Does Financing Fuel the Climate Crisis?
What the Technical and Social Realms of a 2013 Massachusetts ‘Green Bond’ Can Teach Us About the Governance of the Climate Crisis (Part 1 of 2)
Nevena Pilipović-Wengler (MUP ’20)
Figure 1 :Detroit protesters: Photographer: Rebecca Cook/Reuters, from the Daily Beast article “Detroit Shuts Off Water to Residents but Not to Businesses Who Owe Millions” (link here)
We are in the midst of a global climate crisis. While city governments increasingly do important work in strategizing how to fight the crisis, their funding mechanisms to support these strategies remain unclear. (1)
One of the most promising financial tools that has emerged to fund governance of the climate crisis is the ‘green bond.’ A municipal ‘green bond’ functions like the stock market, but is public and used to fund environmental projects (Figure 2). They are particularly interesting because of their scale: according to UMass Boston’s Sustainable Solutions Lab, ‘green bonds’ disproportionately accumulate the most funds when compared to other financial tools. (2)
This all sounds promising. In fact, IFC’s model of a ‘green bond’ shows a tree growing money to communicate endless growth and seamless profit (Figure 2). However, I have a hard time seeing only positive growth here.
Figure 2: Diagram of the Green Bond: International Finance Corporation World Bank Group
We must consider how racialized, colonial and extractive economies created the climate crisis to begin with. (3) Countless moments of environmental injustice exist, and finance plays a role in each of them, some more explicitly than others. In 2017, Detroit shut down water to more than 15,000 households who were behind on water payments – households that are majority black families. The city claimed it had to do this in order to manage the debt it had taken on to finance its water system in the first place. (4)
It is exactly this tension we need to pay attention to. The ‘green bond’ market is on the rise for the financial world, public governments included (Figure 3). They offer promising potential to provide much needed funding, yet as Detroit and countless other examples reveal, these bonds are a function of a racialized and extractive debt market. (5)
Figure 3: Global green bond market 2013-2019: Climate Bonds Initiative
It is this tension that I am focusing on in my thesis. I am studying the 2013 ‘green bond’ of $100M issued by the Commonwealth of Massachusetts, the first of its kind and modeled after the World Bank’s ‘green bonds’. (6) The Commonwealth has re-issued this bond four times, most recently in 2018 with over $1.4B of capital. (7)
The Massachusetts Green Bond must be examined through two realms: the technical and the social. The technical reveals how the Commonwealth’s ‘green bond’ functions, its investors, and its deliverables.
The social addresses that financial systems are not natural. Just like our built spaces, these systems are designed with informed sets of imaginations and assumptions. Who are the architects of this ‘green bond’? What are their perceptions and assumptions of our economies?
These questions are important because public actors’ perceptions and identities directly influence their policy, programmatic, and financial designs.
Thus, in order to preserve the necessary promise of funding urban governance towards the climate crisis, we need to understand how the ‘green bond’ and other financial tools materialize ideologically and socioeconomically.
We must ask, how can city and state governments finance the fight against the climate crisis without further fueling it?
Can they?
Bibliography:
Bulkeley, H. (January 01, 2010). Cities and the governing of climate change. Annual Review of Environment and Resources, 35, 229-253.
UMass Boston Sustainable Solutions Lab, Barr Foundation & Boston Green Ribbon Commission. (2018). Financing Climate Resilience: Mobilizing Resources and Incentives to Protect Boston from Climate Risks. Boston, MA: David L. Levy.
Three articles that reference this: [1] Hardy, R., Milligan, R., & Heynen, N. (2017). Racial coastal formation: The environmental injustice of colorblind adaptation planning for sea-level rise. Geoforum, 87, 62. [2] Isla, A. (2015). The "Greening" of the UN Framework on Climate Change and Environmental Racism: What Payment for Ecosystem Services Means for Peasants and Indigenous Peoples, Women and Men. Canadian Woman Studies, 31(1/2), 34-43,14. [3] Klein, N. (2014). This changes everything : Capitalism vs. the climate (First Simon & Schuster hardcover ed.). New York: Simon & Schuster.
Ponder, C., & Omstedt, M. (2019). The violence of municipal debt: From interest rate swaps to racialized harm in the Detroit water crisis. Geoforum, Geoforum.
Ibid.
Varghese, R. (2013, June 3). Massachusetts Green Bonds Mirror World Bank: Muni Deals. Retrieved November 8, 2019, from https://www.bloomberg.com/news/articles/2013-06-03/massachusetts-green-bonds-mirror-world-bank-muni-credit.
Varghese, R. (2013, June 3). Massachusetts Green Bonds Mirror World Bank: Muni Deals. Retrieved November 8, 2019, from https://www.bloomberg.com/news/articles/2013-06-03/massachusetts-green-bonds-mirror-world-bank-muni-credit.
Baker-Polito Administration Files Legislation Committing Over $1.4 Billion to Climate Change, Environmental Protection, and Community Investments. (2018, March 15). Retrieved October 10, 2019, from https://www.mass.gov/news/baker-polito-administration-files-legislation-committing-over-14-billion-to-climate-change.