TM 6 Workshop: Green Finance and the Global South – Money and Nature: questioning and reflecting on the global fragmented financialised mobilisation of capital for ecological good
Organised by Oliver Kessler, Indradeep Ghosh and Ismail Ertürk from The M.S. Merian – R. Tagore International Centre of Advanced Studies ‘Metamorphoses of the Political’: Thematical Module 6 – Political Economy of Growth and Distribution
Date: 23 to 24 June 2022
Venue: Weimar, Germany
About the workshop:
This workshop aims to develop a framework for research that question the democratic legitimacy and cognitive credentials of the evolving technocratic and market mobilisation of global finance to govern the world’s economic resources towards an ecologically desirable socio-economic system where geopolitical interests diverge, especially between the “North” and the “Global South.” Given that the size of finance in global economy has grown to multiples of real economy and continues to grow at higher rates despite and because of regular big financial crises, a phenomenon that has come to be known summarily as financialisation, the expansion of the power and logic of finance into the technologies for solving the climate and ecological problems naturally raises valid questions and objections.
Both mainstream and critical literatures on finance and environment have so far primarily problematised the organisation of finance in capital markets – its initiatives, motifs, instruments, and calculative logics regarding investments- to improve, even transform environmental conditions globally. Organisation of responsible finance in capital markets to contribute to the environmental and social causes has a set of non-standardised metrics that are known under the acronym ESG-environmental, social and governance (OECD 2017). Asset managers and investors subscribe to the principles for ESG investments to be impactful on environmental and social issues in the economy. Companies are rated under several ESG criteria that influence their capital market funding. ESG metrics that have primarily been developed as knowledge practice of financialised capital in core capitalist economies have performative effect on the global allocation of capital including Global South. The calculative logic of ESG and its correlative research paradigm in academia and industry have collectively given rise to a self-legitimising but contestable truth regime with validation protocols regarding finance’s impact on climate and ecology. At the same time both in academia and in the industry, there is equally strong evidence that ESG ratings are not standardised and the calculative universe of ESG is rather chaotic.
Then recently the organisation of finance for environmental issues has expanded to include banking by the formation of the Network for Greening of the Financial System (NGFS) in 2017 by some leading central banks that see the prevention of the probable destabilising impact of climate risk on financial markets within their mandates (Carney et al 2019 and NFGS 2019). And in 2019, the United Nations Environmental Programme’s (UNEP) Finance Initiative (FI) launched the Principles for Responsible Banking (PRB) initiative with 130 banks that collectively represent one third of all banking assets globally. The principles form a framework for the banking industry to align business objectives with the UN Sustainable Development Goals (SDGs) and the Paris Agreement on climate change (UNEP FI).
The central banks’ initiative, NGFS, aims to develop global supervisory capabilities to prevent probable systemic financial risks that may arise from transitioning to a carbon neutral economy after the Paris Agreement of 2015 and the COP26 Glasgow Climate Pact in 2021. UNEP FI’s PRB, however, is an initiative that expands the earlier UN initiatives of Principles for Responsible Investment (PRI) in 2006 and Principles for Sustainable Insurance (PSI) in 2012 to include banking. These two separate initiatives that link the banking sector to the environmental agenda belong to two different institutional histories. The UNEP FI initiative introduces the banking sector to the supranational cause of UN Sustainable Development Goals whereas the central banks’ initiative aims to develop a regulatory framework for banks’ exposure to the climate risk. But both initiatives derive social and business legitimacy from the supranational agreements at the UN level on dealing with the social and environmental problems faced by the humanity.
The suitability and effectiveness of central bank knowledge on risk management in banking are questionable. The regulatory intentions of central banks on climate risk are translated into operational algorithms for risk management that are derived primarily from modern finance theory that failed in predicting the losses suffered in previous sudden collapses of asset prices. Epistemic resources of central banks themselves are not stress tested but the central banks heroically launch risk modelling based on their questionable epistemic resources, theoretical and empirical, to stress test banks’ exposure to climate risk. But at the same time Bank for International Settlement has dramatically acknowledged the knowledge deficits of central bankers, by introducing the concept of “Green Swan” and by superficial reading of Gaston Bachelard’s work on science, in managing the climate and ecological risks that financial markets and institutions are exposed to (Bolton P. et al 2020). Added to this regulatory initiative by central banks there are also debates about the use of QE and monetary policy for greening the economy by green bond purchases.
All these institutionally fragmented initiatives lack a synergistic force at the policy level and a global consent by the world’s citizens that can successfully and meaningfully deploy public and private funds as an effective governance mechanism for all humanity.
At this workshop we call for presentation of theoretical and empirical work that address the following issues.
• How can we deconstruct and contest, both in core capitalist countries and in global South, the values that shape technocratic and market initiatives to mobilise global finance for the good of nature?
• Although the UN is the unifying author of the need for global action by businesses and finance on ecological problems, does it expose itself to a technocratic capture in the way it creates institutional frameworks that rely on the knowledge reservoir and financial interests of financialised capitalism?
• How do we create both global and local governance mechanisms to prevent central banks from repeating past errors in monetary and financial stability mandates? Or should central banks be mandated to design a universal regulatory framework for banking on the issues of transitioning to a carbon-neutral economy?
• What are the business, governmental, financial, and civil society responses, and initiatives to the ESG agenda of asset managers, investors, and capital markets in Global South?
• How can the central banks and banks in Global South be involved in the design of regulation and credit allocation for climate and ecological purposes?
• How non-western knowledges and values about nature can contribute to the mobilisation of global capital to solve climate and ecology problems