Climate Change Policy Through Capital Markets

Point: OK illustrious EBI’s all-seeing Man-in-DC: Here’s a direct quote from one of our fellow opinion leaders: “Over the past few months, we’ve been hearing growing voices warn that climate change poses an existential threat to companies and economies, and that those not ready to address that threat in a serious way are flirting with financial disaster.” Many climate change advocacy groups emphasize the existential threat to humankind on the planet as a primary driver for climate change policy.  Do you believe a campaign oriented around short term economic impacts will be more credible and/or more effective in driving climate policy at the global or regional level?

Aligned Point (but not Congruent; nor a Counterpoint)


Curbing carbon emissions may no longer be about the MESSAGE (a campaign), but the TARGET AUDIENCE.

Instead of Parliaments and Legislatures, Bloomberg’s CDP, and the Climate Bond Initiative are not seeking as much to educate on Climate Change.

Instead they are targeting large pools of Capital in Pension Funds, Insurance Companies, and Government bonds (e.g., state bonds for infrastructure).

This looks to be a MORE EFFECTIVE campaign approach than trying to chant against Legislatures bribed by the Fossil industry, or saddled with constituents who genuinely want to save their jobs in extractive industries. A political campaign is useless on that landscape.

Targeting the actual flow of capital and investment (a 21st Century model) is more fruitful, than pounding away on sand for EPA regulations (20th Century model).

This approach amounts to aligning financial incentives WITHIN the Capitalist system by affecting returns on capital and risks.

Targeting CONSUMERS with “price signals” does not reduce carbon emissions much; instead consumers vote Governors out of office (like CA in 2003).

Transforming energy use (toward de-carbonization) via direct CAPITAL market incentives yields deeper and longer term shifts, than merely trying to affect stubborn consumers who want heat or A/C.  Energy demand is INELASTIC; ready substitutes are few.  Electric Vehicles are fundamentally an INVESTMENT decision in capital equipment — consumers will continue to drive as much (or more), but do so with decarbonized equipment.  Smart Cities will continue to amplify this trend in Energy Asset Transformation.  People have lives to live, jobs to commute to, kids to pick up after school.