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
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
So, are financial markets intrinsically opposed to this goal of
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. …