A lot of money has been spent by Governments in the last six months as they try to catch up on what they should always have done - regulating the banks. The amounts will continue to rise, at least for a little longer, and avoiding a deep recession, a recession is now a given, will be the priority of all Governments and not just in the developed world.
But is this an opportunity? Never, well perhaps never, have Governments been in a better position to advise banks of what they should and shouldn't do and never have the banks, and indeed other big companies like GM and Chrysler, been more prepared to listen. What might that mean for the environment and climate change? Well potentially a lot actually. In the UK the Climate Change Bill is yet to be passed. It will set targets and penalities, it will ensure that a new commodity, carbon, is created and traded well into the future, but it won't be able to provide the capital or investment that might effect the changes.
As we all know, banks have a big role to play, climate change or not, so why not use the opportunity of the recapitalisation of the banks, and may automotive companies, to ensure that they lend or publish to environmental targets? This won't work across a whole bank portfolio, that would be too risky, but it might be introduced as part of it and gradually extended. In that way banks, through lending practices and even procurement, can help create and hasten a market for suistainable products. Lending might just soothe a transition to a more sustainable world, and frankly shareholders of banks, who have been bailed out, will just have to accept it.
Some commentators might say that this is not what banking should be about, but there are a few precedents. The Equator Principles have been adopted by banks who lend to extractive industries like mining and are a set of rules that are governed by environmental standards. So important are these rules in mining finance that now, any project in the developing world must abide by them otherwise there is little or no bank lending. Could this be taken further so that banks, over time because that is also important, are made to lend to new projects that will only comply with emissions targets or accepted environmental impacts?
Governments in bailing out banks have an opportunity to force changes in thinking on climate change and the environment by forcing the banks to think and lend more sustaionably. If they do, they might help avoid the next world crisis and that one might have nothing to do with money.
