limited resources. A substantial percentage of Sovereign Wealth Funds is not investing sustainably, and this illustrates the difficulty of achieving commitment to sustainable investment at a global level. Investment strategies therefore need to include adaptation as well as mitigation issues.

Introduction

There is considerable scientific evidence of ecological degradation (Intergovernmental Panel on Climate Change, 2007; Millennium Ecosystem Assessment, 2005; Rockström, et al, 2009; International Climate Conference, 2009). The consequences of a 3-4oC or greater warming of the Earth are summarised by Lynas (Lynas, 2007; 2009) and Hamilton (Hamilton, 2010), but the summary does not include the consequences of overstepping the planetary boundaries of biodiversity loss and interference with the nitrogen and phosphorus cycles (Rockström, et al, 2009). Nor does it take into account the limits and decline of conventional energy sources, and the inability of alternative sources to make up the difference (Heinberg, 2009). This evidence indicates that there are significant threats to human life, with a likely future of widespread loss of life and a hostile environment for those who survive.
There is no consensus among scientists as to when this bleak future may arrive, or whether we have passed a point of no return. However, many leading climate scientists see a 2oC limit as unrealistic: 3-4oC is now a likely minimum level (International Climate Conference, 2009). To stay within acceptable limits involves peaking in the very near future, with severe declines in emissions beyond then (Hamilton, 2010). Humankind faces a very difficult transition to a healthy and safe future, and any transition will involve major challenges to the financial sector. Any move away from the goods and services that destroy the Earth, to those activities and products that save it, will require investment.

What are these changes? Are there any banks or funds that can provide role models? This article describes the limitations of managed funds, the Socially Responsible Investment (SRI) industry, sovereign wealth funds (SWF), and the mainstream banks. An earlier article described the case studies of Portfolio21 and HSBC Holdings. It assessed how strongly sustainable they are, and whether their risk analysis included the major global change drivers that will significantly influence the next few decades and beyond (Howell, 2010b). This article describes case studies of funds (Highwater Global Fund, and Generation Investment Management) and banks (Banco Bradesco and Westpac Bank), and identifies the lessons that can be learned from the six case studies. It describes some public policy changes needed for the transition to a sustainable world.
Definitions, Principles and Standards

The terms ‘sustainability’ and ‘sustainable development’ are used in many ways. The Intergovernmental Panel on Climate Change (IPCC) discusses a number of difficulties with the term ‛sustainable development’ (IPCC, 2007, III, 12, 695-699). The report states that the term is variously defined, is vague, can be used to support green washing or cosmetic environmentalism, is inherently delusory and oxymoronic, is anthropocentric, and avoids reformulation of values that may be required to pursue true sustainability. Unfortunately the IPCC adopts a model of weak sustainability, where the three dimensions of economic, social and ecological are seen as independent but linked pillars of sustainable development (IPCC, 2007, II, 20, 815; Howell, 2009). Weak sustainability that includes the triple bottom line (TBL) model allows economic matters to dominate social and environmental matters (Sustainable Aotearoa New Zealand, 2009). The need for economic activities to be based within the limits of the Earth’s systems and ability to nourish life is not a necessary condition of weak sustainability and TBL. This will not change the business-as-usual (BAU) model, because economic returns will dominate social and environmental factors in business decision making (Howell, 2008; Howell 2009). Strong sustainability requires the preservation of the integrity of all ecological systems in the biosphere (Sustainable Aotearoa New Zealand, 2009).

Many principles and standards established for ethical investment use a weak (if any) definition of sustainability. Many have no adequate content and construct validation processes to show that the standards measure the essential components of what they claim to measure. Many have ranking and scaling processes that give methodologically unjustified weights or values (Howell, 2001). In a study that examined the SRI funds worldwide in 2003, Hawken found that the combined portfolio of conventional mutual funds were virtually no different from the cumulative investment portfolio of the combined SRI funds. Most SRI funds allow practically any publicly held corporation to be considered as an SRI company. The environmental screens used by portfolio managers are loose and do little to help the environment (Hawken, 2004).

The initiatives taken by the UN Environment Programme Finance Initiative, the UN Principles for Responsible Investment, and the Equator Principles (Equator Principles 2010), do not distinguish between weak and strong sustainability. While sustainable companies need to make profits, the TBL model permits companies to avoid the difficult transitions to sustainability that substantially deal with the ecological degradation threats. While they encourage financial institutions to adopt policies that are a move in the right direction, they are based on a modified BAU economics model, rather than an ecological economic model. The Equator Principles, founded on a distinction between Categories A, B and C, are not well defined. A strong definition of sustainability will be used in evaluating existing investment and the case studies.

