Greening Trump's Infrastructure Plan
Guest blog by Hazel Henderson
Surprising most pundits, Trump seems to be a Keynesian. The growing consensus in the US and most countries sees a better chance to shift to fiscal policies, stimulating their economies with needed infrastructure spending. The fragility of the global economy and legacy financial systems can no longer rely on central banks and fiat currencies to restore their flagging GDP-growth recipes. Growing ranks of green, low-carbon investors, pension funds can now step in and shape infrastructure spending to foster healthier forms of growth beyond GDP. These are in the United Nations’ (UN) Sustainable Development Goals (SDGs) which recognize current realities and encompass future imperatives: inclusive knowledge-rich renewably resourced, circular green economies. The world requires new green infrastructure. Green bonds issued now total US $150 billion reported at www.climatebonds.net.
Trump's infrastructure plan now focused on restoring 19th & 20th century fossilized sectors must be re-shaped to underpin 21 century green inclusive economy goals. Central banks no longer need negative interest rates as bond markets are now signaling inflation. Quantitative Easing (QE) is ever less effective (see my “Bernanke and Friedman Were Right: Time for Helicopter Money and Qualitative Easing”), and their bond-buying was distorting markets as reported in The Economist. Governments cognitively captured by academics and politicians are caught in the 19th century ideologies of Keynesian versus laissez faire austerity – which worsened recessions. Many will follow stock markets after Trump by reversing austerity – and re-focus on stimulating lagging aggregate demand to stave off global recession. Historically low interest rates will not last, so governments recognize their opportunities to invest in infrastructure.
Since 2015 and the UN’s 195 nation members ratification of the SDGs and the COP21 and 22 NIDC pledges to shift to low-carbon economies, these 19th century GDP models have become clearly obsolete. Financial markets are waking up to the reality that the transition of the global economy beyond the fossil-fueled Industrial Era is already accelerating, as we have tracked in our Green Transition Scoreboard® since 2007, totaling private investments in green sectors worldwide – currently a cumulative $7.1 trillion. Mainstream financial models still see this growing shift to post-carbon, renewably resourced economies as a “niche” – rather than the estimated $45 trillion global market opportunity it has opened.
Enter the first wave of green bonds initially promoted by the global non-profit Climate Bonds Initiative led by Australia’s Sean Kidney. Institutional investors continue rushing to green bonds, along with China’s Green Financial System, the World Bank and pension funds, over-subscribing many issues. Central bankers are supportive, including Mark Carney of the Bank of England who calls for 5 measures to scale-up the green bond market: 1) a “term sheet” standardizing these bonds; 2) definitional frameworks for validation of green projects; 3) integration into credit ratings, 4) green bond indices and 5) harmonization of principles and standards for green bond listings. The herd behavior of all markets can now be steered by such new standards to assure that the proceeds of these green bonds are applied only to truly green, scientifically verified, investments. The Climate Bonds Initiative, the Sustainable Accounting Standards Board (SASB); the Climate Disclosure Standards Board (CDSB), along with IIRC, the Chartered Institute of Management Accountants (CIMA) and others are monitoring these green bonds.
The next stage involves applying new investments and shifting stranded fossilized assets into the next-generation green infrastructure upon which the Solar Age green technologies, companies and jobs can grow. It's now time for asset managers to correctly re-classify fossil reserves as "feedstocks" for future use as plastics, building materials and other imports to production rather than wastefully burn them. Joel Makower advocates in THE NEW GRAND CHALLENGE (2016). Green redevelopment bonds can begin to grow this green infrastructure, reclaiming agricultural land, saving forests and watersheds, moving to smarter, compact cities, efficient public transit, charging stations for electric vehicles, LED lighting, micro grids for solar, wind farms, green buildings and design, as well as across the board efficiency. All this is on the COP22 agenda in Marrakech.
All this will require Brown-to-Green Redevelopment Bonds on steroids – focused systemically on redeveloping whole sectors of our 19th and 20th century industries: from wasteful retailing of obsolescent products to re-useable, modular, take-back, recyclable items in a fully circular economy. These redevelopment bonds will help restructure our medical-industrial complex now gobbling 16% of US GDP by insurance and pharmaceutical giants, crisis medical approaches – toward prevention, lifestyle learning and wellness models with less cost, risk and better health outcomes. The vast industrial agriculture sector overuses pesticides, water and fossil energy. This global monoculture-based industry needs restructuring toward lower-cost, smaller-scale, distributed, organic farming, urban, vertically grown food and local markets. Utilizing solar energy, desert lands and salt-loving plant varieties can diversity our food, fiber and energy systems while restoring soils and re-sequestering carbon, as in DesertCorp.
This kind of sectoral restructuring avoids enormous social and environmental costs which companies have been allowed to “externalize” from their balance sheets for decades, passing them on to taxpayers. These incur health and safety hazards and social costs as well as depleting ecosystems, species, fish stocks, and drive climate risks. These “externalities” are now estimated by the IMF as costing over $5 trillion annually. Such huge avoided costs, formerly unaccounted, can be captured, along with many co-benefits in floating, long-term, expanded Brown-to-Green Redevelopment Bonds designed and suited for pension fund investments. These are similar to large-scale real estate developers selling their redevelopment bonds with architects’ models of new buildings, facilities and parks to transform formerly derelict neighborhoods. Depopulated districts in cities like Detroit which Trump vows to rebuild can be re-zoned for future purposes and re-developed into smart new urban neighborhoods, reviving city economies and tax bases.
Today, as trillions of stranded, fossilized assets are re-valued as "feedstocks" these Brown-to-Green Redevelopment Bonds, can mop up the huge overhang of capital in many markets. They will use science-based metrics such as those in Intergenerational Finance™ (IGF) which will guarantee attractive returns in the avoided costs of these “externalities”. This will include the co-benefits: healthier people, cleaner, more nutritious food, restoring blighted, polluted areas, reforestation and investing in re-growing fish stocks in expanding the ocean reserves recently mandated in the USA as national monuments.
Today, all is in place for accelerating the global green Transition to the Solar Age: robust private investments tracked in the Green Transition Scoreboard®; Green Bonds now expanding rapidly worldwide led by China; efficient renewable energy and resource technologies scaling rapidly and reducing prices; the new sustainable development model in the SDGs and COP 21. New metrics for Sustainable Infrastructure and Insurance, new accounting, measuring all six forms of capital: finance, built, intellectual, human, social and natural as in Financial Management, May 2016 (CimaGlobal.com). The science-based Brown-to-Green Redevelopment Bonds can be designed using Intergenerational Finance™. Even central banks can re-direct any further QE toward Green Qualitative Easing – using similar science-based metrics. Investments in the green transition are now urgent to meet COP21 and 22 targets below 2 degrees of atmospheric global warming – and are achievable as in 2° Investing Initiative and other post-carbon portfolios.
Hazel Henderson is the founder of Ethical Markets Media, LLC and the creator and co-executive Producer of its TV series. She is a world-renowned futurist, evolutionary economist, a worldwide syndicated columnist, consultant on sustainable development, and author of The Axiom and Nautilus award-winning book Ethical Markets: Growing the Green Economy (2006) and eight other books. She co-edited, with Harlan Cleveland and Inge Kaul, The UN: Policy and Financing Alternatives, Elsevier Scientific, UK 1995 (US edition, 1996), and co-authored with Japanese Buddhist leader Daisaku Ikeda, Planetary Citizenship (2004).
© 2016 Hazel Henderson