Professor Joyeeta Gupta explains why banks should be embracing Earth System Justice
On the day she received the Spinoza Prize (the Netherlands' most prestigious academic award) Joyeeta Gupta, Professor of Environment & Development in the Global South at the University of Amsterdam, took time out from her busy schedule to explain to a full auditorium why she believes the future of finance should be embedded within an understanding of Earth System Boundaries and Earth System Justice.
On one level, her hypothesis is pretty straightforward. “If you aim to ensure that everyone's basic needs are met, this has implications for living within the Earth System Boundaries.” “And that,” argues Professor Gupta, “is why we need Earth System Justice.”
When safe isn’t really...well, safe
Five systems — climate, biosphere, aerosols, water and nutrients — ensure our planet prospers. But there are limits to how long we can keep using our resources or emitting pollutants into our environment before that system eventually collapses. For example, if global warming increases beyond 1.5°C, we will trigger at least four tipping points that can lead to a total transformation of the global climate. This is why 1.5°C has been set as a ‘safe’ limit. But in recently published research, Professor Gupta and her colleagues ask a key question: are these ‘safe’ boundaries also just?
“We know the 1.5°C ‘safe’ limit will harm 200-500 million people through the rise in sea levels alone, and we've calculated that even at the current 1°C rise in temperature, tens of millions of people worldwide will be harmed from the resulting rise in wet-bulb temperatures,” she went on. Hence the need for just boundaries.
“Politicians are in power on average for 4-5 years, CEOs of top companies for even shorter timespans. Nobody feels responsible for the long-term global consequences.”
Global crisis, local impact
Looking at intergenerational, intragenerational and inter-species justice, Professor Gupta and her team have come up with just boundaries for each ESB area. In the case of climate change, air pollution and nitrogen pollution, these are more stringent than the current safe boundaries, and with good reason. “Even in the one area where global boundaries haven’t yet been crossed — air pollution — current levels still cause seven million deaths annually. Sub-global and local justice boundaries for air pollution have clearly already been breached in many parts of the world. At the local level, there are many places in the world where all seven boundaries have already been breached and at least two boundaries have been breached in areas affecting 86% of the world’s population. And at the global level, we have breached 7 out of 8 boundaries.”
In other words, we’re already in the midst of a global crisis that we, in our luxurious homes, simply don’t feel. And to underline just how divorced we are from the current environmental reality, Professor Gupta gives an eye-opening illustration. “To give everyone on Earth access to the basic requirements of minimum water, food, energy and housing while still staying within the planetary boundaries, we would need to completely redesign our world. But these minimum needs allow only for about three lightbulbs and one refrigerator in terms of energy. The problem is inequality: the top 4% put as much pressure on the environment as the poor, should they be able to access minimum resources.”
So how do we achieve this fundamental change to the way we live? “It starts by questioning the barriers to achieving that change, like GDP. Or as the UN Secretary-General said last year: perhaps we need to move beyond GDP, which encourages the externalization of negative impacts.
"Another barrier is contracts. Many contracts between states and companies are problematic because if the state decides to close down, say, a fossil fuel company, that company can sue the state for compensation, which makes it difficult for the state to take such steps. Many multi and bi-lateral investment treaties protect the investor and don’t really concern themselves with environmental damage.”
One area Professor Gupta feels will become increasingly important is liability. Across the world, there are currently some 1,800 ongoing court cases specifically on climate change (with many more on related areas, such as water). “Younger generations are taking older generations to court, essentially for messing up the planet and their chances of a bright future. But with citizens suing governments, governments suing companies, and NGOs suing governments and companies, the situation is complex. And not helped by so-called ‘SLAPP’ (Strategic Lawsuit Against Public Participation) litigations, where companies sue NGOs in the hope that they then can’t afford to continue their legal proceedings against the company.”
With liability becoming a growing issue, Professor Gupta thinks very soon banks will start being taken to court for loans they have made. “NGOs are already running campaigns to shame banks for directly or indirectly investing in, say, weapons, fossil fuels or deforestation. But while most development banks of course say they’ll no longer invest in such areas, one of my PhD students has found that most are still lending to banks in other countries that in turn then invest in fossil fuels.”
Younger generations are taking older generations to court, essentially for messing up the planet and their chances of a bright future.
“Up to now, I think most banks have externalized the issue of environmental impact and tried to stay below the radar. In the face of growing scrutiny, some have started to exhibit a degree of conscious behavior and most are now aware of the financial risks of environmental challenges. But it’s not just about the bank’s own actions. It’s the whole chain of events that may be triggered by the way they behave.”
Professor Gupta cites the example of how banks and other institutions have adopted net-zero targets. “The problem is that if everyone adopts this target, where will we find the land to plant enough trees to compensate our emissions and get to net zero?” The inevitable result, seemingly borne out by recent newspaper investigations, is widespread greenwashing fraud and flawed projects. Many projects on the Great Green Wall of trees in Africa have not assessed if there is enough water to irrigate the trees.”
On externalizing the issue, Professor Gupta sees another pitfall. “It’s also important that, when considering their role in embedding these planetary boundaries into their work, banks avoid the inclination of most types of organization to think: 'We’re an educational institute, we just teach' or 'We’re a bank, we just give loans,' or 'We’re a government, we need to run the country.' The only way we can solve this global problem is if we stop thinking in this segmented way and start thinking about our global responsibility. For a bank, that might mean looking beyond what’s required legally to consider the precautionary principle: ‘How can we ensure the investment we’re making is the most responsible we can make, given that we’re in the midst of a planetary crisis?'"
WHAT ARE EARTH SYSTEM BOUNDARIES?
The Earth System Boundaries are scientifically-measured safe and just limits to the impact of human activities on the Earth system from local to global level. If these limits are crossed, the environment will be tipped out of balance and may be unable to self-regulate anymore, with disastrous consequences and things we currently depend on no longer being possible. A simple example: if bees disappear, we won’t be able to pollinate our plants.
So what’s stopping organizations from taking such steps? “I believe the biggest constraint is that nobody feels responsible for the long-term global consequences. Politicians are only in power on average from 4 to 5 years, the same period as the average Fortune 500 CEO. People in rich countries don’t seem to (want to) make the connection between their lifestyles and the fact that, for example, island nations in other parts of the world are literally disappearing.”
So how on Earth, in the face of such complacency, does she stay optimistic? In her reply, Professor Gupta recalls watching the fall of the Berlin Wall. “No one knew it was going to happen, but suddenly it did. Overnight. I don’t think we’ll see an evolutionary change in mindset. I think a number of factors will come together to cause a drastic event — say the total collapse of all investments in fossil fuel, a large and extreme event somewhere in the world, a leader that is willing to lead — that finally triggers that transformation in mindset. And for now, we need to plan for that moment.” A clear call-to-action if ever there was one.
The eight ESBs for five domains
Nutrients: Agricultural nitrogen and phosphorus surpluses
Water: Ground water and surface water
Biosphere: Natural ecosystem area, and functional integrity of human-modified ecosystems