CHANGING THE GAME OF FINANCE

Invited paper for "The World as We Want It to Be" SRI in the Rockies 20th
Anniversary, October 25-28, 2009.

By Hazel Henderson © 2009

www.hazelhenderson.com

Word count: 4418

Marking the 20th Anniversary of SRI in the Rockies offers more than an

opportunity to review the hard-won progress of investors to prove that

socially responsible investing is viable and now clearly out-performs

traditional mainstream investing. Since the credit crises of 2008-2009, we

can now assert with confidence that investing for long-term sustainability

and taking ESG factors as material to asset valuation could have actually

helped avert these crises.1 We investors are now winning the paradigm

battle and cite the evidence to show that the Efficient Market Hypothesis

(EMH) is bunk and by the same token show that the Modern Portfolio

Theory (MPT), the Capital Asset Pricing Model (CAPM) and, yes, even the

sacred tenets of the "rational investor" and the Black-Scholes Merton

Options Pricing Model will soon be part of history.2

1
Nick Robins , Cary Krozinsky and Stephen Viederman UN-PRI, Sept. 2009 and Matthew J Kiernan,
Investing in a Sustainable World ,AMACOM.N.Y. 2009
2
Nassim Taleb, The Black Swan (2007) and Paulo Triana, Lecturing Birds on Flying (2009)

Page 1 of 25
Thomas Kuhn, told us in 1963 in The Structure of Scientific Revolutions, we

often must wait until a generation passes from the scene. Today, we

humans are out of time. Climate chaos is upon us and our limiting factor is

not money – it never was, since money is simply one form of information.

Time is now our limiting factor, as we have until 2020 to keep CO2 and

other greenhouse gases, methane, as well as soot, ozone and other

pollutants from raising global temperature more than 2˚C. This means that

the game of finance must change to address both its internally-generated

global crises and the climate crises which finance has and continues to

exacerbate with its blindness to ESG factors and its culture of greed,

myopia and short-termism.3 We were encouraged by our colleague Mindy

Lubber's remarks at the introduction of the statement on September 17th of

the Institutional Investors Group on Climate Change (IIGCC): "We are

ready and willing to up the ante and finance the transition to a low-carbon

economy.4

Some 15 years ago, I, Steve Schueth and Wayne Silby began creating the

Calvert-Henderson Quality of Life Indicators (www.calvert-henderson.com)

in the belief that incorporating ESG factors into asset valuation and
3
Overcoming Short-Termism: A Call for a More Responsible Approach to Investment and Business
Management. The Aspen Institute, September 9, 2009.
4
Environmental Finance, London, September 17, 2009.

Page 2 of 25
corporate accounting at the micro-economic level would be necessary but

not sufficient. We and Calvert CEO Barbara Krumsiek knew that traditional

micro-level accounting when aggregated into national accounts such as

GDP would inhibit the needed corrections at this macro-economic level.

We knew that GDP would also have to include ESG factors; otherwise, its

faulty, narrow, short-term view of national "progress" would drive us closer

to environmental collapse, social inequality, disease and conflicts.

Economist Joseph Stiglitz agrees and warned of the dangers of "GDP-

fetishism" in his report to France's President Nicholas Sarkozy.5

Today, UN-PRI, CERES and other groups of institutional investors continue

to lead in promoting ESG and longer-term asset valuation and the need to

address climate change. Yet too often, these worthy organizations and

their institutional investor members are still captive to the discredited

paradigms of finance I have mentioned. Until trustees and shareowners

change incentives for their asset managers and consultants, they will still

obsess over benchmarking each others' performance according to these

now destructive criteria and models. Financial networks are complex,

5
Bloomberg.com, September 14, 2009

Page 3 of 25
adaptive systems,6 but reliance on this approach serves little more than to

comfortably abstract the debate. Some critiques, such as that of Andrew

Haldane of the Bank of England,7 analogize financial networks to electrical

grids. This overlooks the different purposes of these networks: an electrical

grid is designed to deliver a useful service: electricity to human societies.

