Summer Reading 2020
So, once again I have looked around to see what books various sources are suggesting for reading this summer, and to see if anyone has noticed that we’re in a climate emergency. And as usual, I start with The Financial Times, since it’s the newspaper I still read most regularly. And once again, the answer seems to be “apparently not.” Just like last year, I’m disappointed to see. It’s a very good list of fiction, history, what have you, and I have…
Summer Reading
The FT’s Weekend Edition this past Saturday had its annual compendium of summer reading, put together by its editors. It’s always fun to go through these sorts of list to see if there anything surprising on this list–something that catches our eye as being potentially interesting and, perhaps, even useful. In fiction, predictably, the answer is no–we’re still assured that Ian McEwan “maintains his status as a master of fiction.” Sigh. And across the usual list of categories, there are undoubtedly some useful books–some of the books on robotics look timely–but there is a depressing sameness to the list. Even the venerable Martin Wolf, who is usually required reading, comes up with a list that fails to impress this time around.
Why is this, I wonder? It’s the same kind of list the FT publishes every year, just like other publications. But perhaps that’s the exact problem–it’s the same list, pretty much, the same old stuff. We’ve got the usual economics books on things like austerity and the financial crisis, business books on gender and leadership, some potentially interesting history titles, a whole raft of books on art and architecture and travel, even some books on health and on sport. All worthy, no doubt. But not one on the climate crisis, or environmental issues in general, not even in the Science category. Crisis, what crisis?
We need a better language for nature
Unsolicited Book Reviews: Horizon, by Barry Lopez; Underland, by Robert Macfarlane There are any number of ways to begin this review. I could discuss how our language of “Nature” is fundamentally exploitative–that most of us have difficulties thinking of nature as anything other than a grab-bag of resources to be exploited (even if we do it carefully.) I could discuss the attempts of many–including Lopez, MacFarlane and others–to preserve the language, and the knowledge, that underpins traditional societies, knowledge that…
How to Grow the Green Bond Market–A Modest Proposal
Once again, the Climate Bonds Initiative has pulled off an interesting conference. There were lots of good panels, Sean Kidney was in fine form, and I was asked to monitor a round table on Green Bond pricing, which people seemed to think went pretty well. The group was pretty knowledgeable, with a majority of the panel from various Capital Markets departments–a group that, if there really were anything weird going on with Green Bond pricing, they would have noticed it. The verdict is still open–while there seems to be agreement that it’s difficult to see any consistent effects at primary issuance, there is still insufficient data to generalize pretty much anything at present. Ditto for secondary markets, with one notable exception–the US municipal bond market, where Green Bonds seem to outperform non-Green bonds in certain contexts (see the excellent work by Candace Partridge.) The US muni bond market has its own oddities, however, which may limit the extent to which generalizations about the broader bond market will be meaningful. All interesting and potentially important stuff.
Adventures in Green Investing: Why can’t I find anywhere to invest my money?
When I finally retired at the end of 2016, much to everyone’s relief, I had to make some financial decisions. In the UK there are a couple of options–I could take the nice retirements set up for me by former employers and treat them as an annuity, or I could take all that money and put it somewhere else. If somewhere else, this meant I could take the whole shebang as a lump sum and buy a Maserati or something, or I could put it into something called a SIPP (a self-invested personal pension.) In either case the first 25% is tax-free, with the rest taxed as income when it’s drawn down. The latter is clearly preferable, for a couple of reasons. First, it defers the taxation until I actually start drawing down some funds. Secondly, I can choose where I want those funds invested.
This seems to be a great idea. I’m knowledgeable about this stuff, I have worked in finance, including fund management, for three decades, and I should be able to navigate around this landscape pretty well. Clearly, there’s a lot I don’t know, about the mechanics of, say, tax implications across different countries–but there are people who do know that, and I can just ask them. But the main thing was that I could put this money into a big “green” pot and feel virtuous. Well, it’s a bit more than that. I actually do believe that investments in scale do matter–consider the implications of the boycott of South African goods on the eventual collapse of the apartheid state. Money matters.
Plus, I know that there’s this huge trend in Green investing going on right now, and has been for several years. I know this because everyone is telling me this. I continually encounter articles in the financial press about this big investment swing that’s going on, from “brown” industries to “green” industries. Everyone–by which I mean major fund managers, who actually manage funds that people invest in–is starting a Green Bond fund. Five or six have been started up this past year alone. Is there anyone on the planet who hasn’t heard of Green Bonds at this point? Doubtful. Plus the even bigger thing in investing the past couple of years has been incorporating ESG issues–Environmental, Social and Governance. Everyone is now committed to good environmental stewardship, not killing too many employees and promoting women, and not breaking the law.
What would a “Natural Capital Bond” look like?
There is increasing interest in developing financing mechanisms for preserving, restoring, or the sustainable development of natural capital. One notion being advanced, although perhaps in a not particularly systematic or informed way, has been the issuance of Natural Capital Bonds, the proceeds of which could be used for the above purposes.
The frame of reference for this concept seems to be Green Bonds, which have enjoyed considerably popularity in bond markets over the past decade, particularly in the past five years following the issuance of the first corporate (as opposed to, say, sovereign or supranational) Green Bonds. Green Bonds are bonds–obviously–that are issued by a wide range of entities. These include sovereign governments, corporations, municipalities (especially in the US, where the overall municipal bond market is nearly $3.8 trillion), supranational organizations such as The World Bank, and a range of financial entities. Unlike the proceeds of most bond issues, which can be used for a wide range of purposes, Green Bonds are characterized by a pledge by the issuer to apply the proceeds to some Green activity. Often this is well defined in the offering literature; sometimes it is completely undefined. In spite of lots of discussion of Green Bonds standards, the bond market has actually remained pretty relaxed about what can be called Green in this context–it proves to be a wide range of projects, activities, and purposes. In some cases Green Bonds have been issued simply to refinance the acquisition of, for example, wind farms.
At the World Forum on Natural Capital 2017 (II)
Another excellent day, with a number of good presentations, some fine speeches, a somewhat dopey closing plenary, and a better lunch than yesterday (when the gnocchi was horribly overcooked–but who’s complaining?) Again, the sessions ranged in quality and interest, but on balance provided a range of sensible and interesting discussions on the fundamental issue of making natural capital central to economic and public policy decision-making–more specifically, what needs to happen for this to take place. It’s a tall order–look how…
At the World Forum on Natural Capital (I)
Since I’m retired and can go to any old conference I want, I decided this would be the year to attend the Natural Capital conference, held in Edinburgh every two years. I’m not normally this smart, because it was a very good decision indeed. Day one of the two-day affair (followed by a further day of general brainstorming, apparently) was pretty solid, with strong opening and closing plenary sessions (particularly the closing talks from Richard Mattison from Trucost and Gretchen…
We need a good word for “Green-ness.” What about Resilience?
I have become a bit more irritated these days about linguistic sloppiness. Well, I’m getting old and cranky. But it’s also probably because my academic background was in Linguistics, before a crappy job market in the early 1980s led me to a career, such as it was, in finance. But I have retained some of my unreasonable expectations about words and what they mean, or what they’re supposed to mean, which means I am constantly disappointed. This state of affairs…
So, read any good ESG books recently?
Since I’m currently writing an ESG book for institutional investors, I thought I might take a look at what’s out there. There were a bunch published in the 2010-2011 time frame, but there have been considerable developments since then, and these seem a bit dated. So I just went on Amazon and picked a bunch of books from 2015 onwards, including several published this past year. It’s a hot area indeed. It’s also a highly arbitrary list. I decided to…