Why should we be concerned?
Across the planet humanity is facing multiple, inter-related crises. A crisis in social justice as inequality soars and a tiny elite gain increasing power and wealth. A crisis in the environment as the capitalist system continues to destroy the web of life and emits climate changing gasses such as CO2.
Part of the solution to these crises is to stop funding unjust and destructive activities and to finance progressive and environmentally friendly activities and infrastructure.
But we have a double problem: we don’t know how much finance is dedicated to sustainable and responsible investments but we definitely know it is not enough.
We have very little transparency on how much investing and lending is truly sustainable and responsible. We need a better classification of investing and better reporting.
One measure, which almost certainly overstates the amount of truly sustainable and responsible investing is provided by the Global Sustainable Investment Alliance (GSIA). In their Global Sustainable Investment review of 2016, they claim “there are now $22.89 trillion of assets being professionally managed under responsible investment strategies, an increase of 25 percent since 2014.” In their next sentence, however, they show the problems of measurement – the measure of responsible investing in Europe fell because the definition became more strict.
By way of comparison, Global Financial Assets were estimated at $ 294 trillion for 2014, and Global Wealth was estimated at $280 trillion in mid-2017. In other words, SRI investments are equivalent to around 7% of total financial assets or around 8% of global wealth.
What should we change?
The main thing is to get democratic control of the financial system, so we can really begin to exert control over what does and doesn’t get built. As with indicators such as ‘bank lending to the real economy’ and ‘finance by finance for finance,’ it is not the profit motives of giant financial firms that should decide where society’s investments are made. We need new more democratic and accountable means of directing investment and lending.
We also need more and better information on what investments and lending financial institutions, both public and private, are making. Transparency and information alone will not be enough: relying on transparency alone means relying on a logic that markets are somehow “efficient” and will fix everything. This is an idea based on defunct economics and is clearly nonsense – just look where 40 years of letting profit decide has left us. Transparency is a part of the solution though – we need better information about where society is allocating financial resources, if only to debunk false claims by the financial industry that nothing needs to change.