Financial networks have expanded globally to increase and speed up the

activity of trading which is linked to compensation of the actors and the

financial returns of firms. That humans have a propensity to barter and

trade is commonplace,8 but trading for trading's sake has become

pathological, an addiction similar to gambling, obsessions with pornography

and sex.

Addiction to trading and internet-use are now studied by psychologists as is

the elevated testosterone levels exhibited by traders in London's financial

markets.9 Thus, one cannot expect any human actors embedded in today's

financial networks to think more deeply about their purpose, social utility or

the systemic risk that finance now clearly poses to all societies and to

ecosystems. At what point did financial markets metastasize to become a

6
Best's Review, "Risk, Uncertainty and Economic Futures," Hazel Henderson, May 1978 (invited paper,
North American Risk Management Association).
7
Andrew Haldane, "Rethinking the Financial Network," Speech delivered at the Financial Student
Association, Amsterdam, April 2009.
8
See for example Hazel Henderson, Politics of the Solar Age, Doubleday, NY, 1981.
9
New Scientist, "Traders Raging Hormones Cause Stock Market Swings." April 16, 2009.

Page 4 of 25
cancer on their host: human societies? To ask individual traders or

companies would be analogous to expecting the patients and psychiatrists

in a mental hospital to design a more optimal system to address

dysfunctional aspects. Even less charitable criticism comes from Prof.

Simon Johnson at MIT, former chief economist of the IMF who comments

on Wall Street's capture of politicians of both parties in the US Congress as

"mind control" (Baseline Scenario, October 8, 2009).

Britain's head of the Financial Services Authority Lord Adair Turner

questioned the social usefulness of finance10 and proposed to downsize

financial sectors by imposing a financial transactions tax (originally

proposed by James Tobin in 1978)11 and by Lawrence Summers in 1989.12

To re-think financial networks requires going outside the box of all current

economic models and the financial "innovations" from which they are

derived.13 Current models derived from faulty economics include: the

aforementioned EMH, MPT, CAPM, and VaR. The Black-Scholes-Merton

Options Pricing Model is now challenged as plagiarized from options

10
Responsible Investor. "UK FSA chair slams City of London's 'socially useless' excesses, floats Tobin
tax," August 27, 2009.
11
James Tobin, 1978, "A Proposal for International Monetary Reform," in Eastern Economic Journal,
Vol.4 (July, Oct)
12
Summers, V. and Summers, L. "When Financial Markets Work Too Well: A Cautious Case for a
Financial Transactions Tax." Journal of Financial Services no. 3, 1989.
13
See for example The United Nations: Policy and Financing Alternatives, eds. Harlan Cleveland, Hazel
Henderson, Inge Kaul, Elsevier Scientific, UK, 1995.

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traders' practice by Nassim Taleb (Financial Times, October 12,2008).

Human investors do not conform to economics' "rational actor" model, but

are revealed by neuroscience (not neuro-economics) as being of two

minds: the forebrain (logic, foresight ad higher analytic functions) and the

amygdala (the primitive, reptilian brain that responds to emotional stimuli).

Thus, financial markets, far from being "efficient," are typical examples of

herd behavior (monkey see – monkey do!, see my editorials at

www.HazelHenderson.com and www.ethicalmarkets.com).

The key issues in reforming financial networks are: human social purpose,

design criteria and assumptions. Using analogies from architecture and

engineering: a bridge, if well designed on physical principles, mapping the

forces of nature correctly, will be robust; if badly-designed, as the famous

Tacoma Narrows bridge, it will respond to natural forces of wind and

oscillate with ever greater amplitude until it collapses. The same applies to

buildings that are not designed to account for the laws of natural systems.

