Eco Investor July 2015

Features

The Pope Supports Environmentally Positive Investments

The Pope has shown himself to be a strong supporter of ethical and environmentally positive investment principles as a way of solving the world's many environmental problems and making humanity's place and role on the Earth sustainable.

The Encyclical Letter Laudato Si' of The Holy Father Francis On Care For Our Common Home shows a deep love, connectedness and concern for the environment that is worthy of many of the world's indigenous cultures. And like them he writes about creation and the environment in the same sentence, giving the environment a spiritual dimension.

He contrasts this with the consumer based economic and social systems of Western and other modern cultures and how their lack of spiritual values and a lack of concern for the environment is the basis for the Earth's many ecological problems.

The Pope is not afraid to list these issues, large and small. Among the biggest are climate change, land use, pollution, the throwaway culture and greed that reduce biodiversity and threaten life on Earth. The depletion of natural resources means "The exploitation of the planet has already exceeded acceptable limits."

The Pope looks at the detail and many smaller and more specific issues also get a mention such as the increasing use and power of air-conditioning, genetically modified foods, hazardous wastes, the growing problem of marine waste, and the lack of sufficient green space in our cities.

On the ball. The Pope is a strong supporter of positive environmental and ethical investment.

The Pope is not afraid to be controversial. He says progress on the protection of biodiversity and desertification has not been significant. On climate change, the advances have been regrettably few. And "Each year hundreds of millions of tons of waste are generated, much of it non-biodegradable, highly toxic and radioactive, from homes and businesses, from construction and demolition sites, from clinical, electronic and industrial sources. The earth, our home, is beginning to look more and more like an immense pile of filth."

So widespread is man's violence on the world that there are "symptoms of sickness evident in the soil, in the water, in the air and in all forms of life. This is why the earth herself, burdened and laid waste, is among the most abandoned and maltreated of our poor; she "groans in travail" (Rom 8:22)."

The Pope says we need a new economic system and a better, sustainable lifestyle to stop creating problems and start fixing them. "In some countries, there are positive examples of environmental improvement: rivers, polluted for decades, have been cleaned up; native woodlands have been restored; landscapes have been beautified thanks to environmental renewal projects; beautiful buildings have been erected; advances have been made in the production of non-polluting energy and in the improvement of public transportation. These achievements do not solve global problems, but they do show that men and women are still capable of intervening positively."

It is the values and ethics of people that decide if science and technology make a negative or positive contribution. "We are free to apply our intelligence towards things evolving positively," he says. "Technoscience, when well directed, can produce important means of improving the quality of human life, from useful domestic appliances to great transportation systems, bridges, buildings and public spaces."

To provide solutions to environmental problems, science has "to take into account the data generated by other fields of knowledge, including philosophy and social ethics", even though "this is a difficult habit to acquire today".

The many solutions to the world's environmental problems that are offered by the Pope are well known to environmental investors.

On energy the Pope reveals himself as a crusader for clean energy and energy efficiency, and more investment to speed their development and widespread use. He says "We know that technology based on the use of highly polluting fossil fuels – especially coal, but also oil and, to a lesser degree, gas – needs to be progressively replaced without delay." The solution is "greater progress in developing widely accessible sources of renewable energy."

These technologies are needed immediately. "There is an urgent need to develop policies so that, in the next few years, the emission of carbon dioxide and other highly polluting gases can be drastically reduced, for example, substituting for fossil fuels and developing sources of renewable energy. Worldwide there is minimal access to clean and renewable energy. There is still a need to develop adequate storage technologies. Some countries have made considerable progress, although it is far from constituting a significant proportion. Investments have also been made in means of production and transportation which consume less energy and require fewer raw materials, as well as in methods of construction and renovating buildings which improve their energy efficiency. But these good practices are still far from widespread."

These solutions can also alleviate poverty, another issue that greatly concerns the Pope. For example, he says "Taking advantage of abundant solar energy will require the establishment of mechanisms and subsidies which allow developing countries access to technology transfer, technical assistance and financial resources."

