The fragility of the global economy and legacy financial systems can no longer rely on central banks and fiat currencies to restore their flagging GDP-growth recipes. Politicians gridlocked in many countries must now step in and use fiscal tools to foster healthier forms of growth beyond GDP, such as in the United Nations’ (UN) Sustainable Development Goals (SDGs) which recognize current realities and encompass future imperatives: inclusive knowledge-rich renewably resourced, circular green economies. These require new green infrastructure. Green bonds issued now total US $150 billion reported at www.climatebonds.net.
Central banks throw in the towel, acknowledging that their stop-gap use of negative interest rates and quantitative easing (QE) are ever less effective (see my “Bernanke and Friedman Were Right: Time for Helicopter Money and Qualitative Easing”). Their bond-buying is distorting markets as reported in The Economist. Governments cognitively captured by academics and politicians are caught in the 19th century ideologies of Keynesian and laissez faire austerity – which worsened recessions. Now they are reversing austerity – forced to re-focus on stimulating lagging aggregate demand to stave off global recession. With current historically low interest rates governments recognize their opportunities to invest in infrastructure – even as savers, pension funds and banks suffer.
Since 2015 and the UN’s 195 nation members ratification of the SDGs and the COP21 NIDC pledges to shift to low-carbon economies, these 19th century GDP models have become clearly obsolete. Yet, financial markets still are frozen, blinded to the reality that the transition of the global economy beyond the fossil-fueled Industrial Era is already accelerating, as we have tracked in our Green Transition Scoreboard® since 2007, totaling private investments in green sectors worldwide – currently a cumulative $7.1 trillion. Mainstream financial models still see this growing shift to post-carbon, renewably resourced economies as a “niche” – rather than the estimated $45 trillion global market opportunity it has opened.
Enter the first wave of green bonds initially promoted by the global non-profit Climate Bonds Initiative led by Australia’s Sean Kidney. Institutional investors continue rushing to green bonds, along with China’s Green Financial System, the World Bank and pension funds, over-subscribing many issues. Central bankers are supportive, including Mark Carney of the Bank of England who calls for 5 measures to scale-up the green bond market: 1) a “term sheet” standardizing these bonds; 2) definitional frameworks for validation of green projects; 3) integration into credit ratings, 4) green bond indices and 5) harmonization of principles and standards for green bond listings. The herd behavior of all markets must be steered by such new standards to assure that the proceeds of these green bonds are applied only to truly green, scientifically verified, investments. The Climate Bonds Initiative, the Sustainable Accounting Standards Board (SASB); the Climate Disclosure Standards Board (CDSB), along with IIRC, the Chartered Institute of Management Accountants (CIMA) and others are monitoring these green bonds.
The next stage involves applying new investments and shifting stranded fossilized assets into the next-generation green infrastructure upon which the Solar Age green technologies, companies and jobs can grow. Green redevelopment bonds can begin to grow this green infrastructure, reclaiming agricultural land, saving forests and watersheds, moving to smarter, compact cities, efficient public transit, charging stations for electric vehicles, LED lighting, micro grids for solar, wind farms, green buildings and design, as well as across the board efficiency.
All this will require Brown-to-Green Redevelopment Bonds on steroids – focused systemically on redeveloping whole sectors of our 19th and 20th century industries: from wasteful retailing of obsolescent products to re-useable, modular, take-back, recyclable items in a fully circular economy. These redevelopment bonds will help restructure our medical-industrial complex now gobbling 16% of US GDP by insurance and pharmaceutical giants, crisis medical approaches – toward prevention, lifestyle learning and wellness models with less cost, risk and better health outcomes. The vast industrial agriculture sector overuses pesticides, water and fossil energy. This global monoculture-based industry needs restructuring toward lower-cost, smaller-scale, distributed, organic farming, urban, vertically grown food and local markets. Utilizing solar energy, desert lands and salt-loving plant varieties can diversity our food, fiber and energy systems while restoring soils and re-sequestering carbon, as in DesertCorp.
This kind of sectoral restructuring avoids enormous social and environmental costs which companies have been allowed to “externalize” from their balance sheets for decades, passing them on to taxpayers. These incur health and safety hazards and social costs as well as depleting ecosystems, species, fish stocks, and drive climate risks. These “externalities” are now estimated by the IMF as costing over $5 trillion annually. Such huge avoided costs, formerly unaccounted can be captured, along with many co-benefits in floating, long-term, expanded Brown-to-Green Redevelopment Bonds designed and suited for pension fund investments. These are similar to large-scale real estate developers selling their redevelopment bonds with architects’ models of new buildings, facilities and parks to transform formerly derelict neighborhoods. Depopulated districts in cities like Detroit can be re-zoned for future purposes and re-developed into smart new urban neighborhoods, reviving city economies and tax bases.
Today, with the need to rescue trillions of stranded, fossilized assets in so many older, polluting sectors of mature economies, we will need these Brown-to-Green Redevelopment Bonds, also to mop up the huge overhang of capital in many markets. They will use science-based metrics such as those in Intergenerational Finance™ (IGF) which will guarantee attractive returns in the avoided costs of these “externalities”. This will include the co-benefits: healthier people, cleaner, more nutritious food, restoring blighted, polluted areas, reforestation and investing in re-growing fish stocks in expanding the ocean reserves recently mandated in President Obama’s national monuments.
Today, since 2015, all is in place for accelerating the global green Transition to the Solar Age: robust private investments tracked in the Green Transition Scoreboard®; Green Bonds now expanding rapidly worldwide led by China; efficient renewable energy and resource technologies scaling rapidly and reducing prices; the new sustainable development model in the SDGs and COP 21. New metrics for Sustainable Infrastructure and Insurance, new accounting, measuring all six forms of capital: finance, built, intellectual, human, social and natural as in Financial Management, May 2016 (CimaGlobal.com). The science-based Brown-to-Green Redevelopment Bonds can be designed using Intergenerational Finance™. Even central banks can re-direct their QE toward Green Qualitative Easing – using similar science-based metrics. Investments in the green transition are now urgent to meet COP21 targets below 2 degrees of atmospheric global warming – and are achievable as in 2° Investing Initiative and other post-carbon portfolios.
Other News
Hakuna maoni:
Chapisha Maoni