My late friend Nicholas Georgescu-Roegen made similar observations

about economists' love of abstraction in his The Entropy Law and the

Economic Process (1971) which I reviewed in the Harvard Business

Review.

Page 6 of 25
Therefore, financial networks must be examined from these perspectives

and we see their design flaws immediately: they were designed by

individual actors and firms to maximize their self-interest and produce

rewards in money terms. They were never designed to optimize at the

societal level, let alone to function within natural system constraints.

Furthermore, they optimized for trading as the primary means to money

rewards (hence the growth of proprietary trading desks, day traders, high

frequency trading and algorithmic program trading which now dominates

market activity). This is why a financial transactions tax is urgent and why I

and my partner, mathematician Alan F. Kay, designed a computer program

which can be installed on all trading systems to collect such a small tax, the

Foreign Exchange Transaction Reporting System (FXTRS) for which we

were granted a US patent (see www.hazelhenderson.com FXTRS).14

Beyond the pathologies of trading with ever-faster computers, we must next

examine the other huge design flaw underlying financial networks: money-

creation and credit-allocation. These activities are designed not to create

stable, healthy, equitable sustainable human societies. Here, again,

14
Asia Times. "Tax to the rescue," Hazel Henderson, March 24, 2009.

Page 7 of 25
money-creation and credit-allocation follow power laws and are designed

by sub-system level actors and institutions (banks, central banks, local and

national government agencies). Their design criteria are fitted to highly

abstract goals: containing or targeting inflation, increasing or decreasing

the money supply, NAIRU formulas for unemployment levels, fostering

private investment – all vague generalities and measured with dubious

statistics: the Consumer Price Index (CPI), Gross Domestic Product (GDP),

M1, M2, M3 (now deleted as too revealing of monetary expansion).

The good news is that today's confluence of global crises in finance and

climate are revealed as crises of human perception: a mirror our mother

GAIA is holding up for us to see ourselves and our myopic value-systems.

The Information Age, as I predicted at SRI in the Rockies in 2005 has

morphed into the Age of Truth. Our native American nations and the

world's indigenous peoples have been articulating these truths for centuries

now echoed by the President of the UN General Assembly in New York,

June 2009.15

15
Speech by President Miguel d'Escoto Brockmann, video and text at www.ethicalmarkets.com.

Page 8 of 25
The movement toward planetary awareness is now worldwide and goes by

many names: One Planet, socially responsible investing, sustainability, the

Global Green New Deal, the Green Economy Initiative, the Climate

Prosperity Alliance, Transition Towns, Green Jobs, Green for All, "green

stimulus," the Global Marshall Plan, the Post-Carbon Society, the State of

the World Forum, the Phoenix Economy, Breaking the Climate Deadlock,

Climate Bonds, as well as the hundreds of thousands of groups in over a

hundred countries calling for new forms of sustainable livelihoods in their

own languages. NGOs are leading and governments are devising

responses to protect the most vulnerable populations: women, children, the

poor and the least-developed countries from the crises' impacts.16

Connecting all these groups working on these same interlinked crises can

achieve their shared vision of "The World as We Want It to Be."

All our crises are closely related to the dying fossilized paradigm of

"economism" and its deadly addiction to continuous economic growth

measured in money, whatever the social and environmental costs.17 The

disparate social movements of the past 30 years began coming together

16
See for example, ECLAC, INSTRAW, UNIFEM, Doha, Financing for Development, Monterrey
Consensus, Rethinking Bretton Woods, World Social Forum, ITUC
17
New York Times, Hazel Henderson, "Economists versus Ecologist" 1971; Financial Analysts Journal,
"The Limits of Traditional Economics: New Models for Managing Economies," 1973.

