Force the world of finance to save Earth

Ensure a rapid transition into green economy is a necessity, and the world has finally understood this. The financial world will play an essential role in the process. Some financial institutions have already made their contribution by naming bonds related to projects that have a positive impact on the environment, or by installing energy saving lamps in their offices. However, many continue to finance the fossil fuels sector and support other areas of the economy, which are incompatible with the transition. These loans, many of which are long-term, are further exacerbating the climate crisis.

To discover, develop and exploit a new oilfield takes decades, a much longer time when the world will have to eliminate greenhouse gases emissions in the atmosphere. These traditional projects will lose value in the years to come.

Possible losses are a risk to investors, to the economic system and to the entire planet. Powerful, well - disposed lobes are doing their best to counter the ecological transition. Moreover, if they fail to do so, the same groupings will seek compensation for any loss of investments they should not have made.

If history has something to teach us, they'll come clean. In theory, we have to stop these investments. But for now in the United States and other countries, this idea is politically irreplaceable. Another option is to adopt new laws.

But since markets are miopes, they have to intervene supervisory entities, such as central banks. The 2008 financial crisis showed what can happen when even a very small portion of the world's capital base (in this case, U.S. mortgages) loses their value.

A change in the price of products that are likely to be affected by climate change could bring the economy to collapse on such a scale that it overshadows those in 2008. The fossil fuels are just the tip of the iceberg (which is also melting). For example, rising sea level and extreme weather events, such as fires and hurricanes, can lead to an unexpected review of land and property prices. Therefore, the control authorities must seek full transparency over climate-related risks not only for physical dangers but also for financial risks.

A policy that is able to make zero emissions in the atmosphere by 2050 (through combined use of taxes on carbon dioxide emissions and very strong laws) will have an important impact on product prices.

A very slow transition will add to the risks. Instead of a smooth road to zero emissions in the atmosphere, through gradual adjustments, we can end up in a chaotic transition where markets will detect change as prices can rise in the stratosphere.

To ease this risk, finances should not only stop lending funds for investments that are harmful to the environment, but also finance those investments that are going in the right direction. In this case we need to use both “cart” as well as “Archbishop”. For example, banks that finance dangerous climate investments should be forced to have more reserves to take action against this danger. Investors will be warned: those who, regardless of everything, continue to invest in fossil fuels should not be supported by the public system through debacle.

In the United States, the government provides the vast majority of residential mortgages. In the future, this should be done only in the case of ecological mortgages (the contract for purchasing homes that have greater energy efficiency).

In the meantime, to encourage investments based on a high cost of CO2 emissions, governments must provide “garance”: If the emissions cost is lower than expected, the investor should be compensated. This would be a kind of security policy that will motivate governments to respect commitments made under the Paris Agreement.

These and other similar policies will support the ecological transition. But the private financial sector is unlikely to do enough if left alone. Many of the crucial investments we need are long-term, and meanwhile, financial markets often focus on short-term goals.

To help overcome this gap, in many areas, including New York, banks have already been established that have environmental issues at their main focus. We have no choice. We must change the way we use consumption, production and investment. The challenge is within our reach. But the world of finance must play its part. And this will require more than a boost, whether it comes from civil society or governments. / Source: Interenceral/In Albanian by: The world.al/