“Sustainability” and “resilience” aren’t the same thing, and nobody knows what “green” means, anyway.
I have become a bit more irritated these days about linguistic sloppiness. Well, I’m getting old and cranky. But it’s also probably because my academic background was in Linguistics, before a crappy job market in the early 1980s led me to a career, such as it was, in Finance. But I have retained some of my unreasonable expectations about words and what they mean, or what they’re supposed to mean, which means I am constantly disappointed. This sate of affairs should no longer surprise me, but it does.
Arguments over the Oxford comma have nothing on arguments over the meaning of “sustainability,” for example. For such a commonly used word, you would think there would be some relatively reasonable and granulated definition that everyone was happy with. But it seems as if we have progressed little from the Brundtland Commission’s definition from way back in 1987 in the context of development–“sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” This was a pretty good general concept, but hardly an operational definition, and has proved to be sufficiently vague to capture a wide range of meanings. This was also, I have to remind myself, 30 years ago.
And it’s not just the vagueness of sustainability that bothers me, bad as that is (which is why we have seen an explosion of corporate sustainability reports, including from companies who couldn’t be sustainable if their collective livelihoods depended on it). It’s also the sloppiness with which the term “sustainability” is used when what is meant is “resilience”–and vice versa. Everyone, stop using sustainability and resilience interchangeably. Resilience is a systems characteristic, be it ecological or financial–the extent to which any system can recover from events back to its initial state, either fully or partially; sustainability is a set of tools for achieving a certain level of resilience. They do not mean the same thing, although one wouldn’t know this from a quick review of the literature.
However, the fuzziness of the debate over these terms appears set to be eclipsed by the debate over what exactly is meant by “green.” This has become a subject of considerable discussion, especially since Green Bonds came along ten years ago. There is now a furious (relatively speaking) debate over what green means in the context of raising a lot of money for a wide range of purposes, some of which may well be “greener” than others. Much of this discussion surrounds the question of whether current notions of green, such as those found in The Green Bond Principles, are actually stringent enough. This depends, to a great extent, on what you think Green Bonds should be for. We don’t expect this debate to be resolved any time soon. (Our own view is that most investors have been relatively relaxed about how refined these standards need to be–as opposed to a wide range of other market observers, including banks, NGOs and regulatory bodies.)
Partly this is because “green” is such a loaded word to being with, one that doesn’t lend itself to a particular set of characteristics. One person’s green is probably not going to be the same as another’s. We see this in the constant and apparently never-ending discussions about whether the Green Bond Principles need to be tightened up in some way. We also see it in a slightly different context in the increasingly tedious debate over verification–having an independent entity monitoring the use of proceeds to make sure they’re green. Who should do it, and how stringent should the process be? And as various parties push the Green Bond concept–not only the usual raft of investment banks and investors, but also NGOs with only a tangential (and sometimes entirely theoretical) connection to the Green Bond market–we are seeing more and more attempts to bring some stringency to the notion of what is meant by green.
We suspect that one reason why this process has become a bit more complex than is probably warranted is a linguistic one–green is an adjective. And as an adjective it’s used as a descriptor, as adjectives are–we hear of “green finance,” or “green companies,” or green cars,” or whatever. Like “sustainable,” the fluidity of meaning here is pretty impressive. This in itself isn’t particularly problematic as long as the relevant audience shares this fluidity. Bond investors, as noted above, with some exceptions such as Green Bond funds, seem to be pretty relaxed about what is a “green bond” (they are certainly more flexible than other interested parties.) Given that not everyone who buys a Green Bond is buying it because it’s green, this should not be surprising. (In fact, up until recently it’s probably been the case that the majority of most Green Bond deals were bought by investors who were looking for a bond, but not necessarily a Green Bond [data on this is hard to come by, but I’m working on it].) For these investors, the whole notion of green was probably irrelevant–they just wanted, say, an Iberdrola bond, and the one coming that week happened to be a Green Bond. Often it’s as simple as that.
This doesn’t mean that coming up with a standard definition of green isn’t a good idea. But most adjectives have a noun associated with them–they general derive from what is captured by the nominal form of the concept. Think of an adjective, pretty much any one–you will almost always be able to figure out what the nominal form of that concept is. And in most cases the meaning of that noun will be pretty definite (“a person, place, or thing”). But many nouns are that clear–what we end up with is a generality (a “thing”). We can all think of these: democracy; hope; progress. For these kinds of nouns, the referent is usually subjective. Definitions of progress vary widely, but can all be encompassed by the term. It’s that kind of word.