Page 9 of 25
over the internet and at the World Social Forums, launched in Porto Alegre,

Brazil in 1999. Today, in their statement on reforming finance, they are

coalescing over these ever-accumulating threats to life on earth, now

culminating in global climate disruption.18 The United Nations joined with

civil society in calling the financial and climate crises an opportunity to

transition to fairer, cleaner, more sustainable forms of human

development.19

Ever since the UN's climate agreements in 1997 in Kyoto, Japan, the

evidence from the scientific community of this mega-threat to our collective

survival has grown stronger and more ominous.20 Still the biggest per

capita polluter, the USA refused to sign the Kyoto protocols and, with some

of its misguided environmental policy makers, forced their "market-based"

cap and trade approaches on successive UN climate conferences. Their

idea of capping carbon emissions was sensible enough, using government

targets and regulating continuous reductions. But instead of backing

enforcement of carbon caps and shifting tax burdens from incomes and

payrolls to taxes on carbon and all other pollution and waste,21 the US

18
Belem, Brazil 2009, www.ethicalmarkets.com Reforming Global Finance.
19
UN General Assembly Meeting, June 24-26, 2009
20
IPCC, UN 2009, and Pew Center, Science Brief, June 2009
21
Christian Science Monitor, Hazel Henderson, "Introduce 'Green' Tax" 1990

Page 10 of 25
"market fundamentalists" demanded that "allowances" to continue emitting

carbon be given to polluters to trade with each other. The disgrace of Wall

Street has now made trading carbon derivatives as suspect as the credit

default swaps that caused such havoc in financial markets. Widespread

public objections forced governments to agree to auction pollution

allowances, but fossil fuel lobbies have kept their give-aways.22

INTERPOL, the UN crime-fighting agency, warned of carbon fraud and that

carbon-trading could become the white collar crime of the future

(www.heatisonline.org).

Bankers, stock market traders and commodity brokers saw carbon as a

new trillion dollar "asset class" and profit opportunity.23 Yet the "cap and

trade" emissions schemes in Europe created proliferating bureaucracies

with caps on emissions easily lifted by lobbyists.24 Ironically, the very

financial players who caused the global financial crisis see carbon trading

as their next big profit source.25 As carbon markets failed to reduce carbon

emissions, this has shown the efficiency of simply taxing carbon. The

22
Carbon Positive, "US Carbon Bill a Boon for World Offsets Markets," July 8, 2009,
www.carbonpositive.net
23
The Economist, July 4, 2009, p. 24; Business Week, "How Banks Will Pounce on Carbon Trading,"
June 8, 2009, p. 51
24
The Economist, "Cap and Trade with Handouts and Loopholes," May 23, 2009, pp 33-34
25
Institutional Investor, "The Promise of Eco," July-August, 2009

Page 11 of 25
Copenhagen conference in December 2009 can include a global price for

carbon.

This debate as well as on how to alleviate the impacts of the financial

meltdown and meet the UN's Millennium Development Goals and the

Monterrey Consensus of 2002 were forced into the narrow calculus of

costs in money terms. Economic methods usually favor quantifying costs

to incumbent sectors and existing institutions, rather than estimating

savings, benefits and revenues from new ways of doing business, new

technologies and social policies. For example, the climate debate focuses

on GDP growth "losses." Critiques of GDP-measured growth, including my

own over the past 30 years, are finally gaining traction, including the

Calvert-Henderson Quality of Life Indicators, making headway with the

accounting profession and at the European Parliament's Beyond GDP

Conference in 2007 which the European Commission will begin

implementing in 2010.26, 27 Yet the financial sector still dominates US

politics: bailing out Wall Street firms was deemed necessary to "restore"

the financial system. Investing in growing the green economy, our

children's health and education for a prosperous future are deemed "too
26
www.beyond-gdp.eu/
27
Journal of the Society of Charted Accountants of England and Wales, F. Capra and H. Henderson,
"Qualitative Growth," forthcoming, November 2009

