Greenbacks for greenhouse gas

FOR SEVEN years, the Bush administration has advocated "voluntary" approaches to reduce the emission of greenhouse gases that cause global warming. But that approach has been a failure. While responsibility for the problem extends beyond oil companies and automakers to the financial-services industry that invests in destructive activities, a recent survey shows just how little action 40 of the world's largest banks have taken against climate change.

With their hands on the spigot of trillions of dollars, bankers play a crucial role in how the world responds to the threat of rising sea levels, drought, and extreme weather events. But the survey, commissioned by Ceres, a Boston-based group of investors and environmentalists concerned about sustainability, found that the industry has far to go in confronting global warming.

Not surprisingly, the banks that are changing their practices the most are in Europe, where countries are trying to adhere to the greenhouse emission reductions required by the Kyoto Protocol. In the United States, where President Bush has rejected Kyoto and any mandated reductions in carbon dioxide, the survey found that banks have been slow to involve their boards in the issue, incorporate the effect of carbon emissions into investment decisions, or set goals to reduce greenhouse gases in their portfolios.

One exception is Bank of America, which has set such a goal for its loans to utilities. The survey reports that no bank, in the United States or overseas, has opted to avoid investments in coal-fired power plants or the development of Canadian tar sands - two major sources of greenhouse gases.

In her foreword to the report, Ceres President Mindy Lubber called on banks, as "risk management experts," to "consider the financial risk implications of continued investment in carbon-intensive energy technologies." US lenders' failure to foresee the subprime mortgage debacle that is now roiling financial markets does not speak well for their ability to take the long view on an issue like climate change. Presidential scion Theodore Roosevelt IV, who is a managing director of Lehman Brothers, has warned corporations that, because energy is so central to economic growth, the economic disruption driven by climate change "will be more profound and deeper than globalization."

The Ceres survey is further evidence that industry will not adjust to the threat of global warming unless Congress passes legislation for cap-and-trade controls on carbon emssions. When market signals aren't enough to awaken Wall Street to the danger of a climate catastrophe, government has to take the lead.