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Environment
Greenbacks Need a Green Economy To Decrease Climate Anxiety
Central banks are engaging climate change and 'us.' What have they found out?
Posted January 2, 2019
Central banks around the globe use money as a key form of communication, as do we. What do they make of climate change?
In a sense, it’s a tough time to be a banker: blamed for the 2008 global financial crisis; subject to a Royal Commission in Australia (akin to a massive Senate inquiry); massively unpopular with the public; and at risk from new financial instruments like Bitcoin. In the decade since the crisis hit, the profession’s image has failed to recover.
But rather like the Great Depression, when Toby’s dad was the only boy in school with shoes because his father was a bank teller and none of them were laid off in Australia, things inevitably get better for bankers.
Capitalism needs them, and so do workers. Businesses rely on loans to build and run their plant and hire employees, and to weather inventory and supply problems. Workers need somewhere secure to put their money and gain ready access to it. And both live on credit, as corporate profits soar while wages stagnate and small firms struggle.
Most of us encounter stories in the media about banks only when there are scandals involving malfeasance by rogue traders or selfish executives, or pressure from Wall Street. But we also realize that finance is itself a medium of communication—how we show we can or cannot afford to purchase objects and services through our public and private images.
If we read about the Federal Reserve, it is generally because of rate increases to the cost of money, in order to cool down inflation, or headlines about its license to print money—the quantitative easing that took place from 2008. Nowadays, it can even be because the Chair of the Fed is deemed at risk of being removed!
But central banks around the world are hitting the headlines for other reasons: they are becoming leaders in finance when it comes to combating climate change.
A little over a year ago, these institutions formed a Network for Greening the Financial System (NFGC). The Network seeks to develop "environment and climate risk management in the financial sector" and "mobilise mainstream finance to support the transition toward a sustainable economy." It sees environmental failings as instances of market failure, rather than an inevitable aspect of capitalism’s growth ethos.
The NFGC’s membership is drawn from the equivalent of the Fed in Spain, Mexico, Portugal, Britain, France, Malaysia, Luxembourg, the Maghreb, the Netherlands, Sweden, the European Union, Japan, Germany, Singapore, Belgium, Norway, Austria, China, Australia, and New Zealand/Aotearoa. The World Bank and the Organization for Economic and Cooperation & Development are observers, inter alios. Amongst the world’s leading economies, any countries in particular that you don’t see listed?
Russia, Brazil, and us.
NFGC released its first progress report in October. The document makes for interesting reading and attracted considerable media coverage—beyond our shores. It clarifies that financial risks flow from as well as generating climatic ones, and that we need new analytic tools to comprehend how this may happen and uncover ways of countering it.
The very concept of risk is of course part of daily life—the risk of job loss, car-based travel, air pollution, failure to vaccinate, proliferation of firearms, legal recreational drugs, poverty, domestic violence, hate crime, and sexual assault, for instance.
Despite our absence from NGFC, US banking authorities are alive to these matters. For example, the Federal Reserve of Richmond, Virginia is, so to speak, on the money. It recognizes the threat to the nation’s economy posed by global warming, particularly in states that already have an abundance of warm weather. A Californian counterpart, the Federal Reserve Bank of San Francisco, has discerned what is called ‘climate gentrification,’ a process whereby areas deeply affected by newly rampaging floods lose value in the housing market by contrast with those safely removed from such threats. The wealthy move to dry land. Over in the mid-west, the Kansas City Fed acknowledges the risk to agriculture that is posed by climate change. And in the private sector, Deloitte just announced the introduction of climate change as a variable in its evaluation of financial markets.
All these tendencies point in one direction—the need to change how we do business.
Structural adjustment in economies brings fear, pain, and inequality. We’ve seen that in our two great transitions: the first from an agricultural slave economy to an industrial one, and the second from a manufacturing base to one that makes its money from the media, tourism, software, finance, insurance, the law, and so on.
Creating a green economy to replace our use of fossil fuels for power and temperature control and our current fetish for air and road as forms of transportation will not be easy or painless. Consider the well-heeled propaganda campaigns to obstruct change that are backed by fossil-fuel capitalists, to which we have become all too accustomed.
And hence, also, the grassroots anxiety about a turn away from coal, or the push for retraining working people. After 2008, folks have good reason to mistrust governments, banks, economists, and other high priests of economic wisdom.
That said, we truly need a new economy, but its introduction must be predicated on taking seriously the discontent, alienation, and disenfranchisement that are felt so keenly in so many parts of the country.
Bodies like the Federal Reserve, universities, the media, and the military need to draw on and extend their community standing by reaching out across the nation. They have ideal networks to share the present and potential reality with the population and use their knowledge and expertise to solve problems in ways that make sense scientifically, prudentially, and locally.
Those last three aspects will not always, or easily, align. The deep-rooted emotions at play over climate change need not only listening but credence, too, as those of us persuaded by scientific evidence and prediction learn to learn also from those who are negatively affected both by climate change itself, and by attempts to ameliorate it. They know not to trust the banking system in its macro-incarnations. We need to give them a reason to join both that system and us in the transformation needed to save our country and economy.
Greenbacks need to be backed by green work, and urgently. Since the Fed realizes that fact, it must network across the nation with the other institutions we’ve mentioned—and sign up for the NFGC. Little by little, we can all become less anxious and more confident about our future. That will require structural adjustment on the part of bankers just as much as workers.
