Friday, April 29, 2005

Banks adopt "Green" Accounting

As nation states lose their power relative to multinational corporations and globalization environmental groups are starting to target banks and other financial institutions in their attempt to stimulate sustainable policies and initiatives. This week in the Wall Street Journal, Jim Carlton wrote that J.P. Morgan, Citibank and Bank of America are now calculating the cost of greenhouse gas emissions and pollution in its loan calculations. Fearing litigation and public relations problems J.P. Morgan is creating a whole bunch of ecological and sustainable target that it is trying to support. Basically you have the beginnings of a kind of ecological accounting and the recognition that markets need guidance about the criterion they use to create a price.

The value of an ecosystem and the cost of an emission are very complex issues involving comparative value and value over the long term. If you disable or permanently lower the careering capacity of an ecosystem how do you fix a value on what might have been produced? Placing a dollar value on a ecosystem does not work, because the complex relationships between the various actants cannot be quantified in their totality. However, don’t underestimate the importance of the Morgan, Citibank and BOA initial steps. They are the opening of a debate.


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