Current Unsustainable Finance: SRI

SRI is “a generic term covering ethical investments, responsible investments, sustainable investments, and any other investment process that combines investor’s financial objectives with their concerns about environmental, social and governance (ESG) issues” (EuroSIF, 2009). This is a very broad definition covering a wide range of values. The traditional SRI approach is for the investor to select key values they want to be considered. Certain types of investment can then be excluded. An engagement process can be taken to try to persuade the company to change its behaviour. The investor can also ask for certain positive investments to be made (Council for Socially Responsible Investment, 2010)

For the establishment of sustainable investment, there are problems with the tradition SRI model. EuroSIF (EuroSIF, 2009) estimates that 17.6% (€2.665 trillion) of the European asset management industry can be classified as SRI. However, 14.2% (€2.154 trillion) is reached when there is a single screen, such as weapons, norms-based, or tobacco. The Social Investment Forum USA estimates that 11% of $US27.1 trillion under professional management is SRI (Social Investment Forum, 2007), but the bulk of this (77%) is simple screening, mainly tobacco, followed by alcohol and gambling (Social Investment Forum, 2005). Less than 5% is estimated to be ethical, and most probably less than 1% is strongly sustainable (Howell 2009b).

Current Unsustainable Finance: Sovereign Wealth Funds

The largest 50 SWF have $3891 billion under investment (SWF Institute, 2010). Just under 60% is oil and gas related. Norway is currently the second largest investor, with $443 billion or 11%, and is the leader in setting ethical requirements. One of the ethical standards it is required to meet is the avoidance of investment in companies that cause severe environmental damage (Council on Ethics, 2010). The Norwegian Fund has invested in Shell, which is involved in Canadian tar sands extraction. Tar sands extraction is a major contributor to Canadian greenhouse gas emissions, yet no companies have been excluded by the Council of Ethics on the basis of extraction of tar sands. Because the Norwegian Fund excludes only companies causing severe environmental damage, rather than companies that have a high carbon impact and are ecologically unsustainable, investment of SWFs that are strongly sustainable is likely to be less than 5% and closer to less than 1% (Howell, 2010b).

Case Study: Description of Banco Bradesco

Banco Bradesco was founded in 1943. One of Brazil’s largest private banks, it has over 3000 branches serving all levels of the population as well as nearly 6000 branches in partnership with the Brazilian Post Office. It claims to be the only Brazilian bank among the ten most valuable financial institutions in the world, with US$13.3 billion (Banco Bradesco, 2010).

The Bank’s 2009 Sustainability Report describes a number of initiatives taken and standards adopted. It has used the Global Reporting Initiative guidelines for its Report. It has adopted SA8000 standard certification and the Equator Principles, and the UN’s Global Compact and Millennium Development Goals. It has joined the Brazilian platform Companies for Climate. It is listed on the Dow Jones Sustainability World Index and the Corporate Sustainability Index of the Sao Paulo Stock exchange. It has a number of initiatives for inclusion in staff and community activities. It has assisted with funding for environmental agencies, including organisations planting nearly 2 million native tree seedlings annually. It has used positive screening to identify environmental loans, environmental lines of credits, and socially responsible investment funds. It paid a small fine due to non-compliance of Brazilian Government rules dealing with investment, and a larger fine for failures in security devices. The independent auditors recommended more transparency under the balance principal, with the inclusion of both the positive and negative aspects of the organisation’s performance (Banco Bradesco, 2010).

Evaluation of Banco Bradesco

Banco Bradesco is one of the banks chosen by Portfolio21 (Howell 2010b) and Highwater Global Fund. Portfolio21 states that Banco Bradesco’s sustainability report is in line with the Global Reporting Initiative guidelines, achieving an application level of A+. Also, unlike many of its emerging market peers, Banco Bradesco has initiated several supplier initiatives, including its Social-Environmental Questionnaire. Areas for improvement include creating and implementing sector policies that would further minimise the indirect environmental risks associated with the company’s corporate lending (Portfolio21, 2010).

In its Sustainability Report, Banco Bradesco states that between 2007 and 2009 it approved ten high-risk, eighteen average-risk, and no low-risk projects. These categories use the Equator Principles. In 2009 there were three high-risk projects, and they were energy projects. In the same year, five average-risk projects were financed and they were agribusiness projects (Banco Bradesco, 2010).