Page 12 of 25
expensive," even as a BBC-Globescan poll in 20 countries found 72% of

their public's support governments investing in renewable energy and

green technology.28

At last, focusing on carbon emissions in the obsolete fossil-fueled sectors

no longer trumps quantifying the uncounted savings, benefits and avoided

costs of investing in a global transition to the green post-carbon economy

based on energy efficiency, wind, solar, ocean and geothermal sources.29,

30,31
Guy Dauncey, author of Stormy Weather adds up all the estimates of

savings so far at $1.7 trillion annually in the USA alone. McKinsey &

Company finds that a $520 billion investment in energy efficiency would

yield $1.2trillion by 2020 and reduce US demand by 23%.32 Meanwhile,

some still view financing for meeting the UN Millennium Development

Goals as a cost when in reality, such finance belongs in the investment

category. The "rearview mirror" economism calculations must no longer

dominate the financial and climate debates – spreading increasing gloom

and fear while governments pour trillions into trying to restore the broken

28
BBC-Globescan World Public Opinion
29
UN World Economic Survey, 2009 (overview posted at www.ethicalmarkets.com)
30
UNCTAD Trade & Development Report, September 7, 2009, United Nations, Geneva and New York
31
Center for American Progress and the UN Foundation. Meeting the Climate Challenge, October, 2009.
32
Unlocking Energy Efficiency in the US Economy McKinsey Report, July 2009

Page 13 of 25
status quo.33 Meanwhile, fossilized asset-allocation models still blind

security analysts to the growing companies in the expanding sustainability

sectors of the world economy.34

Meanwhile, the greener, sustainable sectors are still growing worldwide, as

renewable energy investments by 2008 exceeded investments in coal

power plants.35 The grassroots movements for sustainability are growing

as well. The Obama administration in the USA and the General Assembly

of the United Nations grasped the potential of the shift to the green,

sustainable sectors worldwide.36 The rigid G-7 and G-20 summits gave

ground to the G-192 as all the member countries of the UN came together

in New York in June 2009, adopted the Stiglitz Commission Report37 and

declared their support for the new just, green, sustainable global economy

led by UNEP, UNDP and the ILO.38 Eighteen other UN agencies also

support what is now called the Global Green New Deal.39 The European

Union's president called on the USA to make bigger commitments to cut its

33
Hazel Henderson, Re-Designing Money Systems to Reduce Greenhouse Gas Emissions and
Accelerate the Growing Green Economy, presented to the Green Economy Initiative Conference, UNEP,
Geneva, Dec. 1, 2008
34
Hazel Henderson, "The Sustainability Sector," SeekingAlpha.com, Nov. 5, 2008.
35
REN 21
36
Obama's American Recovery and Reinvestment Act of 2009, www.recovery.gov
37
Preliminary Draft of the Full Report of the Commission of Experts on Reforms of the International
Monetary and Financial System, UN General Assembly, March 21, 2009
38
www.unep.org and www.unepfi.org
39
UN General Assembly

Page 14 of 25
carbon emissions and assert more leadership on climate.40 All now see the

meltdown of the global financial casino and the climate crisis as a chance

to create a new, more just, green economy promoted for decades by civil

society.41

Finally, the world can put economism in its place and downsize finance to

its limited role facilitating real production. An efficient financial sector

should constitute less than 10% of a country's GDP. Britain’s Financial

Services Authority head, Lord Adair Turner shocked many insiders, but his

proposals for a financial transactions tax are now supported by many

academics and NGOs. Financial firms not covered by FDIC should pay

into a Systemic Financial Risk Insurance Fund (SFRIF) to protect the

world’s taxpayers from future bailouts. As our Chinese friends say,

"Markets and money are good servants but bad masters." Thirty-four

percent of China's stimulus package and 81% of South Korea's are focused

on investing in solar, wind and green economic growth.42 UN Secretary

Ban Ki-moon praised China's President Hu Jintao for these green economy

initiatives.43 China's "green technology sector" is expected to grow to 15%

40
Environmental Finance, September 17, 2009.
41
www.helio.org
42
The Economist, "Green Shoots," April 3, 2009
43
Environmental News Service, July 28, 2009, www.ens-newswire.com

Page 15 of 25
of its GDP by 2013.44 As policies of John Maynard Keynes are back in

vogue, many forget that his main insight was about the inherent

uncertainties and instabilities of financial markets.

