Monday, April 2, 2018

How do we finance sustainability?

Fixing climate change and other environmental messes will take money. Unfortunately our economy has long ignored the environment as part of the economy. Traditional economics pays no attention to stocks of natural resources and places no value on the “Commons,” things no one owns but we all need like air, oceans, etc. If no one owns “the environment” and it’s given no value, then who would pay to restore it?

A decade ago I was calling for green bonds. If building new roads or schools is consider a social benefit, eligible for municipal bond rates, then why couldn’t climate or environmental restoration projects also, regardless of who does the work: a corporation, NGO or municipality. The Catch 22 was that there was no income coming off of these projects to pay back the bond. Now, however, ecosystem services are now being valued and paid for. (For example, people who live along rivers can sometimes get paid for protecting or restoring them to maintain cool water temperatures or reduce flooding risk and erosion.)

A framework has just been proposed by an expert panel and is on its way to the EU. It includes a process for defining what is green.

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