The problem: economics has failed to incorporate ‘externalities’.
I completed the Cambridge University’s Institute of Sustainability Leadership (CISL) course on Sustainable Finance and did very well indeed – over 80%! Yes!
I highly recommend the course to all in the environmental space if you have the time and money. It was fun, informative and interesting in may unforeseen ways. I thought I had said goodbye to essay crises 25 years ago….but almost every Monday night! Phew!
Anyhow 5 bite-size chunks for everyone who has neither the time nor money – here goes:
This may seem obvious, but the fact is the financial system and all of life on planet earth both depends on and has an impact on society and the environment. Everything is interlinked.
Social and environmental issues affect the ability of that system to fulfil its functions i.e. The financial system’s concurrent distance and continued divorce from us is increasing, at the same time as the evident harms to our societies and environments of that separation. This must (and can) be swiftly corrected for the long term. We have to move quickly.
The two things from which the problems and the potential solutions originate are:
In the last 200 years the world’s population has multiplied by 8 times, from 1 billion in 1800 to almost 8 billion in 2020. The planet’s environment was able to absorb a smaller, less consumptive population. Now, its natural systems are not able to absorb and process the waste and by-products that our society produces.
Economics has failed to incorporate ‘externalities’.
Both the ‘great enrichment’ and the ‘great acceleration’ from the 1950s, are integral parts of the omission of externalities – caused and created by them.
At the heart of the matter are the methods of evaluating “value”; since the dawn of classical economics. These methods mean that the divergence of the financial system away from its dependencies has been rewarded and actually harms those dependencies. This is unsustainable in the short and long term. It is existential; for us and life on the beautiful planet earth.
2. The growth in ESG awareness nowadays is largely about avoiding harm. It does not fully yet reflect environmental boundaries or translate into a transformational shift in investments towards a sustainable future. A few are now claiming the urgent need of more strict ‘policy’ and ‘regulation’.
3. ‘Greenwishing (as opposed to its better-known cousin ‘greenwashing’ which is easier to spot and correct) is described by it’s author as “the earnest hope that well-intended efforts to make the world more sustainable are much closer to achieving the necessary change than they really are”.
To improve on him, maybe, is to define it as this: “‘Greenwishing’ means that well-intended efforts in the hope of making the world more sustainable (or ‘green’) are much further from achieving the necessary change than they are thought to be “?
A small analogy might make you realise that we are all ‘greenwishing’. eg. for example, is it greenwishing to use a bamboo-constructed with-odd-rubber-polymer-lid as a coffee cup? Because we are not using plastic? The energy involved in producing such an item and its un-recyclability might mean that it is more detrimental to the environment than a standard paper-plastic coffee cup that is recycled locally?
4. There is a philharmonic-orchestra-sized-concert of ACRONYMS – of different bodies doing plentiful, sweet-sounding and noisy sustainability initiatives, yet deafening is the silence when you ask for a universally accepted and acclaimed tool of measurement, or even a decided definition of what we are measuring, and how we might measure it.
5. My overall conclusion from the course is this: it is all about internalising (making true) present externalities.
What is ‘it’?! the ‘aim’? The ‘trend’? Our generation's ‘mission'?
............................................................ [i] https://en.wikipedia.org/wiki/Great_Acceleration [ii] https://www.investopedia.com/terms/e/externality.asp [iii] The main initial thinkers are held to be Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Robert Malthus, and John Stuart Mill. These economists produced a theory of market economies as largely self-regulating systems, governed by natural laws of production and exchange (famously captured by Adam Smith's metaphor of the invisible hand) and extended by Friedman etc.