Banktrack, in its report Close the Gap, has evaluated 49 banks for how they meet socially and environmentally sustainable standards (Banktrack, 2010). The scores given in the Banktrack analysis are seven 0s, ten 1s and one 3. (A score of 0 is given where there is no policy; a 4, where essential elements are included in policy.) The Bank was graded 0 for Agriculture, Fisheries, Forestry, Military Industry and Arms Trade, Operation in Conflict Zones, Taxation, and Accountability. They scored 1 for Mining, Oil and Gas, Power Generation, Biodiversity, Climate Change, Corruption, Human Rights, Indigenous peoples, and Labour. They scored 3 for Transparency.

Banco Bradesco is a significant bank in Brazil and the Amazon area where deforestation and other resource extractions degrade the environment. Although the bank has still to develop sustainable policies in many areas, there is work in progress.

Case Study: Westpac

Westpac Banking Corporation is the largest bank in Australia (by market capitalisation) and the second-largest bank in New Zealand. It had assets of $590 billion, with around 34,000 employees and 10 million customers. Westpac has about 25% of the banking market in Australia. This is in part because of the four-pillar policy initiated in 1990 by Paul Keating, the Australian Treasurer, disallowing acquisitions and mergers of the main banks (Four Pillar Policy, Wikipedia, 2010) to ensure adequate competition.
Westpac has stated that it aims to be a global leader in sustainability. It has adopted the UN Environmental Program Finance Initiative as well as Equator Principles, and participates in the Carbon Disclosure Project. In the Dow Jones Sustainability Index from 2004-2007, it was assessed as the global sustainability leader for the banking sector. Sustainable Asset Management Group and the World Wildlife Fund have named Westpac as one of only six mainstreamers in the global banking community to have integrated climate change strategy into core business practice. Its strategic focus for 2009-2013 covers key areas dealing with environmental impact: applying sustainable principles through key product lines; providing community services; helping customers and employees move to a low-carbon economy; advocating for sustainable business practices; and mainstreaming governance and risk issues (Westpac, 2010).
Westpac defines sustainability as ‘managing what matters’. This means it includes issues like water security; an aging population; and areas of business performance, such as governance or human capital management. In regard to its own footprint, Westpac measures its emissions, energy use, business travel, paper, waste and water usage, and it sets targets for their reduction. It has developed a Sustainable Supply Chain Management policy and process, and requires its suppliers to adhere to its principles, practices and requirements (Westpac, 2010).
Westpac’s Responsible Lending Policy commits the Bank to lending only what its customers can afford to repay; marketing its products and services responsibly; supporting customers facing financial difficulty; and helping to improve its stakeholders’ financial literacy and capability. Its policy for SRI Products and Services commits the Bank to developing SRI funds where there is a market for them; developing products that promote positive social and environmental outcomes; lending with high social and environmental benefit; implementing trading mechanisms that support better environmental outcomes and, through its funds management business, BT Financial Group, the United Nations Principles of Responsible Investment. Additionally, the Bank voluntarily incorporates environmental, social and corporate governance issues into mainstream analysis, investment decision-making and ownership practices (Westpac, 2010).

Efforts have been made to build capacity into the organisation to cope with carbon and water risk. Forums have been held for the Westpac Institutional Bank, and the Retail and Banking groups. The Agribusiness Division has developed a dedicated carbon and water strategy and has appointed carbon champions in each Australian State. Carbon risk has been explicitly incorporated into the Westpac Institutional Bank credit manual with templates for industry sector strategy reviews.

The Renewable Energy Target, requiring that 20% of all energy generation in Australia come from renewable resources by 2020, was established by the Australian Government. Westpac has estimated that $A25 billion will be required, and has set up a renewable energy strategy. Currently, Infrastructure and Utilities financing for Australia and New Zealand totals $A2220 million. Renewables make up 13.4% of this: brown coal, 13.3%; black coal, 19%; gas, 16.8%; and hydro, 37.5%.

Risk is defined in a Material Issues Matrix in their Annual Review and Sustainability Report 2009. Some of the risks are being incorporated into Westpac Credit Policy, which is not a public document. However, Westpac does not lend to logging companies that log native forests. No account is taken in New Zealand of the impact of climate change (such as rising sea water levels) when analysing mortgage risk (D. McLean, personal communication 2010). Westpac’s reason is that there is a lack of conclusive science. Westpac is currently working on a water policy. It is recognised as a significant risk in the Westpac Credit Policy and is considered for all agricultural lending (S. Marsden, personal communication, 2010).

