(Bradley, A. & Collett, J./The Age. 2021. ‘Ethical’ funds, how to choose them, and the dangers of ‘greenwashing’).

Directing Money to the Environment I

Section
9. Support New, Environmentally-Aware, Economic Systems
Page
9.8

We have already aired arguments as to whether the environment can be, or should be, better accounted for within the modern capitalist economy, but one thing not up for debate is that it is currently almost entirely outside this economy. As such, it can generate few funds itself and must rely on government or philanthropy for financial resources, and these resources are pitifully few.

In Section 7.6 I mentioned budget allocations ‘for’ the environment in my home state, Victoria, and readers would have noted that more than half went to fire activities anyway, as well as other amounts to ‘planning for growth’, land titles, etc…but even if it were all ‘for’ the environment, the ‘environment’ department gets only about 3-4% of yearly, total, departmental expenditure1. This is about typical for many Western nations, and a positive largesse compared to allocations in Developing nations.

The situation with philanthropy is no better. Section 6.6 reproduced an article from ‘The New Statesman’ on philanthropy and climate change and it contained a most informative graph of U.S. philanthropy contributions to different sectors; I present it again here:

(Ferris, N./New Statesman UK. 20222. U.S. Philanthropy by sector).

 

Sadly, in this, the world’s largest philanthropic centre, ‘Climate and the environment’ receives only 1.4% of funds! There is a consistently grim picture emerging here, that – as a rough ‘rule of thumb’ – perhaps around 1% of government and philanthropic funds in Developed nations is genuinely directed to the environment, and in less-developed nations is considerably less than this. This is worth remembering when one hears politicians and corporate leaders expressing their deep commitment to ‘the environment’.

Clearly, there is a desperate need for more funds, and although this could be construed as ‘keeping the system afloat’, when really what is needed is deep, structural change – as outlined in 9.6 and 9.7 – I think it is probably better framed as doing what we can/working in parallel with, efforts to build a new and better economy. (See, also, Section 4, ‘Work, Volunteer, Act for the Environment’).

The other contextual point worth making is that for most of the world this webpage and the next – 9.9 – are irrelevant: they have no discretionary income. It is estimated that by 2030 around 5 billion of the world’s 8 billion people will not have any discretionary income to direct anywhere, let alone to the environment3. Yes, there are other ways to contribute to the environment, e.g. see Section 4, but this situation is yet another injustice and disempowerment of the poor.

In wealthier countries there are two ways that money can be directed to the environment: directly and indirectly. In 9.9. we will look at direct contributions, but here we will examine the indirect application of income via funds, such as pension and superannuation funds, or companies one may have investments in.

In many countries ‘pension funds’ and similar have been established on the back of compulsory contributions throughout a worker’s life. These funds can become enormous –  for example – the world’s largest such fund, GPIF in Japan, is so large that it holds funds larger than the yearly GDP of all but 12 of the world’s 190 nations, including my country, Australia!4

(Thinking Ahead Institute. 2019. Assets of the World’s Top 300 Pension Funds).

 

With the top 300 funds alone wielding $18 trillion to invest, it is a massive understatement to say that they are powerful and can do much to shape the world, for good or ill.

To try to bend this great river of money to better outcomes, environmentally and socially, a plethora of ‘ethical’ funds has sprung up – for instance, 177 new funds worldwide in the June Quarter of 2021 alone5. This is an encouraging development, but is it genuine and how can one decide which fund(s) to support?

An example of a good, general article on this topic was printed in my local paper last year, and I reproduce it here as a starting point for advice on this vital issue:

(Bradley, A. & Collett, J./The Age. 2021. ‘Ethical’ funds, how to choose them, and the dangers of ‘greenwashing’).

 

Unfortunately, this advice is very much needed as I have found dealing with superannuation funds an unpleasant experience. Superannuation in Australia is compulsory, so, backed by legislative power, let alone financial might, I have found them to be equal parts arrogant and secretive. Most no longer have offices or staff for customer enquiries, and one is left battling through numerous electronic barriers to try to gain any information at all about ‘your’ money. This disdain is in inverse proportion to their advertising, which presents them as fearless social or eco-warriors; galling indeed.

