The New Economy: A Financial Climate for Climate Finance

• Main Author: Yehuda Kahane
• Format: Article
• Language: English
• Published: Risk Institute, Trieste- Geneva 2020-07-01
• Series: Cadmus
• Online Access: http://cadmusjournal.org/article/volume-4/issue-2-part-2/new-economy-financial-climate-climate-finance

In these past two centuries, capitalism has driven substantial economic growth. However, this growth has not been responsible for the “thrivability” of our planet in terms of society and the environment. This economic model now threatens the continuation of the human species on planet Earth. In 2015, The United Nations created a paradigm shift. All the countries committed to reach 17 Sustainable Development Goals (SDGs) by 2030. Trillions of dollars are going to be invested annually in these goals. But a question remains as to how we can obtain the necessary funds. Long-term pension and insurance funds (including social security) are the perfect candidates: they need long-term investments to back up their commitments. A perfect match! Alas, each dollar invested in the SDGs will not bring high yields, because of “externalities” that are not taken into account. The prospective investor only receives economic profits, while others (government or the public) get the environmental and social benefits. The SDGs represent more than just economic goals, therefore, a dialogue with the capitalist model cannot happen. It will only work if there is an approximation, or new factors/metrics, incorporated into that model that can translate social and environmental benefits into monetary terms. If the SDGs become the business of governments, then they could facilitate an approximate solution. Governments must do this, as they manage the SDGs, and the regulation. If each country issues a special long-term bond which can cover SDG investments with a high yield, it may suffice to return a pension or a social security to the entire population. The cost of the plan is the difference between the rate of the bond yield and the return to the owner of said bond. National accountants know how to make this happen. This way, we finance the SDGs, and create a pension and jobs for millennials and future generations.