Bloomberg Línea Ideas — It took several years (or decades!) for the climate crisis to enter the financial market’s agenda. Warnings about the economic impacts of climate change are not new, but for a long time, the market ignored the scientific community.
However, the tables have turned. This does not mean that the market, in general, is committed to this agenda. Many still do not feel imbued with any responsibility, others speak rather than taking action, but there is already a significant group that has placed the topic at the center of decision-making.
It is possible to observe that the debate by the market on this subject is limited almost exclusively to a scientific point of view. The perception that climate change is caused by humankind has already been incorporated, the same goes for the perception that fossil fuels are directly responsible for the phenomenon, that the solution involves transitioning to green energy, as well as agreement regarding the effects predicted by science, such as drought, agricultural loss, increases in sea level, among many others.
Data and statistics hide a much crueler reality. When the market looks at the big picture and pragmatically understands the causes, effects, and potential solutions, it disregards the granularity of the issue, which impacts some adversely to the detriment of others. “Climate justice” remains a debate marginalized by the market.
According to an Amnesty International study, half of the greenhouse gas emissions verified between 1990 and 2015 were caused by the richest 10% in the world, while the poorest 50% were responsible for only 7% of emissions. In other words, those who are the least responsible for the climate crisis are precisely the most vulnerable to its effects.
The same reasoning can be applied to countries. The most industrialized countries on the planet – therefore, the ones directly responsible for emissions on a large scale are, in general, more economically prepared to deal with its effects. On the other hand, the poorest nations on the planet will be the ones to feel the effects of climate change the most, without having been directly responsible for causing it.
The report released by the ZOE Institute, which compiles the mapping of the carbon footprint in Europe, brought interesting, albeit frightening, data. To contain the climate crisis, we should target CO2 equivalent emissions within the range of 2-2.50 metric tons per capita. The poorest 5% in Europe were below this level in 2015, while the richest 1% in the region exceeded it by more than 30 times, especially emissions related to food, housing, clothing, land, and air travel. It is also noteworthy that between 1990 and 2015, the per capita carbon footprint of the richest 1% increased by 7%, while among the poorest 50%, the index dropped by 32%.
Therefore, climate change affects less developed countries, the most vulnerable communities, and those on the periphery more sensitively, but those people and countries are generally excluded from the debates in which solutions and proposals are put forward and end up not being taken into account.
For Brazil, in particular, indigenous and Quilombola populations are those that most preserve forests but are instead among the most affected by climate change, as well as the Black population. But is there any indigenous, Quilombola or black representation in policy-making?
It is clear that the climate crisis is no longer just an environmental issue. Not only has it become a social issue, but it is also fundamentally an ethical issue.
Now, what does the market have to do with it?
Well… everything. The role of the capital market in both fighting climate change and mitigating its effects is fundamental.
It is important to understand that funding the fossil fuel industry is not only exacerbating the climate crisis but is also inflicting a great burden on the vulnerable. Investing (i.e., fostering) in polluting companies or not having decarbonization targets means imposing harsh consequences on those who cannot handle them.
If, on the one hand, the capital market can be a major ally in fighting climate change, on the other hand, it can also contribute to reducing inequalities and, therefore, reducing the vulnerability of the poorest so that they have the tools to handle the effects of climate change. Among many possible actions, we can mention the availability of products for small investors, financial education, the availability of credit at appropriate rates for individuals, in addition to micro and small companies, etc.
The market has neglected the climate issue for far too long, ignoring the problem and moving away from the solution, and it is now chasing the agenda as if it were possible to make up for the lost time. Fair enough. But before potentially making the same mistake again, it is worth remembering that the climate crisis requires an approach that is not only scientific but also fair and ethical.
This text does not necessarily reflect the opinion of the editorial boards of Bloomberg Línea or Bloomberg LP and their owners.