Thursday, April 14, 2016

We'll Always Have Paris? Banks and Climate Change

Greetings from the Australian National University in Canberra, where Dr Megan Bowman from King’s College London is speaking on "What does the Paris Agreement mean for private finance actors in the global response to climate change?".

Dr Bowman pointed out that the Paris Agreement on climate change has provision for non-nation state actors, which can be cities, regions and companies.

One difficulty I have is that the Paris agreement does not contain sufficient actions to achieve the stated aim of a 2 degree increase in temperature. Even these commitments by nation states are not binding, in that there is no penalty for not achieving what they promised. The money to help developing nations are also not committed. The money from the private sector is not firm.

As Dr Bowman pointed out probate companies will act on climate change when it is in their own self interest, in particular banks, insurance companies and pension funds. However, I suggest that nation states will also only act in their own interest.  So a better approach would be to craft an international agreement where it is in the interest of each individual party to act.

As an example, rather than developed nations "give" money to developing nations, it should be recognized that these are investments which the developed nations expect to receive a return on. It would be better if this self interest was explicitly recognized, rather than being hidden, as it is at present. This approach might use some aspects of Islamic banking: rather than giving a soft loan to a developing nation, the developed nation would be come a partner in the investment.

The question then is how to get nation states to act in the public interest, or in the case of companies, to act in the long term interests of their owners, not in the interests of the politicians and managers in power for a brief time. Given that the Panama Papers show government officials funneling funds to offshore accounts and companies acting dishonestly in the short term, it is difficult to see how any world order can make them act ethically in the long term. Unless there is something like a carbon market, which converts public interest into individual private interest, it is difficult to see how there could be changed.

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