Carlos Joly (Argentinian, born 1947) has lived and worked in Europe for twenty-five years. He is an investment manager who over the years has pioneered various approaches to integrating environmental issues in portfolio management. He is a Fellow at CISL, Cambridge University, and the architect and prime mover of its Investment Leaders Group.
He is a co-founder and was Chair of the UNEP Finance Initiative and its Asset Management Working Group for over 10 years. He Co-Chaired the Expert Group that drafted the UN Principles of Responsible Investment and also served on the Commission d´Investissement Socialement Responsable of Paris Europlace-Euronext, and advised the Fonds de Reserve de France.
Carlos has taught at the Ecole Supérieure de Commerce, Toulouse as Visiting Professor of Finance and Sustainable Development; and taught at seminars at Oxford, Cambridge, Yale, Kellogg Business School, Haute Ecole de Commerce, Université de Paris-Dauphine, and the Chartered Financial Analyst Institute. He has an A.M. in Philosophy from Harvard University, where he was lucky enough to learn ethics from John Rawls, philosophy of science from Hilary Putnam, and logic from Willard Quine.
From a half century of progressive enlightenment and increasing well-being we are moving to a new Dark Age of hard times for the many and inordinate privilege and wealth for the few.
Upward social mobility was a general phenomenon from after 1945 until about 1990. In one and two generations, families moved from being poor or working class to middle class and upper middle class. In the United States, reindustrialization, economic growth, broad university access, labor union–negotiated benefits, Medicare, Medicaid, and health insurance did the trick. In western Europe, their equivalents in social democratic economies and European Union (EU) policies resulted in well-functioning welfare states providing a better life with expanding opportunities for urban workers, farmers, artisans, and small businessowners. Working hours shortened and vacations lengthened while purchasing power increased and healthy, youthful pensioners came to see retirement as a “golden age.”
But in the past twenty years this has begun to change. People in mature economies no longer report increasing well-being. They have grounds for pessimism. They will be worse off.
As I see it, we are entering an age of increasing polarization economically, socially, culturally, and environmentally. In mature markets there will be more poor and more inequity—polarisation between the pauperized many and the fortunate few. In emerging economies we will see less poverty—an economic and social evolution like we saw in mature markets after the Second World War. They are catching up, as the Western rich are falling back. However, common to both will be a general degradation of environmental conditions and an increasing frequency and severity of extreme weather events affecting economies everywhere, albeit in different ways. Emerging economies will have to learn to deal with emerging climate change, from soy and wheat affected by too much and too little rain in the Argentine pampas to pipelines and other infrastructure in Russian Siberia breaking up from sagging tundra.
Overall, I expect the international community will not put in place robust emissions-reduction limits until disaster is upon us, and probably then policies and money will go to emergency response and remediation, as prevention will be seen as no longer possible. Mature economies will fall behind as they fail to modernize and green their industrial infrastructure.
China will win this game—in wind, solar, battery technology, and railways. Oversimplifying the situation, the cause of the recurrent crises in the West is the triumph of financial capitalism, aided and abetted by its neoliberal institutions—the Federal Reserve, the US Treasury, the International Monetary Fund, the European Central Bank, international patent rights legislation—and coupled with the takeover of government by a corporate and financial oligarchy. There are exceptions, noticeably the Nordic Model with its real social democracy, its worklife constitutions mediating in a fair way the interests of capital, labor, and government, its natural resource laws making sure the extractive industry pays proper taxes, and its welfare state institutions meant to create well-being for the many through incentivizing employment.
Growth, Consumerism, Climate Change
People’s closets, attics, and garages are full of stuff. Yet at the macro level, the world is driven to more material production. Governments promote traditional GDP growth to create jobs and take in more taxes, and they actively support financial capitalism because they falsely believe it is the only way. The GDP accounting system leaves environmental assets like water resources, soil fertility, quality of life, and a stable climate out of the calculations, while finance ministries, the EU, the Union of South American Nations, and the Association of Southeast Asian Nations design economic policy with environmental blinders. Globalization means more stuff gets shipped to the other ends of the earth at all times of the year, multiplying emissions.