Evaluation of Westpac

Westpac’s definition of sustainability, ‘managing what matters’, is so general and unusual that it is misleading. Any bank could claim to be sustainable under this definition. It is misguided in that it does not provide clear qualities that Westpac wants to see for itself and its customers. Its application of materiality, inclusiveness and responsiveness are very general criteria, and may or may not lead to relevant sustainable policies.

The analysis of risk published by Westpac does not adequately account for the global drivers that deal with ecological degradation and resource depletion. A major weakness is that there are no publicly available policies. The stated reason for not including climate change risks into its mortgage polices is that there is no conclusive science. In one sense no science is conclusive, but there are probabilities of risk. There are a number of sites in New Zealand with high significant risk. There is no Westpac public policy dealing with adapting to the adverse effects of climate change, or the encouragement of clean-tech investments.

Westpac has a policy of leading beyond the corporate walls and speaking out in support of sustainable practices. In recent years, major changes in government policy in both Australia and New Zealand have made public engagement difficult. Westpac (along with other Australasian banks) has been too quiet. There is a place for companies to take a publicly principled approach that regards ecological degradation seriously without getting entangled in party politics.

Westpac received a score of 80 in the financial sector of the Carbon Disclosure Project (Carbon Disclosure Project, 2010). Other Australasian banks received higher scores: Australia and New Zealand Banking Group (82); National Australia Bank  (82); Commonwealth Bank of Australia (81). The highest score, 92, was given to HSBC Holdings. In the Banktrack Report, Close the Gap (Banktrack, 2010), Westpac scored six 0s, and nine 1s. The Australia and New Zealand Banking Group scored five 0s, ten 1s and three 2s. The Commonwealth Bank scored ten 0s and eight 1s. National Australia bank scored nine 0s, seven 1s, and two 2s. HSBC scored two 0s, thirteen 1s, one 2, one 3, and one 4. (A score of 0 is given where there is no policy; a 4, where essential elements are included in policy.) A few years ago, Westpac was a leader in sustainability in the financial sector for Australia and New Zealand. This is no longer the case: it is now most probably the Australia and New Zealand Banking Group, but not by very much. HSBC is the leading international bank (Howell, 2010b).

Case Study: Description of Generation Investment Management

Generation Investment Management was set up in 2004 by Al Gore and David Blood. Their approach is that sustainability is a key factor in determining the long term performance of companies. The issues include climate change and environmental degradation, poverty and development, water, natural resource scarcity, health, demographics, migration and urbanisation. Corporate Governance, stakeholder engagement, bribery and corruption issues are also considered. Generation Investment management combines sustainability analysis with traditional analysis. Its first fund was Global Equity; the second, established in 2007, was Climate Solutions. The latter invests in private equity, restricted public equity, and unrestricted public equity. This fund focused exclusively on deploying capital into companies that are part of the transition from a high-carbon to a low-carbon economy. It has four areas of focus: renewable energy generation and distribution; energy efficiency and demand destruction; carbon markets and climate-related financial services; and solutions for the biomass economy. (Generation Investment Management, 2010).

Generation Investment is primarily an institutional investment management firm, operating at the wholesale level (major pension funds, foundations, family offices and a smaller number of insurance companies) rather than the retail level. The exception is the arrangement with Colonial First State, the distributor of the Generation fund in Australia, that constitutes about 1% of Generation Investment’s total investments. Because of its decision to work with institutional clients, Generation Investment can not make information about its services, strategy and investments widely available, and is not permitted to make it accessible to retail clients. Basically, the rules restricting the amount of information that firms offering an institutional product can provide are there to ensure that the general public is not enticed into investing in unsuitable and overly complex products (M. Mills, personal communication, 2010).

Global Equity, its flagship fund, concentrates on 30-50 companies that are high-quality businesses, with high-quality management teams, that can be bought at the right price. It has 21 investment professionals, with 20 additional partners, directors and associates (Generation Investment Management, 2010). As at 30 June 2010, it had an investment in Varian Medical Systems (who provide technologies for cancer treatment); Northern Trust (who manage investments and funds); Becton Dickinson (who provide medical technology); Henry Schein, (a health care company); Quanta Services (who provide specialised services for power, gas, and telecoms); Plum Creek Timber, (a forestry and timber operation); Qualcomm Inc (a communications company); Paychex (who provide payroll and payroll tax services); and C R Bard, (a health care company). These investments were 57% of the fund, the total of which was valued at $2.6 billion (Stockpickr, 2010).

