Risk, finance, procedures of financialization and the new worth of the green

Abstracts

A new financialization of carbon markets: Getting rid of political risk

Stine Engen, TIK, UiO

A new financialization of carbon markets: Getting rid of political risk
Carbon markets are oftentimes taken to be the epitomal financialization of the climate issue – its proposed solution boiled down to finding “the correct price”. This paper argues that the world’s largest carbon market, the EU Emissions Trading System (EU ETS), is currently undergoing a form of financialization where financial actors are operating in the market both in increasing numbers and in a new way. Financial actors have for a long time been criticized for buying up carbon credits for speculative purposes, using them as an asset like any other without ties to actual emissions. Through a case study of a financial experiment conducted by a Norwegian insurance company, this paper shows how the recent, and significant, rise in carbon prices have led the EU carbon market to take up a greater and different role in the financial mind. Specifically, carbon credits are now used by some financial actors as a hedging tool, that is, as security against financial losses because of anticipated higher emission prices. The central argument of the paper is that this new use of carbon credits is a further form of financialization of the carbon markets geared towards getting rid of what is called “transition risk”, or the “political risk” of new regulations coming in from the EU and affecting emission prices. Using the EU ETS to deal with such risk consequently changes the aim of the market from minimizing emissions to minimizing “political risk”. This paper explains the financial logic behind this procedure in order to open the question to broader critical examination.

From housing to territory: thinking with counterspeculative forms of resistance

Maka Suarez, SAI, University of Oslo

Since the 2008 global credit meltdown, civil society has produced a rich strategic repertoire to counter the speculative processes of financial markets. This repertoire offers novel and grounded understandings of socioeconomic inequality that contribute to ongoing critical thinking about both the future of our planet and life in it. This talk presents counter-speculation repertoires generated by citizen platforms fighting for the right to housing in Spain through the lens of Latin American migrants who come from a long history of struggle for the rights of nature and territory. In doing so, I bring together decolonial perspectives of housing, household, and territory to think through the assetization of houses and resources. Based on ongoing reflections on novel political responses to financialization, an ethnographic approach to what I conceptualize as ‘counter-speculative democracies in action’ offers unique insights into the different ways in which everyday people critically engage with the constant expansion of finance into the realm of politics. I hope it can open a conversation with environmental forms of resistance to capital-intensive forms of neoextractivism.

Carbon Known Not Grown: The political economy of carbon measurement technology in Scottish nature restoration

Theo Stanley, University of Oxford

Across the Scottish Highlands, a growing group of tech-minded entrepreneurs are developing advanced measurement technologies (AMTs), such as drones, lasers and remote sensing, to measure forest carbon in unparalleled detail. AMTs are marketed with a promissory sales pitch: landowners can hire contractors to measure the ‘real’ amount of carbon stored on their estates, creating a fair and accurate revenue stream for ecosystem restoration. This paper situates AMT development and use within the wider political-economic context in which they are employed, to show how measuring forest carbon with increased accuracy is not a value-neutral process. Measurement accuracy is interlinked with power and capital. Compared to the standard form of forest carbon measurement used to verify carbon stocks, the Woodland Carbon Code, carbon estimations can afford to be less conservative whilst maintaining the credibility of the carbon offsets produced. AMTs create more negative emissions/ carbon offsets – fungible, tradable representations of carbon – without necessarily increasing the amount of actual carbon materially stored within a forest. AMTs produce more carbon known not grown. This has powerful implications for net zero. Landowners with the financial and cultural capital to access AMTs can increase the value of their natural capital assets. And as AMT use proliferates, potentially more carbon can be ‘found’ in a range of ecosystems, leading to more carbon offsets circulating in the net zero economy. However, no material changes in actual carbon stored in biological sources is guaranteed.

From efficiency and scarce resources to nature as risk and opportunity: Versions of valuation and economic expertise in tension

Kristin Asdal, TIK, UiO

Economists have their own distinct approach to the environmental problem: The reason why the environmental issues is not properly handled is due to the failure of valuing the environment correctly. In economic terms, environmental problems are externalities that can only be valued by being properly priced. The key valuation-procedure to solve this is by putting a tax on the environment and thus put the market to work on the problem. A large body of Norwegian public reports, so-called NOUs, have for decades been sites and instruments for re-ordering the environment in market and efficiency terms. The economists represented in these reports have predominantly been economists trained at universities and employed by or sitting close to departments of economics or public sector offices. Now, another version of economics is increasingly making itself relevant for the environmental issue, namely economists trained in business schools and with expertise on and from finance. What is labelled green finance is publicly sanctioned and represented in the same kind of public reports and inquiries. With a point of departure in these key sites for the encounter between expertise and public policy and tools of democratic political procedure, this paper sets out to examine what is suggested we start seeing as an ongoing shift in the economic expertise deemed relevant vis a vis the environment, and with interesting yet underexplored implications for valuation procedures as well as the ordering and formatting of nature.