The key points from Bradley’s and Collett’s articles are:

  • ‘ethical’ funds usually employ one or more of three investment strategies; namely:
  • (i) Avoid investing in damaging, dangerous or unethical enterprises, e.g. armaments, cigarette manufacture, fossil fuels;
  • (ii) Invest in ‘transition’ enterprises which may have less-than-ideal current operation but have committed to, or are, transitioning to, say, a less polluting production system, or less unjust work practices;
  • (iii) Invest in/support certain ‘positive’ industries or sectors, e.g. renewables
  • Portfolio diversity is still fairly small for ethical funds, though is growing rapidly
  • Portfolio risk is still fairly high for most ethical funds
  • Transparency of fund operations, and the companies invested in, is a problem
  • ‘Greenwashing’ is estimated to apply to between 5—10% of funds labelling themselves as ‘green/ethical’
  • 25% of investment managers, only, can prove responsible investment
  • There are groups, bodies, authorities that can assist in monitoring and reporting on the bona fides of ethical funds, such as in Australia the Australian Securities and Investments Commission and the Responsible Investment Association of Australia; hopefully there are similar in other countries.

Clearly there is much promise here, but also many difficulties. Marc Lepere provides inciteful comment in his article ‘Green Investing’ for ‘The Conversation’6 , and I urge you to read it: Green investing: the global system for rating companies’ ethical credentials is meaningless (theconversation.com) .

 

He summarises his findings:

“Overall, progress is promising but it’s still patchy. Many parts of the world still need to get on board with requiring companies to do a double materiality analysis (my note: double materiality means risk to the external environment, as well as the risk of the environment – internally – to company profit). Small and medium businesses everywhere need disclosure requirements, albeit with a lighter reporting requirement than bigger companies (just as with financial reports). Disclosures need to be assured by certified public accountants – even in the EU this is still voluntary. And ESG ratings agencies must be regulated: they have broadly been ignored by regulators to date.”

(The Telegraph/The Age. 12/1/21. Green Charter).

He seems to think that the EU is currently leading the way in doing a better job, and links to their efforts are provided. The current, three, largest ESG ratings agencies are MSCI, Refinitiv, and Sustainalytics, though Lepere is critical of their methodologies and transparency. Good luck!

There are, of course, other business sectors and companies than pension funds, and other ways of directing money to and from those with better or worse records and reputations. Section 2, ‘Consumption’, deals with this at the smaller, domestic scale, and an exciting recent development at the larger scale is Prince Charles’ initiative to establish a ‘green charter’, a Terra Carta, for businesses, a bit like the Magna Carta. It is introduced in the adjoining article and I urge readers to go to the following site – Home | Sustainable Markets Initiative (sustainable-markets.org)  – where the full, 18-page charter, is reproduced. (One will notice that many of the initiatives supported in T10, e.g. ’30 X 30’ [habitat protection: Section 7.8] are included). Prince Charles, a lifelong protector of the environment, terms the charter “a centre of gravity” for global initiatives for “Nature, People and Planet” and its ‘Statement of Intentfleshes this out, as follows:

“The aims of the Terra Carta will be met by: …

3. (i) Furthering, and where possible exceeding, the goals and targets outlined in the Paris Climate Agreement, the Sustainable Development Goals, the Convention on Biological Diversity, the Convention to Combat Desertification and the UN Convention on the Law of the Sea.

(ii) Broadening the definition of sustainability, beyond simply net zero transition, to be inclusive of Nature, People, Planet, Equality and Prosperity.

(iii) Supporting the protection and restoration of a minimum of 30% of biodiversity, on land and below water, by 2030 and 50% by 2050.

(iv) Making global investment and financial flows consistent with a pathway towards low greenhouse gas emissions, climate-resilient development and Natural Capital/ biodiversity restoration (on land and below water).

(v) Encouraging coordination, cooperation and cohesion within corporate and public-

4. The Terra Carta recognizes that each industry, business and investor needs to chart its own course to a more profitable and sustainable future, and that global, regional, local and industry variance exists. With the sustainable direction increasingly clear, the Terra Carta aims to encourage and provide a voluntary framework for each actor to accelerate along their respective transition journeys.