At the corporate level, increasing volumes of stuff is what gives rise to the profit levels demanded by the stock markets. And, as in national accounting, corporate accounts are not required to internalise pollution and environmental degradation. Until the measurement and reporting systems used by markets take into account environmental degradation, we will continue to outpace nature’s limits, by which I mean its assimilative and regenerative capacities to sustain civilization and other life.
New Accounting Rules
What is being counted has to change: in mature markets at least, the production and consumption of cultural, nonpolluting, and nonmaterial goods has to replace stuff, and their monetary value has to be repriced upward. In simple words, what we do to make money has to change. But the needed wholesale transformation of energy, agriculture, transportation, and manufacturing will not happen in time—that is, well before 2052—owing to successful political opposition by vested interests in the coal, oil, shale gas, petrochemical, and automobile industries and the utilities and related businesses that depend on them.
The result is that we are only forty years from disaster. In 2052 the concentration of greenhouse gases in the atmosphere will be moving toward levels that will trigger irreversible large-scale damage. To keep from reaching that level, the world would need to cut emissions by at least half by 2052. I do not expect that this will happen. Man-made greenhouse gases will grow beyond the tipping point.
New technology is not the barrier: 100% wind, water, and solar energy can be achieved with existing technology.7 Nor is lack of money the real issue. War spending is over 2% to 3% of world GDP. It would take much less than this to cover the cost of bringing greenhouse gas emissions down by 50% in twenty years and do the necessary adaptation to residual climate-change impacts.
From Mitigation to Adaptation
What I expect is that efforts will shift from emissions reduction to adaptation—from trying to avoid the disaster to vain attempts to soften the blow from storms, droughts, floods, heat waves, cold waves, and changing rainfall patterns of increasing frequency and severity.
Not only will agriculture change, but so will the location of new cities and the localization of new infrastructure. Tourist destinations and all that depends on them will be affected. Some established places in the Mediterranean will be too hot and dry in summer, to be replaced by others, perhaps in the Baltics and Scandinavia, for example.
Sustainability will come to be identified with survivability. Corporate social responsibility, responsible investment, voluntary eco-efficiency, carbon trading, and romantic conservationism will be no more of a solution to the epic climate challenge than the Global Compact, Agenda 21, and the Millennium Development Goals are solutions to world poverty. Voluntary self-regulation by the markets is the failed dogma of the 1990s and 2000s. Nothing less than government-led efforts on the scale of Second World War industrialisation and a Marshall Plan will do the job. We have to stop kidding ourselves with Band-Aid solutions when radical surgery is needed.
Capitulation in Decision Making
The problem in the developed world will continue to be political priorities, leadership, and will. Politicians and parliaments will continue to err on the side of polluting rather than green industries. Developing countries will understandably focus on growing their economies to provide basic housing, transportation, and health services to their people and not focus on the best environmental solutions in order to get there. They will be subject to the same short-term financial-market pressures as developed markets. Thus I believe that climate change disaster is inevitable during the twenty-first century. It will affect all countries, at different speeds and with different impacts, depending on their natural and social conditions, infrastructure, and adaptation resources. Society unfortunately seems to shift direction only under acute danger and high drama, whereas climate catastrophe comes in drips and drabs, not as a big bang but rather as the sum of a large number of small calamities.
With the stock market in the driver’s seat, humanity will pursue continued economic growth. Governments will remain unable to imagine other ways to create jobs or raise taxes and thus will go along with this. The effect, by 2052, will be less poverty in developing countries, more poverty and inequity in the developed world, and more environmental degradation overall.
I sincerely hope I am wrong. As Romain Roland, nineteenth century novelist and humanist, said: “The pessimism of the mind does not exclude the optimism of the will.”
