A word of caution with regards to climate-related standards and regulation

From the 30th of May to the 31st of May 2017, we had the privilege to take part of the 2nd GreenInvest platform gathering, organized by the German Ministry for Economic Cooperation and Development. With questions around how can Fintech support the low-carbon transition and how can domestic economies attract green FDI, the agenda spurred lively discussions.

 

I found most of the discussions delighting, since they clearly emphasized the case for 2 °C-compatible business models and science-based emission targets as a way to reach them. Innovation for the sake of innovation was dismissed, since innovation needs to be put in context of a greater purpose. Currently the understanding that innovation´s true purpose is not being achieved by incremental progress but by a new understanding of scale has great implications. For right. based on science, a new understanding looks at scale no longer from a relative, but from a context-based perspective, which requires we embrace complexity.

 

Looking at scale from a context-based perspective is a bold thing to do, since it forces us to look into certain things we would rather not. Just to name one, the nightmare that countries dependent on fossil-fuel exports increasingly face: the value erosion of assets that pay the nations bills for welfare, education and national security once the low-carbon technology wave has hit. In cases in which oil and gas are main economic drivers of a domestic economy, a timely turnaround can become the challenge of a politician’s life. A main element of this challenge is arguably to attract foreign direct investments, ones that are able to foster the required kind of innovation to shift GDP sources from those which are highly risky (since they depend on fossil fuels) to ones that are able to deliver true productivity and value.

 

Through one of the many fruitful discussions I was glad to learn that a 2nd generation of investment agreements is about to emerge, agreements which are considering social and environmental issues on a new level. Imagine the first country which is able to leapfrog emission-intensive technologies and directly develop into an economy that provides justice and equality as weapons in the great revolution, weapons much stronger than arms.

 

However, something struck me: In order to shape investor behaviour, some participants argued for precise standards, strict regulation and policies. From time to time, I was quite irritated by how these individuals gave themselves the right to determine other human beings’ behaviour. The need for control does not serve anyone but the person exercising the need for control. Control comfortably replaces decisions taken by individuals and therefore it numbs the human being’s sense of accountability, respect and responsibility. Erich Fromm called this control-oriented authority an “irrational” authority: irrational authority tends to stifle intellectual independence and sound ethical judgment, though it may promote the acquisition of certain adaptive skills, and a kind of cunning or facile intelligence [1]. Under the influence of an irrational authority, a person is no longer capable of engaging with his/her situation as deeply and intensely as required to understand his/her role in the biggest tragedy humankind has probably ever faced. I doubt this is the paradigm shift, which we all look for to find identity.

 

What is the alternative to an irrational authority? Of course a rational authority: rational authority encourages the growth of reason, or critical thinking, and of ethical autonomy [2]. The precondition for this to work in politics, business and especially financial decision making is in our opinion a competent market in regards to information. “The need for better information” as the core requirement of the TCFD. Complete information is the level playing field, complete information de-risks environmental investment and by making risks and their financial implications visible, internalizes externalities. Lack of interest to invest in Green Technologies and the bizarre notion that investment in maintaining life-supporting systems are costly is nothing but a clear symptom of a significant lack of information – pictures of destroyed livelihoods and data with regards to both the planetary boundaries and climate change tell the rest of this sad story. Empowering decision-making under the influence of a rational authority amounts to the most-promising options to reconnect the ambitious human mind and soul to its’ surrounding life-supporting systems and will allow them to understand and appreciate their multidimensional value.

 

Countries investing in the acceleration of the uptake of low-emission technologies by providing incentives is fantastic – the context-based understanding of scale however unveils that more acceleration is needed. Complete information on climate-related market aspects is very likely to promote and spur this required uptake/acceleration.

 

Therefore, right. promotes and advocates for a wider and mandatory uptake of scenario-analysis as a key instrument for business in the transition to a low-carbon economy: what would happen to my current business structure if the market develops into a direction that is in line with the goal of limiting global warming to 2 °C? And how can I make sure this situation is beneficial for me, my employees and my businesses stakeholders?

 

Such questions shed some light on problems that take a certain courage to deal with, this courage is lacking today in the scale required. Generating this courage is a tricky thing, since humans tend to ignore problems, for which they don’t have solutions. The flipside: humans tend to acknowledge problems, for which they have solutions. This leads to the unfortunate situation in which the current market does not need what the future demands: the current market cares mainly about problems that have a feasible solution – an app for example, which decides for you every morning, what to wear and promotes clothes that are exactly what you need.

 

How can we make the right problems available to the right people, those who have a chance to find required solutions? How can we mobilize genius in Fintech and coding for the sake of true and productive innovation? right. has at least one of many answers to these questions and will keep you up to date.

 

[1] Erich Fromm, Haben oder Sein, (1979), p.45 et seq.

[2] Erich Fromm, Haben oder Sein, (1979), p.45 et seq.

Hannah Helmke is co-founder and CEO of right. and aims to increasingly incorporate climate psychology into the way that we push for the transition to a low-carbon economy with public, academic, and private partners.

 

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