  1. In targeting a global private sector and a diverse multi-industry audience, it is recognized that actions outlined by the Terra Carta will not apply equally to all. At the same time, to reach a sustainable future, the systems-level shift required relies on the leadership, resources and interdependence of diverse global, regional and local actors. With this multiplicity of actors, pulling in the same direction is critical.
  2. The Terra Carta recognizes that no one action, industry or actor is, in itself, sufficient to solve the climate and biodiversity crisis. A multitude of actions, initiatives and investments is necessary. The more coordinated, aligned and mutually reinforcing these efforts are, the higher the likelihood of success.
  3. The Terra Carta will be open to affirmation from any CEO, or equivalent, in any sector, that wishes to support the private sector’s role in helping to build an inspiring, inclusive, equitable, prosperous and sustainable future. In 2021, COP15 (biodiversity) and COP26 (climate) will be critical milestones to demonstrate private sector commitment and action.
  4. The Terra Carta is to be a living document that will be reported on and updated annually. This will allow the Terra Carta to keep up with global progress, technological evolution and a shifting investment landscape while seizing rapidly emerging opportunities developing around the world.”

It is to be hoped that signatories (480+ to date [2022]) will be genuine in their commitment and worthy of our support. Progress can be monitored here – Progress | Terra Carta Impact Report – and by checking the listed supporters – Terra Carta Supporters | Sustainable Markets Initiative (sustainable-markets.org) – for consideration when deciding whom we should support with our custom or investment.

 

 

1 Budget papers are deliberately opaque and arcane. My figures, and estimates, are based in part, on:  https://www.parliament.vic.gov.au/file_uploads/2021-22_September_Quarterly_Financial_Report_5qKwdMpZ.pdf#:~:text=2%20Quarterly%20Financial%20Report%20for%20the%20Victorian%20general,at%2028.3%20per%20cent%20of%20the%20budget%20estimate.

2 Ferris, N. 2022. ‘How the Rich Could Stop Climate Change’. The New Statesman – UK, 13th Jan.

3 Higgs, K. 2014. Collision Course: Endless Growth on a Finite Planet. The MIT Press, Cambridge, U.S.

4 Thinking Ahead Institute. 2019. Assets World’s Top 300 Pension Funds/Worldometer. 2022. GDP By Country.  GDP by Country – Worldometer (worldometers.info)

5 Bradley, A. 2021. ESG and a Greener Portfolio/Collett, J. 2021. Funds Pushed to Come Clean on Their Green Credentials. The Age, Oct. 13th.

6 Lepere, M. 2022. Green Investing: The Global System for Rating Companies’ Ethical Credentials is Meaningless. The Conversation, March 24th.

Explore Other Economic System

9.1 Introduction

Just as with the previous section – ‘Energy’ – which is, inescapably, all about fossil fuels so pre-eminent and extraordinary has been their dominance and transformation of the world in the last 200 years, so too is this section – ‘Economy’ – real...

9.2 Capitalism: Benefits and Beneficiaries

“Capitalism can be defined as the deliberate and systematic societal encouragement of the accumulation of growth capital through the use of money and debt, the enforcement of private ownership rights (especially of land and natural resources), and...

9.3 Capitalism: Problems for the Environment

In 9.2 we looked at some of the key planks of capitalism and the benefits they have brought, at least to part of, humanity. Now we turn to the problems they pose, particularly environmental problems, and because of their scale and ubiquity, this i...

9.4 Responses: 1. Re-design the Capitalist System

Just as with the previous section, ‘Energy’, there are basically two responses to the problems identified: 1. Re-design/improve the existing system to account for these problems, or 2. Build a whole new system; here we look at the first approach. ...

9.5 Fatal Flaws

Despite the almost heroic efforts of Pearce and others to improve the capitalist system, to make it properly account for the environment, and to separate its destructive ways from its standard operation, there remains an irredeemable futility at t...