As the developed world has created most of the carbon pollution to date, it has a duty to assist with both clean energy and poverty alleviation. "The developed countries ought to help pay this debt by significantly limiting their consumption of non-renewable energy and by assisting poorer countries to support policies and programmes of sustainable development. The poorest areas and countries are less capable of adopting new models for reducing environmental impact because they lack the wherewithal to develop the necessary processes and to cover their costs. We must continue to be aware that, regarding climate change, there are differentiated responsibilities. As the United States bishops have said, greater attention must be given to "the needs of the poor, the weak and the vulnerable, in a debate often dominated by more powerful interests"."

The Encyclical is openly political. The Pope wants solutions "proposed from a global perspective, and not simply to defend the interests of a few countries", a statement that makes you wonder if he had Australia's current political leadership in mind. He calls for a consensus among countries and at the global level that "could lead, for example, to planning a sustainable and diversified agriculture, developing renewable and less polluting forms of energy, encouraging a more efficient use of energy, promoting a better management of marine and forest resources, and ensuring universal access to drinking water."

Other things he wants to see are diminished use of raw materials, removing from the market products that are less energy efficient or more polluting, improved transport systems, the construction and repair of buildings to reduce their energy consumption and pollution, and developing an economy of waste disposal and recycling.

He wants protection of certain species, diversified agriculture and the rotation of crops, investment in rural infrastructure in poor countries, better organization of local or national markets, better systems of irrigation, new techniques for sustainable agriculture, new forms of cooperation and community organization to defend the interests of small producers and preserve local ecosystems from destruction.

"Truly, much can be done!" says the Pope.

Nor is he afraid to say that radical change is needed, that there is an "urgent need for us to move forward in a bold cultural revolution". With a touch of humour he says "Nobody is suggesting a return to the Stone Age, but we do need to slow down and look at reality in a different way, to appropriate the positive and sustainable progress which has been made."

The individual has an important role to play. "Politics and business have been slow to react in a way commensurate with the urgency of the challenges facing our world" and "while the existing world order proves powerless to assume its responsibilities, local individuals and groups can make a real difference."

Part of this is a change in lifestyle that includes ethical consumerism to exert a healthy pressure on those with political, economic and social power. "This is what consumer movements accomplish by boycotting certain products. They prove successful in changing the way businesses operate, forcing them to consider their environmental footprint and their patterns of production. When social pressure affects their earnings, businesses clearly have to find ways to produce differently. This shows us the great need for a sense of social responsibility on the part of consumers."

"A decrease in the pace of production and consumption can at times give rise to another form of progress and development. Efforts to promote a sustainable use of natural resources are not a waste of money, but rather an investment capable of providing other economic benefits in the medium term. If we look at the larger picture, we can see that more diversified and innovative forms of production which impact less on the environment can prove very profitable."

The path of productive development "could correct the present disparity between excessive technological investment in consumption and insufficient investment in resolving urgent problems facing the human family. It could generate intelligent and profitable ways of reusing, revamping and recycling, and it could also improve the energy efficiency of cities. Productive diversification offers the fullest possibilities to human ingenuity to create and innovate, while at the same time protecting the environment and creating more sources of employment."

The radical changes proposed by the Pope are not radical to environmental investors. He says "Our industrial system, at the end of its cycle of production and consumption, has not developed the capacity to absorb and reuse waste and by-products. We have not yet managed to adopt a circular model of production capable of preserving resources for present and future generations, while limiting as much as possible the use of non-renewable resources, moderating their consumption, maximizing their efficient use, reusing and recycling them."

That has long been the ideal sought by environmental investors, even if the Pope says that so far "it must be said that only limited progress has been made in this regard".

The Pope is firm in his view of investors who do not consider the environment. "Economic powers continue to justify the current global system where priority tends to be given to speculation and the pursuit of financial gain, which fail to take the context into account, let alone the effects on human dignity and the natural environment. Here we see how environmental deterioration and human and ethical degradation are closely linked."

It is good to know that environmental and ethical investors may have God, or at least the Pope, on their side. Unfortunately, that moral support doesn't automatically translate into investment success. Investors still need their own knowledge and experience to invest wisely.

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