Author: Jonathan Wichmann / Source: Big Think
For millennia, the finance industry has been a primary culprit in global warming. Now it’s time for finance to right its wrongs and provide the solution.
It’s easy to read about the current and future state of our climate and have a fit of despair. For years, the scientific consensus was that we’d be fine if temperatures increased from pre-industrial levels by less than 2°C.
But the UN’s recent global warming report revises the threshold, showing that a 1.5°C increase will have catastrophic effects, and that we could experience such effects as early as 2040.
Avoiding such a fate would require a global economic initiative that has “no documented historic precedent”, the UN report states. Or as Oxford University climate scientist Myles Allen says, we need to “turn the world economy on a dime”.
This is usually when the despair sets in. It’s not that we don’t know how to address climate change effectively, it’s that the solution – completely overhauling the world economy – seems such a vast, insurmountable task.
How, especially in this era of intense nationalism, can we expect the nations of the world to come together and pull off the greatest collaborative feat in human history? Daunting as the project may seem, many of the world’s leading economists and finance industry executives have been pondering that exact question for years, and have developed a rough outline for accomplishing the UN’s lofty goals.
The first step towards achieving a sustainable future is to dispel the notion that environmental sustainability is somehow distinct from financial sustainability. “The degradation of the natural environment presents the greatest challenge faced by humanity”, Harvard Business School professor Geoffrey Jones writes in his 2017 book Profits and Sustainability. Humanity includes the financial world, too.
“A big challenge moving ahead is redefining business so it can have a more productive impact on the world”, Jones tells me in a recent interview. “Figuring out how businesses can productively contribute to societal welfare, including environmental welfare.”
Former Managing Director of J.P. Morgan John Fullerton calls this new financial system – one in which profits and sustainability coexist and reinforce each other – “regenerative capitalism“. It challenges the long-held belief that business success and environmental concerns are inherently at odds. (Indeed, in the US, the Trump administration continues to discredit climate change science and portray it as an impediment to the country’s economic goals).
Regenerative capitalism is the exact kind of massive economic overhaul that the UN report calls for,…
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