Every country in the world is actively participating in preparations for Rio+20, the follow-up Earth Summit in Brazil, June 2012, to stimulate the transition to a green economy. The powerful 34 countries of the OECD (Organization for Economic Co-operation and Development) have a Green Growth Strategy; the EU views “a transition to a green economy is imperative;” the U.S. focuses on “elimination of fossil fuel subsidies;” and Switzerland calls for a “green economy roadmap.”
Amid Encouraging Signs, Washington Mindset Blocks Progress
The Group of Friends on Green Economy includes governments of Egypt, Gabon, Grenada, Hungary, Indonesia, Mexico, South Korea, Sweden and Switzerland. UNEP-Bloomberg found that in 2010, for the first time, developing countries invested more in renewable energy than developed countries.
Key issues in all these shifts are defining the green economy focus: on poverty reduction, developing countries and environmental sustainability (IISD Earth Negotiations Bulletin Summary 2nd Session).
The green economy transition’s greatest challenge is the traditional Washington Consensus model of economic growth of GDP, which remains blind to green concerns, social and human capital and ecosystem assets and services. All this challenges conventional corporate accountants, portfolio managers and institutional investors alike. The shock of transition from fossil fuels to efficient renewable energy is evident in the Carbon Tracker report on misallocated investments, as I warned earlier (“fossilized asset allocation” models). The emergence of green bonds from the World Bank, now finding acceptance by institutional investors, is also helping change obsolete financial models (Climate Bonds Initiative).
Nature Leads the Way
The turf is shifting again to investing in biomimicry companies such as those described by Dr. Gunter Pauli in his Blue Economy, Janine Benyus’ Biomimicry Institute, Dr. John Todd’s Living Machines, Dr. Allan Savory and the Savory Institute, and now showcased in the management programs of Tomorrow’s Company. All these companies design their products with nature, such as Charles River, whose medical clotting agent is harvested sustainably from horseshoe crabs (WIRED August 2011).
This nature-inspired leading edge of the green transition is part of the energy-efficiency revolution now sweeping the global economy, notably in Brazil’s Sustentar 2011. To see the huge returns to these business models requires looking beyond economic calculations of “efficiency” (which are obscured by rigged markets and false prices) to calculating thermodynamic efficiency in the real world: EROEI (energy return on energy investment). Such scientific calculations of actual efficiency show, for example, that extracting oil from tar sands is an energy-loser, as is most ethanol.
The new textbook for asset managers and company executives is The Economics of Ecosystems and Biodiversity (TEEB), a large project for a group of G-20 countries led by former banker Dr. Pavan Sukhdev, who is also an advisor to Ethical Markets. An early example of the efficiency of ecosystems services was devised by Prof. Graciela Chichilnisky of Columbia University, to keep pure water feeding New York City by preserving its forested watershed – cheaper than constructing treatment plants, an approach also used in Brazil and elsewhere. Calculating such broader longer-term efficiencies is the wave of the future Green Economy (UNEP-FI Tipping Point, Washington, Oct. 2011), along with new metrics at the corporate and national level such as those I described in CSRwire’s “Quality of Life Indexes Gaining Ground“.
Rejecting Addictive Behavior
This is a far cry from Wall Street’s current fascination with high-frequency trading and other speculative bets on commodity ETFs and hedge funds. In my “Looking Back From 2020” scenario, I foresee such excessive trading categorized in medical manuals along with gambling as addictive behavior.
Hopefully, Wall Street high frequency traders can learn about Slow Money and how trading is done in biological markets, which is reciprocal and symbiotic (Susan Milius, Science News, July 31, 2011), such as that in minerals between plant roots and fungi. Shifting to longer-term investing is key to the emerging green economy, whether harvesting solar, wind, geothermal or ocean energy – since after the upfront costs, the fuel is free and inexhaustible. Encouraging is the exploration of ecosystems models of efficiency and productivity by British financial gurus Andrew Haldane and Lord Adair Turner, who understand what is wrong with GDP. Meanwhile, the green economy keeps growing as our latest Green Transition Scoreboard® shows. Φ
Hazel Henderson, D.Sc.Hon., FRSA, founder of Ethical Markets Media, is a futurist, evolutionary economist and author of award-winning Ethical Markets: Growing the Green Economy. She leads the Transforming Finance initiative, created the Green Transition Scoreboard®, tracking global private sector investment in green tech, and developed – with Calvert Group – the widely used alternative to GNP, the Calvert-Henderson Quality of Life Indicators. In 2010 she was honored as one of the “Top 100 Thought Leaders in Trustworthy Business Behavior 2010” by Trust Across America. This article is part of the Green Economy series.