Varian Medical Systems accounts for 8.24% of Generation Investment Management’s $2.6 billion investment. Currently, there is no assessment of Varian Medical Systems’ environmental impact on its website, apart from statements of legal risk. Its Annual Report states that it is subject to a variety of environmental laws regulating the manufacture and handling, storage, transport and disposal of hazardous materials. It follows procedures intended to comply with existing laws but acknowledges that it can not completely eliminate the risk of non-compliance (Varian Medical Systems, 2010).

Varian’s Corporate Communications & Investor Relations Director, Europe, stated Varian “committed to have a Global Reporting Initiative (GRI) based report available for public consumption and posted on our website by the end of 2011... Varian has always been socially and environmentally responsible, with initiatives dating back some 20 years, and we have much to be proud of. The missing link is that we’ve been very poor at communicating these achievements”. When asked about carbon emissions, renewable energy, fuel and water use, the company answered that they were working on these matters for the 2011 report. Its Salt Lake City operation has signed up to purchase ‘green power’ through its local utility. It has not adopted the Natural Step or its equivalent, although it does have environmental and health and safety prescribed operating practices. (N. Madle, personal communication, 2010).

Evaluation Of Generation Investment Management

The philosophy of this Fund is attractive. Al Gore has a long-standing commitment to facing the issue of climate change, has worked for many years internationally, and has deservedly received international awards. This fund has been set up as part of his work to deal with the causes and consequences of global warming. The arguments advanced for a more long-term and responsible form of capitalism are compelling.

The communication of the way in which these principles are applied is poor. Because of the organisation’s focus on the wholesale market, the responsibility for public information rests with the wholesale client. As primarily an institutional investment management firm, it is limited in the amount of information it can publicly provide. It was acknowledged that this did not apply to Colonial First State Investments (M. Mills, personal communication, 2010). However, more information should be available through institutions about Generation Investment’s activities, such as where pension and insurance monies are invested, and these funds should be able to reassure their clients and customers that they are investing sustainably. The Business-to-Business arrangement that Generation Investment has should be described on its website, and enquirers should be directed to pension funds and insurers for information.

The selection of Varian Medical Systems is puzzling. Varian may have some proud initiatives, but the absence of sustainable records and measures calls into question the evaluation, selection and engagement processes of Generation Investment Management. The lack of information means that the application of its principles is questionable. In comparison with Portfolio21 (Howell, 2010b) and Highwater Global funds, the public information available from Generation Investment Management is unsatisfactory.

Case Study: Description of Highwater Global Fund

Michael Baldwin and Paul Hawken started this fund in 2005 by linking with Baldwin Brothers, a privately owned independent advisory firm. The fund invests in companies to provide solutions for environmental and social challenges. Investments are diversified across geographies, market capitalisations and sectors. The investment horizon is medium to long term, with portfolio positions averaging between 30 and 40 holdings. It currently has around $60 million invested. A minimum investment bar means it is primarily for richer investors. The top ten equity holdings are Apple; Banco Bradesco; Cisco; EnerNOC; Ford Motors; Hyflux; Natura Cosmetics; Novozymes; SSL International; and Vivo Participacoes (Highwater Global Fund, 2010).

Highwater Global Fund has a three-stage selection process. (There are some inconsistencies between Hawken’s article and the Baldwin material (Hawken, 2010; Baldwin Brothers, 2010), but these were resolved by discussion with the Fund’s representative (Bill Marvel, personal communication, 2010).) The first stage is to determine the intentionality of the candidate company. The mission and performance are evaluated within the system of five attributes drawn from the work of Natural Capitalism (Hawken, 1999). Does the company provide innovative services and products that address the current and future needs of people and the Earth? Does it address climate change and carbon emissions? Does it work proactively to minimise natural resource use through resource productivity? Does it facilitate a shift from an economy of consumption to an economy of well being? Does it integrate and demonstrate a social and environmental commitment in corporate values and stated objectives? The majority of companies are excluded because of unacceptable activities such as human rights violations; the production of hazardous waste; industrial agriculture; animal cruelty; and corruption. From a field of over 5000 global public equities, around 350 were selected for the next step (Bill Marvel, personal communication, 2010).

The second stage is an assessment of whether the remaining candidates are innovators, shifters or neutrally good. Innovators are companies concerned with advanced research, technology and services. An example is the pioneer in large-scale wind turbines, Vestas. Shifters are companies such as Interface (the carpet company) and Canon, who are making a determined effort to reverse their traditional behavior. Neutrally good companies address a key issue by default. Examples are eBay and Amazon (Hawken, 2010; Baldwin Brothers, 2010).

