Greener Greenbacks: Financiers Go Eco-Efficient New Study Finds Markets, Banks, Insurers, and Accountants Discovering That Environmentally Sound Management Pays
Stephan Schmidheiny. Swiss industrialist Stephan Schmidheiny was chief adviser to the secretary-general of the Un Conference on Environment and Development, and is the of "Financing Change: the Financial Community, Eco-efficiency and Sustainable Development" ., The Christian Science Monitor
THERE is an important question that almost no one is asking: Are world financial markets bad for the environment?
The query may at first sound absurd, but consider this logic. To conserve the environment we need "sustainable development." That is: forms of progress that meet needs today without making it impossible for future generations to meet their own needs. Whatever forms of progress we get - sustainable or otherwise - are going to be financed mainly by stock markets, bond markets, and debt markets (banks).
These markets rigorously "discount" the future. They place little or no value on clean air and water or a stable climate. They purportedly encourage companies, and investors, to think only of the next quarter's returns, never of the next generation. They have not been very effective at rewarding clean companies nor punishing polluting companies.
So, are financial markets intrinsically opposed to this goal of sustainable development?
The World Business Council for Sustainable Development (WBCSD), a global group of 120-plus like-minded corporations, recently created a task force to study this question. Our findings are now published in book form.
First the bad news - and this is not a new thought but may be a new insight for many. It almost always makes more financial sense to destroy a sustainable natural resource by overuse or overharvesting, and to put the money in the bank, rather than to use the resource sustainably. This is true of forests, whales, fish, and usually of topsoil.
It is true because, with prevailing interest rates, one can enjoy higher annual returns by harvesting and selling all the trees or fish, and banking the money, than by harvesting sustainably. Interest earned will almost always exceed annual profits from maximum sustainable yields of slow-growing creatures like rain-forest trees. Human laws and institutions must be made to reflect this dire reality.
Now the good news. We found a lot of positive change in the financial community. A growing number of companies are moving beyond regulations and even beyond green consumer pressure to prove to themselves and the markets that "eco-efficiency" pays. Eco-efficiency is the word the WBCSD coined to describe businesses that add ever more value with ever less waste and pollution.
Some investors are making money in the fast-growing environmental sector. A rising minority of analysts and investors realize that eco-efficient companies are generally better managed, and that good management is a vital indicator of corporate success. …