The New Economy: A Financial Climate for Climate Finance

As a member of the leadership of the World Academy of Arts and Science, Prof. Kahane has submitted a paper that will be presented at the upcoming online convention about Strategies for Transformative Global Leadership.

This paper represents Prof. Kahane’s most up-to-date thoughts, ideas, and vision for the future, including actionable items to implement transformation. To read the full article feature in the World Academy of Arts and Science’s Cadmus Journal, click here.

Abstract

The New Economy: A Financial Climate for Climate Finance

In these past two centuries, capitalism has driven substantial economic growth. However, this growth has not been responsible for the “thrive-ability” 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, in long term output. But a question remains as to how can we obtain the necessary funds?

Long term pension and insurance funds (including social security) are the perfect candidates. These funds need long term investments to back up their commitments, to ensure the pensions of retirees. Essentially, one side creates long term investments and the other side sells premiums that cover the pension costs of people’s retirement.

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 the 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 will be an approximation, or new factors/metrics, incorporated into that model that can translate social and environmental benefits into monetary terms. We have no economic model that properly incorporates the social and environmental ideas. Therefore, the SDGs are a most useful tool, in the face of economic models that solely think of the economic bottom line. The SDGs must be the model until other models catch up.

The SDGs should become the business of governments, then they could facilitate an approximated solution. Governments must do this, as they manage the SDGs, and the regulation. If each country will issue 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 of the rate of the bond yield (for the insured) and the return to the owner of said bond (the investment). 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.