The third stage is scoring the companies on a scale of 1 to 10 for 12 categories (leadership; employees; supply chain; community; diversity and women; intention; customers; materials; energy; water; climate; products and services) and over 200 factors, and making a final selection of 30-40 companies. The rating is not the deciding factor, and some companies are chosen when their scores are less favorable than other candidates’. Pragmatic considerations would include the availability and timing of purchase of stock. A decision was made to exclude Kellogg’s despite the company’s very good mission statement, because their performance does not address the children’s health crisis in the United States from obesity and type 2 diabetes. First Solar is included because its mission is to enable a world powered by clean, affordable solar electricity. Ford Motors is included because their operative intention today is to become the greenest, most efficient transport company in the world (Hawken, 2010; Baldwin Brothers, 2010).

Highwater Global has invested in Ford Motors, a company that accepts climate change as a serious threat. Recent claims that scientists have misrepresented the temperature record do not undermine the broad scientific basis for concern about climate change, states Ford. The company is committed to helping to achieve a 450 ppm climate stabilisation pathway (stated as 1.4-3.1oC) by 2200 (instead of 2050 for the BAU projections). It has set a number of goals to this end, including a goal to reduce US and EU new-vehicle CO2 emissions by 30% by the year 2020, compared to a 2006 model year baseline (Ford, 2010). The data for Ford US fleet fuel economy, US fleet CO2 emissions, and worldwide facility energy consumption shows improvements between 2007 and 2009, although energy consumption per vehicle does not (Ford, 2010). It is unclear is whether the calculation includes the amount of carbon and fossil fuels used in the production of electric cars, and the indirect costs of road building and maintenance.

Evaluation of Highwater Global Fund

Paul Hawken has an international reputation as an environmental author and activist. His Natural Capitalism: Creating the Next Industrial Revolution (Hawken, 1999), and The Ecology of Commerce: A Declaration of Sustainability (Hawken, 1993) illustrate his understanding of the threats to the health of the planet and the role of business. The establishment of Highwater Global Fund is an extension of that understanding and action.

The selection process is reasonably thorough. Highwater Global’s restriction to 30-40 companies indicates careful selection. The public information about the organisation’s scaling methodology is very general and does not mention whether validation and reliability studies have been done. If the items in the 12 categories, and the 12 categories, are given equal status, the ranking will differ from that derived where different weightings are given. Hawken has stated admiration for Portfolio21 but, in comparison, only 60% of its portfolio would qualify for Highwater (Gunther, 2010). Both, however, invest in Banco Bradesco. Highwater Global gives Banco Bradesco as an example of companies offering services that promote quality (and celebration) of life, but does not analyse the investment issues regarding energy and agribusiness that Banco Bradesco faces. With a restriction to 30-40 companies, and the initial selection criteria, this is not so critical for Highwater Global. But when funds invest in a much broader range of companies, the rating process and the nature of the tradeoffs become much more important.

Highwater Global Fund provides a list of the top ten equity holdings. While the names of some companies that the fund does not invest in are disclosed, they are not as public as Portfolio21. Portfolio21 gives a full list of their holdings and reasons for their inclusion. It also provides a list of some of the companies that they have excluded, with reasons. Highwater Global does not do this. Portfolio21 describes some of its engagement activities. Highwater Global does not do this. The link with Baldwin Brothers has avoided some start-up costs, but there are some restrictions on the promotion of the fund. There is some exploration about developing the fund to enable cheaper access and greater disclosure (Bill Marvel, personal communication, 2010).

Ford’s interpretation of 450ppm climate change stabilisation as between 1.4-3.1oC warming is most probably too cautious: it is more likely closer to 3oC. Motor companies in the United States have a dubious record regarding the introduction of sustainable technologies. It would be useful to have more information about what engagement Highwater Global does, so as to be more confident in their support of Ford.