The spectacle of the US and other central banks printing money on TV

helped raise public awareness that money is not real wealth but just a

clever invention of humans to track our promises and intentions and keep

score of our transactions and uses of natural resources. The many

electronic trading exchanges are flourishing, such as Entrex, showcasing

and steering capital to small companies; peer-to-peer lending sites,

Prosper, Qifang and Zopa; barter sites Craigslist, and Freecycle that

facilitate sharing, recycling; microloan sites, Microplace and Kiva, and

Global Giving, Global Greengrants for charitable donating, as well as local

currencies and LETS systems. Today information-based trading has

illustrated that money circuits and markets have been overloaded by

political directives, "quantitative easing," subsidies, carbon trading, etc.,

instead of direct, transparent legislative approaches. Furthermore, it is now

clear that we don't need Wall Street, the City or any other "financial

centers" that have now imploded anyway. The Great Disintermediation

44
Environmental Finance, September 17, 2009.

Page 16 of 25
away from money circuits is underway. The 20th century "too big to fail"

monsters came to believe that they were "providers of capital" rather than

mere intermediaries connecting savers with borrowers and manipulating

money issued by banks out of thin air.

This money-creation and credit-allocation system is so far removed from

the real world of human production and exchange, as well as ecosystem

functioning, as to be delusional. Following the founding of the Federal

Reserve System in the USA in 1913, the money-creation function given to

the US Congress in the Constitution was turned over to the twelve private

banks of the Federal Reserve System. Only the Federal Reserve Board is

appointed by the US President and Congress. Since then, private banks

using the fractional reserve system create 95% of our currency as

accounting entries of the loans they make, i.e., as debt. The interest

charged on their loans is not created, causing increased indebtedness.

This system, which unfortunately spread around the world, was aided and

abetted by the Nobel Committee's acceptance of the Bank of Sweden's

prize to legitimize the profession of economics in memory of Alfred Nobel.

Since this Bank of Sweden Prize was given to Prescott and Kydland in

2004, who used specious mathematics to "prove" that central banks should

Page 17 of 25
be independent, many real Nobel Prize winners as well as mathematicians

Nassim Taleb, Paolo Triana, Ralph Abraham, physicists Hans Peter Durr

and Fritjof Capra, and historian of science Robert Nadeau, joined me and

Peter Nobel in calling for its de-linking from the real Nobels.45

These deeper issues of design, human purpose and hidden assumptions

must be examined for their roots in power dynamics and how such initial

conditions in complex systems lead to deviation amplifications, e.g., money

systems came to dominate political systems and disorder local social

systems and ecosystems. Elegant abstractions and use of analogies

obfuscates these basic power dynamics which allowed financial networks

to explode worldwide during the 1980s, fostered by the prevailing market

ideologies promoted by the University of Chicago School and Ronald

Reagan in the USA and by Margaret Thatcher in Britain.46

Many reforms of finance are being debated in the G-20 and the US

Congress. These include a clearing house and exchange for credit default

swaps (CDSs) and other derivatives; more information on financial network

pathways and agents; correcting the errors of Basel II and re-regulation,

45
"The Cuckoo's Egg in the Nobel Prize Nest." And other editorials by Hazel Henderson, IPS, 2004-2005.
46
World Business Academy Perspectives, "Economic Lessons from the Asian Meltdown." Hazel
Henderson, vol. 12, #3, 1998.