So what would be the appropriate nominal form of green, as we think of it when we talk about “Green Bonds?” It’s not clear that there is one. Well, there’s “green-ness,” which has the multiple disadvantages of being both as potentially vacuous as green, and being awkward to boot. No one is going to walk around talking about green-ness–that’s just not going to happen. So what word do we want? We either have to make one up, which society does all the time (practically every word associated with the Internet, for example), but which doesn’t seem to be happening here. And there’s a good reason for that, I think–we don’t really know what we want to mean when we say green. It’s a convenient term precisely because, like sustainability, it leads itself to such a wide range of interpretations. It contains multitudes, as Whitman would have said. A Wendell Berry world is a quite different world from a Bill Gates world, but there are those who suggest that one isn’t any greener than the other.
This will no longer do. To the extent that we don’t have a good notion of what we mean by green, both as an adjective and a noun, we remain in a bit of a policy fog. The reason we need a better definition, and a better word, is because we need to both qualify and quantify what we want and need to accomplish by way of programs to both mitigate and adapt to the significant warming that’s coming along. This will require public policy determinations regarding regulatory measures. And for this discussion we need something more informative than green. Actually, we need something more persuasive as well, since, frankly, throwing the term green around in terms of public policy measures doesn’t appear to have been a resounding success. In some circles, including some important political ones (such as the US Republican Party), green is still seen as a pejorative term. It’s like that old argument that the reason people don’t eat horsemeat is because there isn’t a good neutral term for it. There is for pigmeat, for example–we call it pork. And we have no objection to eating pigs even though pigs are smarter than horses. We need a more neutral word that will still mean something.
All of this reflection was prompted by a recent (well, December 2016) report from the Cambridge Institute for Sustainability Leadership on some recent thinking in the insurance industry. Called Investing for Resilience, the report looked at how insurance companies were investing in terms of preserving resilience in a wide range of situations, and it covers a lot of useful ground. The report was actually prepared by Climatewise, an association of insurers. As stated in the report,
“Many of the actions that individual insurers (and other industry stakeholders) can take are comparatively small scale. Yet while their individual impact may be small, they could be collectively significant, especially if used to reinforce and support multiple efforts by a broad range of stakeholders.
“These actions would be further enhanced by the existence of a universal climate resilience rating system that would allow resilience to be considered, benchmarked and communicated across different areas of decision-making. This could include the resilience of investments, of property, of municipalities, of corporates – indeed any entity for which resilience is important.”
It’s an excellent report, and is worth a look for its discussion of resilience and its various meanings alone. What struck me was the notion of the industry developing “Resilience Ratings.” This is the insurance industry, after all, and if anyone has a good sense of the resilience of, say, property to weather events associated with global warming, it’s going to be this industry–they’ve already got the numbers. For this sector, “resilience” is indeed a quantifiable characteristic–they do it all the time, in fact. Such ratings might be more useful that the Green Bond ratings that currently seem to receive a whole lot of attention.
Which got me thinking about whether what we really mean when we say green is “resilient.” And the more I thought about it, the more the two terms converged. I suspect what we mean by green is really something more substantial than reducing CO2 discharge, although this in and of itself is a worthy and necessary goal. And, interestingly, much of what we think of as green finance is exactly that–reduction of CO2 production. Or that’s what a lot of Green Bond financing has been directed to. But surely we mean something more by green. It means accommodating water depletion and allocation issues. It means preserving natural capital in forests and fisheries. It means waste reduction and a more circular economy. It means reducing topsoil loss, which is occurring on a global basis and may even be a more imminent problem than global warming. In fact, there is a whole range of green issues that we can easily subsume under the concept of resilience. And the fact that there is much about the concept of resilience and the particular domains it can apply to that is quantifiable is a point in its favor.
And if the objection is that resilience is a broader concept than green, well, maybe that’s the point. I suspect the insurance industry is where we want to take our models from, at least in some areas. Maybe our horizons need to be a bit broader, to encompass social impact bonds under the same umbrella, and not to silo them the way Green Bonds have been. The thing about green is that it’s easy–everyone has a vague notion of what it is meant to encompass, and perhaps that’s why it’s been as successful as it’s been–its vagueness. But maybe we need something more precise, and resilience gives us the way to get there. I’m not sure whether the 130 or so parties currently involved in The Green Bond Principles are up to re-naming them The Resilience Principles. But it’s a thought.