Implications for the Transition to Financial Sustainability

While it is possible to argue over some details of Portfolio21’s and Highwater Global Fund’s application of their principles, the broader picture is that their approaches provide useful insights for sustainable investment. The similar principles of Generation Investment Management are also good. It convincingly argues that companies need to consider the longer term, and therefore the risks that ecological degradation brings. The application of these principles and their communication needs improvement. Portfolio21 states that there are no fully sustainable companies to invest in. It is therefore important to support and encourage those companies that aim to be sustainable, and engage with them to make the changes. Principles, standards, guidelines and benchmarks based on strong rather than weak sustainability are important in this respect. Many international standards are inadequate. Both funds can provide useful models for extending sustainable investment, although a challenge for the Highwater Global model is to lower the financial admission barrier so as to include less wealthy people. The initial selection stage of Highwater Global Fund eliminates the majority of investment options. Hawken says, “simply stated, we get rid of the chaff” (Highwater Global Fund, 2010). While there are many useful lessons from these case studies, it is the ‘chaff’ that is relevant for the transition to a sustainable world. In that respect, questions raised above about ranking procedures will become more critical for funds that are bigger and have a much greater range of investments. Also important are the issues of public reporting.

Banks provide important investment for the transition to sustainability. The case studies of Westpac and Banco Bradesco show that there is much work to be done, particularly in regard to policies for energy, mining and forestry. HSBC had good policies for forestry, but not for mining and energy (Howell, 2010b). There are other bank models that could be considered. Global Alliance for Banking on Values is a group of ten banks with combined assets of $10 billion, operating in 20 countries (Global Alliance for Banking on Values, 2010). The Alliance’s charter includes the principle of supporting sustainable and environmentally sound enterprises. Whether sustainability in the Alliance’s definition is strong sustainability is not clear. For Triodos Bank it most probably does mean this (Triodos Bank, 2010), but evidence for Banca Etica is not clear (Banca Etica, 2010). A number of these banks are cooperatives and not readily open to general investors. The Global Alliance for Banking on Values group does not include the German Government bank, KfW Bankengruppe, the UK’s Cooperative bank, or Sweden’s cooperative JAK bank. The UK Cooperative Bank does appear to have a commitment to strong sustainability, but JAK bank’s special feature is that it does not charge or pay interest on its loans, a principle similar to one in Islamic banking. The latter banks do not appear to significantly address the threat of ecological degradation.

However, the focus needs to be on the majority of banks that are not performing well. In a survey of 16 US and 24 non-US banks representing more than 60% of the total market capitalisation of the global publicly traded banking sector, it was found that many of the 40 banks have done little or nothing to elevate climate change as a governance priority. “While many banks have made improvements, the actions to date are the tip of the iceberg of what is needed to reduce greenhouse gas emissions consistent with targets scientists say are needed to avoid the dangerous impacts of climate change” (Cogan, 2008). The examples of HSBC, Westpac, and Banco Bradesco banks identify the policy changes that are needed.

The investment required by developing and developed countries is considerable, and will not be achieved alone by managed funds and banks. Stern has estimated that 2% of GDP is needed to move to a low-carbon economy (Jowit and Wintour, June 28, 2008). The world’s Gross World Product in 2008 was $61.22 trillion, so 2% amounts to $1.244 trillion. The EU’s GDP was $18.14 trillion and the USA’s was $14.44 trillion. In 2008 the USA’s spending on war amounted to 4.8% (Velasquez-Manoff, 2010). Two reports indicate that the required investment will not be obtained unless governments take an active role. The first report is by a group of individuals from NGOs (IndyACT, David Suzuki Foundation, German Watch, World Wildlife Fund, Greenpeace, National Ecological Centre of Ukraine) who produced a model climate treaty for the Copenhagen UN meetings in 2009 to achieve a reduction in admissions to below 2oC. They estimated that industrialised countries should provide at least $160 billion per year for the period 2013-2017 to developing countries. This will comprise $56 billion per year for adaptation activities; $7 billion per year for a multilateral insurance mechanism; $42 billion per year for REDD (forestation); and $55 billion per year for mitigation and technology diffusion (Meyer et al, 2009). The second report is by the Green Investment Bank Commission in the UK, who recommended the establishment of a Green Bank (Green Investment Bank Commission, 2010). This report describes the tasks for the UK in a transition to a low-carbon economy, the market failures and barriers to investment, and the case for intervention. It states that the scale of the investment required to meet UK climate change and renewable energy targets is unprecedented, with estimates of investment required reaching £550 billion between now and 2020. For comparison, only £11 billion was invested in Britain’s new gas industry during the 1990s. The Commission recommended that a Green Investment Bank be set up to work as part of overall Government policy to open up flows of investment by mitigating and better managing risk (Green Investment Bank Commission, 2010). These reports indicate that the required investment will not be provided for both developed and developing countries without the active intervention of governments.