Page 18 of 25
including an updated version of Glass-Steagall (see my 2009 articles at

www.EthicalMarkets.com). Other systemic reforms are also widely

debated: reforming financial compensation and incentives; credit rating

agencies; re-introducing financial transactions taxes; creating a new

Systemic Financial Crisis Insurance Fund (SFCIF) to assess premiums

from all financial firms not covered by the FDIC in the USA; setting up

systemic risk oversight bodies; creating a new global reserve currency

(based on a basket of robust national currencies: the dollar, euro, yen,

yuan, sterling, real) and issuing of more SDRs by the IMF.47 Reforms

already in the public debate include auditing and reforming the US Federal

Reserve System (in a bill offered by Republican Congressman Ron Paul

with over 250 co-sponsors) and the Monetary and Financial Reform Act of

2009 offered by Democrat Congressman Dennis Kucinich and the

American Monetary Institute (www.monetary.org).

This new understanding that money is simply one form of information is

helping people realize that, of course, there is enough money to invest in

our common future. Hundreds of towns around the world have issued local

47
Stiglitz Commission Report to the UN General Assembly, June 2009.

Page 19 of 25
currencies to link unemployed workers with needed jobs.48 Lawyer Ellen

Hodgson Brown, author of The Web of Debt (2008), explored the Bank of

North Dakota, a state-owned bank that has kept North Dakota's budget in

surplus.49 The real constraint has never been money, but rather limited

vision and faulty economics. Human societies' ten-year window to install a

post-carbon, global economy led to the global network, the Climate

Prosperity Alliance, which I am honored to serve as a vice-chair. The

Climate Prosperity approach is rooted in ESG accounting and the new

Green GDP approaches in Europe, China and here in the USA. The

Climate Prosperity Alliance is promoting a rapid ramp-up of private

investments in solar, wind, renewables and energy-efficient infrastructure in

developing countries.

Joining the Climate Prosperity movement are many socially responsible

investors, charitable endowments, "green" bankers, many unions and

NGOs, including WWF, which help fund many climate investment studies.

Tomorrow's Company, CERES and the UN Principles of Responsible

Investing all have issued reports on investing in green companies. All of

48
Marusa Vasconcelos Freire. "Social Economy and Central Banks." International Journal of Community
Currency Research, vol. 13(2009) pp. 76-94.
49
Ellen Hodgson Brown. "How California Could Turn Its IOUs Into Dollars," www.ethicalmarkets.com, July
20, 2009.

Page 20 of 25
this and daily news is reported at www.ethicalmarkets.com from sources,

including New Energy News, Responsible Investor, New Energy World

Network, Cleantech, CleanEdge, GreenBiz, Greener Computing, Energy &

Capital, Environmental Finance, Green Chip Review, Alt Assets, the

American Council for an Energy Efficient Economy (ACEEE), Green

Budget News, Germany, China's Syntao, Brazil's Mercado Etico and

Instituto Ethos and others from India, Japan and Australia.

The last piece of the puzzle to achieve Climate Prosperity within the ten-

year window limiting temperature rise to below 2˚ centigrade are the

climate prosperity bonds (see www.ethicalmarkets.com Climate Prosperity

Funds). Socially responsible retail investors are now joining forces with the

Network for Sustainable Financial Markets, the Green Economy Initiative of

UNDP, UNEP and the ILO and the eighteen other UN departments and

many government agencies. We welcome greater leadership from

institutional investors as they shrug off the old EMH and Modern Portfolio

Theory nonsense.