9.6 Build Alternatives I

Heinberg points out in his book ‘Power’1 (see Section 8.8) that critics of the current system are good at pointing out faults, but weak at mapping transitions, let alone constructing alternatives; this is certainly so for alternative ec...

9.7 Build Alternatives II

As well as Varoufakis, there are others – individuals and organisations – who refuse to be crushed and bullied by capitalism and are prepared, nay impelled, to think beyond the current straight-jacket. As so often in T10, Higgs1 serv...

9.8 Directing Money to the Environment I

We have already aired arguments as to whether the environment can be, or should be, better accounted for within the modern capitalist economy, but one thing not up for debate is that it is currently almost entirely outside this economy. As such, i...

9.9 Directing Money to the Environment II

While webpage 9.8 addressed indirect funding to the environment via pension funds or similar, 9.9 will examine direct application of whatever discretionary funds one may have available. At first glance this seems relatively straightforward, but...

Explore Other Sections

1. Build the Nature-Human Relationship
1. Build the Nature-Human Relationship 1.1 Articles 1.2 Art Installations 1.3 Books 1.4 Buildings 1.5 Film, Documentaries, Podcasts 1.6 Music 1.7 Paintings 1.8 Photographs 1.9 Poems 1.10 Spiritual Responses
1/11

1. Build the Nature-Human Relationship

This section is designed to foster appreciation and insight that will – hopefully – lead to novel ways to build a better relationship between human beings and Nature. This section is also atypical ...
2. Reduce Consumption
2. Reduce Consumption

2. Reduce Consumption

I hope Reneé Descartes would forgive us for saying that, at least for the modern world, he was wrong.  When, in 1637, he said: “I think, therefore I am”, he could not have anticipated that the majo...
3. Replace God of Growth with God of Quality
3. Replace God of Growth with God of Quality

3. Replace God of Growth with God of Quality

In a supposedly secular age there has arisen a global religion and god like never before, a religion whose reach and power makes every other belief system before it seem pitiful and insignificant: ...
4. Work, Volunteer, Act for the Environment
4. Work, Volunteer, Act for the Environment

4. Work, Volunteer, Act for the Environment

What we do in our day-to-day lives can have great impact. Section Four divides up these actions into three groups – Work (4.2 & 4.3), Volunteering (4.4), and Action, e.g. voting, protesting, et...
5. Reduce Population
5. Reduce Population

5. Reduce Population

Even on top of Mt. Everest, in one of the remotest, most difficult places on earth, there is a great traffic-jam of people jostling for position. And yet, ever more vociferously, we deny that overp...
6. Ensure Media Acknowledgement of Environmental Context
6. Ensure Media Acknowledgement of Environmental Context

6. Ensure Media Acknowledgement of Environmental Context

The media is one of the three, great ‘poles’ of power in the world (alongside political and corporate power) and how they frame and present ‘the environment’ has a profound effect on how we respond...
7. Stop Further Loss of Natural Habitat and Species
7. Stop Further Loss of Natural Habitat and Species

7. Stop Further Loss of Natural Habitat and Species

New York is an exciting, mesmerising place. Human culture is extraordinary and often wonderful. Our powers of transformation of the natural world seem limitless. The trouble is, we don’t seem to be...
8. Assist Energy Descent and Transition
8. Assist Energy Descent and Transition

8. Assist Energy Descent and Transition

Our current energy largesse is an extraordinary ‘gift’, an unprecedented gift of the ages; millions of years to produce and from millions of years ago. Coal, oil and gas, forming...
9. Support New, Environmentally-Aware, Economic Systems
9. Support New, Environmentally-Aware, Economic Systems

9. Support New, Environmentally-Aware, Economic Systems

Just as with the previous section – ‘Energy’ – which is, inescapably, all about fossil fuels so pre-eminent and extraordinary has been their dominance and transformation of the world in the last 20...
10. Reduce Wastes to the Rate of Natural Assimilation
10. Reduce Wastes to the Rate of Natural Assimilation

10. Reduce Wastes to the Rate of Natural Assimilation

Section 10 will attempt to organise this enormous topic by addressing the context and status of pollution in 10.2, before focussing in on air pollution; particularly greenhouse gas pollution and cl...