Financial firms can expedite green tech
October 19, 2009
By Paul Clements-Hunt
THE SMARTEST financial services companies already know that they can rebuild their reputations, boost their balance sheets and, critically, re-establish trust after the crisis of 2007 to 2009 by playing a dynamic role to help build a vibrant green global economy. This is an economy based on markets that embrace the "people, planet, profit" ethos of sustainable development.
Globally, however, those financial companies that "get it" and are mainstreaming sustainable finance and responsible investment remain the exception, not the rule.
A chilling economic reality is that the coming climate crisis, likely to dwarf the financial and economic impacts of the credit crunch and the multi-trillion dollar market meltdown that it triggered, is only now coming onto the radar screens of a few of the many, many thousands of financial institutions that exist worldwide.
The South African financial institutions supporting the UN Environment Programme (UNEP) Finance Initiative, a unique partnership between the UN's environmental arm and more than ' such institutions worldwide, are part of this small vanguard.
As about 500 financiers and investors gather at the UNEP Finance Initiative's 2009 Global Roundtable in Cape Town later this week, the theme of "Financing Change, Changing Finance" could not be more timely. With sustainable development our banks, insurers and investment companies, including the world's largest institutional investors such as pension funds, are balanced on a precarious high wire.
After two years in which the finance and investment sectors have been under forensic examination in terms of their governance, business practices, investment choices and even ethics, this is not the time for greenwash or a public relations response to the economic calamity that rained down on hundreds of millions of families worldwide after the bubble of the Goldilocks economy burst.
Time for delivery
It is time for delivery in terms of financial products and investment approaches that speed the transition to the low-carbon economy of the future where the ideas, entrepreneurs, technologies, projects and companies of the 21st century thrive and those rooted in the grime of the industrial past become the historical relics they deserve to be.
And Africa's banks, insurers, asset managers and pensions funds must play their part in the transformation.
The King 1, King 2 and now King 3 reports on corporate governance, the leadership position taken on responsible investment by the Government Employees Pension Fund, and the inspiring work of the JSE through its sustainability index all show that South Africa's financial institutions and capital market actors have the thinking, tools and possibility to become leaders in this field.
The good news is that a dynamic economy does not have to clash with a protected environment, more and better "green jobs", stronger communities, and smoother operating markets.
In late 2008, UNEP launched its Green Economy Initiative (GEI) to make the case with world governments that a massive investment in green tech - clean technology and smart low-carbon energy solutions - as well as environmental infrastructure (water supply, water treatment, waste management, pollution control, and low-carbon mass rapid transit systems), could help speed the global economy out of recession and stimulate a revolution in the green jobs market.
It is estimated that as much as 20 percent of the $3 trillion (R22 trillion) in collective government stimulus packages - finance and investment to kick-start the world's economy - is tagged to go green.
That is an enormous $600 billion-plus bet by governments that, without doubt, green and low-carbon technology is the way of the future and that the financial crisis and economic meltdown of the past two years could mark a sea change as a market crisis becomes the opportunity for a global green revolution.
Warming summit
The green makeover of the markets also comes at a critical point in the world's battle against the perils and threats of global warming.
In December, 192 governments - including many world leaders - will gather in Copenhagen for a historic UN summit to determine how the global community will tackle the ticking time bomb of climate change that, if we stay with "business as usual", could spell catastrophe for the planet, our ecosystems, and the human family.
Our efforts to build "bridges from Cape Town to Copenhagen" as part of the city's amazing Green Week, and to ensure that the African finance and business voice on climate change is heard in Denmark, is part of a global green economic revolution that is gathering pace. Smart financiers and investors will position their institutions at the very heart of this transformation.
Paul Clements-Hunt is the head of the UNEP Finance Initiative. See www.unepfi.org for details
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