The new global effort to fund Climate Prosperity, would invest $10 trillion

over the next ten years and plans to double installed renewable energy and

Page 21 of 25
efficiency savings each year.50 This $10 trillion is less that the $14 trillion

spent in the US on Wall Street and other bailouts so far (actual liability is

now estimated at $23.7 trillion by the TARP Special Inspector at

www.sigtarp.gov). The proposed $10 trillion investment in Climate

Prosperity is less than 10% of the $120 trillion of assets in pension funds

for beneficiaries' future security. Today, climate change is a threat to them

and all humanity's future security. The British government now estimates

the "green" market at £3 trillion worldwide.51 What better plan is there than

to invest these pensions' assets now in securing their future in a safe,

sustainable green economy? Climate Prosperity bonds with governments'

guarantees and laddered maturities are geared to the payouts from energy

efficiency (the quickest payback) and to expanded efficiencies-of-scale in

wind, geothermal and solar. Most developing countries can never afford

nuclear energy and are unlikely to be able to afford much coal or oil-fired

electricity. Solar, wind, geothermal and small-scale hydro and biomass are

their most realistic options, together with new natural gas finds, making it

cost-effective for coal plants to switch to natural gas for base load and

peaking power – reducing carbon emissions by 50%.52

50
Sean Kidney's "Climate Solutions II" PowerPoint presentation from Climate Risk Pty in Sidney,
Australia.
51
The Economist, July 18, 2009, pp. 54-55
52
UN World Development Overview, 2009.

Page 22 of 25
Such bonds will be attractive to pension fund asset managers as outlined

by Climate Risk, Pty of Sydney, Australia, and the Network for Sustainable

Financial Markets. The Breaking the Climate Deadlock Plan of The

Climate Group calls for $1 trillion to achieve a 70% reduction in emissions

by 2020 – largely through energy efficiency. The DESERTEC group of 12

European companies led by Munich Re and ABB plans to invest €450

billion in solar-thermal power plants across North Africa to provide 15% of

Europe's electricity via DC transmission lines under the Mediterranean.53

Surprising support for larger foreign direct investments (FDI) into emerging

and developing countries comes from The Economist in their special report

on the world economy, October 3, 2009, p. 25-6. Such a larger role for FDI

is seen as an optimal way of re-balancing the imbalances that helped

cause the economic crises.

During this ten-year rollout of the new low-carbon economy globally, coal

and oil, as well as nuclear, will become even more costly and less

competitive (even without accounting for their external costs or the price of

carbon).54 The faulty logic of economism which sees the problem as a

53
DESERTEC
54
Climate Risk Pty

Page 23 of 25
"shortage of money" is exposed by the Climate Prosperity movement which

sees the payback on that $10 trillion after 10 years as approximately $30

trillion. This illustrates that the real constraint is time, not money. After

wasting decades, we humans must act now. Economists need to correct

all the colossal taxonomic errors in all economic texts and models. Finance

courses in all business schools also must overhaul their curricula, as many

critics including Nassim Taleb, Paulo Triana and I have proposed. Today's

financial networks are indeed houses of cards and multi-disciplinary

approaches to valuation of all forms of wealth are now supplanting

economics and its metrics, including The Economics of Ecosystem and

Biodiversity Services (TEEB) and the Green Economy Report forthcoming

from the United Nations Environment Program (www.unep.org).

The Climate Prosperity movement, together with many groups leading in

widening awareness, planetary citizenship and perennial wisdom from

indigenous peoples and all faith traditions is succeeding in changing the

paradigm From the dismal economism, money-based scarcity and fear to

a vision of abundance through sharing, caring, volunteerism and

community revitalization, all built on using the energy freely available from

sun, wind, oceans and respect for the Earth and all life. The 16 Principles

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of the Earth Charter are now endorsed by thousands of cities, companies

and NGOs (www.earthcharter.org). Copenhagen can host the positive

tipping point: the "greening" of finance and a worldwide critical mass of

global citizens and their rising eco-aware culture in the emerging

information-rich Solar Age.

Hazel Henderson, president of Ethical Markets Media (USA and Brazil),

authored The Politics of the Solar Age (1981), Ethical Markets: Growing the

Green Economy (2006) and the Calvert-Henderson Quality of Life

Indicators, updated regularly at www.calvert-henderson.com. She is also a

private investor in "green" companies and can be reached at

www.ethicalmarkets.com and www.hazelhenderson.com.

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