What is really behind the failure of green capitalism? | Adrian Buller

LTemperatures peaked at 40C (104F) in England last week, bringing the climate crisis to the forefront and sparking a fresh wave of dismay. How is it, despite a constant drumbeat of extreme weather events, a growing wave of public protest and a growing consensus across the political spectrum, that the world remains so far removed from the outer limits of the considered climate goals as “safe”?

The answer increasingly lies not in climate denial, but in a proliferation of non-solutions advocated by policy makers and business interests with varying degrees of seriousness and good intentions, under the aegis of “capitalism”. green “. These are propositions sold as urgent and pragmatic tools to reduce emissions or reverse the loss of ecosystems, but which in fact provide neither.

Take sustainable finance. By some estimates, assets invested with some kind of environmental, social and governance (ESG) criteria now exceed $35,000,000,000, prompting enthusiastic claims that private investors, driven by rational self-interest, offer a greener future. For many, it seems that you can really “do well by doing good”.

Unfortunately, this feeling of triumph rests on little foundation. For starters, criticism of “greenwashing,” in which corporations and financial firms mislead clients and clients about the green or social qualities of their products, abounds. But the problem is much deeper than a few bad actors breaking the rules (usually on purpose). Instead, the underlying motivation for ESG investing is not necessarily to achieve positive “real world” results. Rather, the goal is to minimize exposure to risks — whether climate regulation or labor disputes — that could erode financial returns.

For this reason, many ESG funds do not differ much from “traditional” funds and indices such as the S&P 500 (the basket of the 500 largest American companies). Vanguard’s flagship US ESG fund, for example, has its top holdings in Apple, Microsoft and Amazon. Tesla ranks sixth, followed by two different share classes from Alphabet (Google’s parent company).

It would be hard to say that many of these would be the companies that come to mind when considering investing in a decarbonized and environmentally prosperous future. Some of them don’t have particularly stellar social records either. pillar of ESG acronym, whether it’s accusations of human rights abuses and forced labor in supply chains or allegedly illegal surveillance of workers.

Additionally, while many might reasonably expect a major ESG fund to invest in the urgent transition to renewable energy and sustainable infrastructure, more than 40% of the Vanguard fund is allocated to technology and finance. Energy and utilities, occupied by many companies that one would imagine to be at the heart of decarbonization, together account for less than 1%. It is important to note that this seems to be the rule and not the exception.

While some specialty companies are using their shareholding to pressure companies to change their business models or allocate capital to clean energy start-ups, much of the industry isn’t interested in funding. a sustainable future directly, but to ensure that their portfolios are aligned with it. In this sense, ESG can be best understood as a way to bet on the likelihood of a greener and more sustainable future, rather than helping to build it.

Indeed, in one particularly striking study, researchers found that the strongest trait differentiating social themed funds from their traditional counterparts was investing in companies with a relative lack of employees. From the point of view of minimizing risk for private investors, this makes perfect sense: no workers, no labor problems. From the perspective of achieving positive social outcomes, this is hardly cause for celebration.

The logic behind sustainable finance is a problem for the argument that markets promote a greener and more respectful capitalism. Indeed, the problem with green capitalism is that the solutions it offers tend to force the complexity of the climate and ecological crises into the narrow framework of the “market”, whether or not the market is a viable arena for dealing with them. As a result, these “solutions” are increasingly turning out to be anything but.

The footprint of green capitalism can be seen in everything from fixation on carbon markets to the proliferation of ideas such as ‘ecosystem services’ and ‘natural capital’, which seek to divide ecosystems into ‘stocks’. distinct entities that provide services to the economy. According to this logic, a whale has value insofar as it captures carbon and impresses tourists. To many, the idea may seem absurd, but with $40 billion in trade in ecosystem services in 2018 alone, these concepts are becoming more mainstream.

Claims of the scale of finance committed to net zero do not diminish the trillions funneled into the fossil fuel industry each year. Worldwide, although some 23% of emissions fall under carbon pricing systems, the impact of these systems on global emissions is well below IPCC targets. And despite the glowing pictures of oil majors’ “nature-based solutions” and tens of billions of annual exchanges of ecosystem services, biodiversity continues to decline at a staggering rate.

We live in a society structured and defined by market relationships, and the idea that market-based solutions are the best, most pragmatic, and often the only way to solve most problems is powerfully grounded in common sense. . It is certainly difficult to imagine an alternative. It is also urgent and necessary. The siren song of easy win-win solutions to systemic crises of unprecedented complexity is powerful, but it must be resisted.

Adrienne is the author of The Value of a Whale: on the illusions of green capitalism, and new research director at Common Wealth

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