The absence of any adequate sustainability criteria for the investment of the large majority of SWF is disappointing. It illustrates the lack of appreciation by these countries of the threats posed by ecological degradation. If SWFs were able to adopt policies that contained adequate sustainability criteria, this would be an important contribution to sustainable investment. It would not be easy as a large proportion of SWF are oil and gas related, but Norway provides the example of a country that has adopted ethical standards for its SWF.

The move to a low-carbon economy will need to consider the absence of an effective international decision-making process where international environmental and economic agreements are able to be achieved and enforced (Brown, P.G., Garver, G. et al, 2009). It also needs to consider dysfunctional states; weak states with corrupt, ineffective or inefficient legal, government and enforcement systems; and countries opposed to decisive action on climate change. Many developing countries fit into one or more of these categories, but so do developed countries like the United States. Its political system has been captured by large international companies, particularly the oil, gas and coal companies, and they have a disabling effect on moves to deal with climate change. This includes disrupting the attractiveness and growth of renewable-energy companies in the US: many initiatives for renewable energy lie with China and Germany (Bradin, 21 July, 2010). This means that companies like Ford Motors, and the funds that have strong sustainability as a cornerstone of their philosophy, need to take into account the negative impacts of the ‘chaff’. Ford’s commitments and plans in this respect, to help in the achievement of a 450 ppm climate stabilisation pathway by 2200, are unrealistic, because the assumption that others will play their part is also unrealistic.

The obstacles for a smooth transition to a sustainable financial sector are considerable. The changes involve foundational changes to the international political, economic and ethical decision-making structures and processes (Howell, 2009; Howell, 2010a; Howell and Cartwright 2009; Howell and Cartwright, In Press), and changes of this type occur infrequently and usually at times of major upheaval. Mitigation alone is no longer adequate: adaptation is required. The indications are that climate change and the trends in ecological degradation will bring widespread disorder and disruption (Lynas 2007; Lynas, 2009). During the next few decades and beyond, large loss of human life and deterioration in living standards is likely. Many of the goods that currently make up international trade patterns will disappear, as floods and storms, rising seawater, lack of water, and pollution destroy factories or production sites. Prudent investment will be in goods and services essential for simple and sustainable living, with a focus on local resources and production in the areas of food, housing, clothing, and water and energy systems. (This calls for simpler and less complicated low-carbon and clean-tech industries..) Production and distribution systems will need to be resilient, and able to cope with relatively rapid changes in temperature and weather. Transport and communication systems currently dependent on unsustainable energy and resource use will disappear. Investment needs to recognise the structural changes that will come through the global drivers associated with ecological degradation and resource limits, and that these will be more important than the usual business cycles.

Financial organisations have an important role in preparing their clients and the public to shift to strongly sustainable models of economic behaviour and to adapt to a turbulent future, because they need to identify risk. In this respect the case studies described above contain important lessons in the selection of companies that take sustainability seriously, and in the ways that principles and standards are defined, operationalised, monitored and reported. They illustrate the gap between the funds and companies that are responding significantly to the challenges of ecological threats, and the majority who are not. They also show that governments have important roles to play in establishing adequate standards, by using Sovereign Wealth Funds, and by supporting international efforts to reach international agreements on mitigation and adaptation policies and plans.

Conclusion

The Earth’s systems are not resilient enough to cope with the damage that humans have done to them. Currently, investment funds (including SRI) and Sovereign Wealth Funds are part of the problem. Consideration of Generation Investment Management, Highwater Global Fund, Portfolio21, Banco Bradesco, Westpac Bank and HSBC Holdings illustrates these problems, and points to some solutions. Adoption of principles, standards, benchmarks and guidelines needs to include strong sustainability as an essential component. Criteria for the selection of companies that aim to be strongly sustainable are necessary, but it is just as important that the operationalisation, engagement, monitoring and reporting be carried out properly. There is considerable room for improvement, particularly in the development of energy (including transportation), mining, forestry, and agribusiness policies and investment.

While there are companies that are inspiring in their attempts to deal with the ecological challenges, the financial sector as a whole will not be able to be part of the solution without governments taking a more supportive role. Standard setting, incentives and taxes that work for, rather than against, the solutions, and dealing with market failures, are some of the required actions. Unfortunately, dysfunctional, weak and failed states, governments unduly influenced by the major oil, gas and coal operations and companies, and the absence of an effective international decision-making and enforcement system, mean that a rapid shift to sustainable investment is unlikely until the impacts of ecological degradation are severe enough to confront the world’s political leaders and their constituencies. Investment strategies therefore need to take account of the risks that a deteriorating Earth will bring to continued human life.

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