Agents for change in shaping green finance: aligning the pension funds with climate change concerns

Linda Soneryd, Score, Stockholm University

The pension funds make up a huge part of the world’s economy, and are at the same time big investors in fossil fuels. In this paper we focus on initiatives to align the pension funds with climate change concerns in Denmark, Norway and Sweden. The three countries differ in how transitions towards green finance are debated, what social agents push for change and how, and with what effect. This will matter for how the environmental issue is shaped in relation to the pension funds and ongoing transitions. In this paper, we follow the social actors pushing for change in each country in order to understand the pathways for shifts in valuation of investments towards green finance. In Norway, key actors in the Environmental movement have been important in pushing for change of responsibility and motives of the state as investor. Being early proponents for divestment from fossil fuels, social movement actors have participated in the creation of pension-savings as a contentious field of asset ownership and long-term financial considerations. In Sweden, previous reforms of the pension system have emphasized the role of the pension saver as active on a financial market. The possibility by individuals to divest a small part of their public pensions have been emphasized in some social movement campaigns, while the occupation pensions have largely remained unattended. In Denmark the occupational funds have been foundational for a more corporativist system where union representatives have used organizational democracy to push for change. By following these social change agents we elaborate on the context for the possible avenues for green transitions in the three countries.

Entangled value(s): Valuation as critique in impact investing

Kaja Lilleng, Aalto University

Practices where economic value and environmental value entangle are becoming increasingly prevalent. Impact investing is one emerging approach aimed at boosting long term sustainable solutions. This aim, however, is hampered by economized valuation practices in financial investments and the challenge of assessing impact. I explore these challenges by looking at how impact investors attribute value in novel ways. This is done through a qualitative study of early-stage private equity impact investors in the Nordic region, drawing on interviews and field observations. I analyse the emerging valuation processes by looking at how impact investors select which objects should be paid attention and qualify values through their critique and criticisms. This highlights practices and assumptions the investors challenge and discard of, and attributes they value instead. The findings show how investors criticise simplified measures and shallow understandings of impact and value frames that can encompass complexity and uncertainty, valuing profound and intentional approaches. Overall, the study contributes insights into new and changing modes of valuation in a highly economized setting. By exploring how financial value and environmental value(s) entangle and shape novel forms of valuation I advocate for a better understanding of valuation processes that try to look beyond the financial imagination.

Scales of Energetic Difference: Relating Finance Flows and Electricity Currents through Power Purchase Agreements

Caroline Anna Salling, Technical University of Denmark

Meta, formerly Facebook, widely advertises that its electricity consumption for datacenters is supplied by 100% renewable energy. Major corporations turn to investment and energy construction as strategic sustainability tools. But which reorganization effects does the imposed financialization of energy infrastructures have for the responsibility and procedures of major grid transformation? Through ethnography with energy engineers in Denmark and document analysis of energy agreement reports, I zoom in on the organization of the financial instrument of Corporate Power Purchase Agreements (CPPAs) that is a long-term contract agreement allowing for investment-capable companies to secure often low electricity prices over long-term periods and to make claims to renewability. The energy financialization through CPPAs depend on a range of different actors, such as contractors, civil servants of local municipalities, investment firms and politicians that support the construction of renewable energy through corporate investments. In Norway, Meta has ensured the building of a wind turbine park that was rolled out through an external asset management firm. The park is advertised to simultaneously power the hyperscale datacenter in Odense, Denmark, but also as a donation to the grid infrastructure. But when the wind does not blow, the datacenter depends equally on fossil fueled electricity plants that supply the transnational grid. These findings suggest that energy is supplied to industrial production facilities at two different scales: the financial flows, and the cabled stream of charged particles, whose critical infrastructural relations prompts further investigation into the effects of political obfuscation.

The conflicting theories of change behind the climate finance agenda

Soline Ralite, Université Paris Dauphine, DRM MOST; Chaire Comptabilité Ecologique; Centre International de Recherche sur L'environnement et le Développement

Since the early 2000s, the public debate on climate finance — how finance impacts climate change and how climate change impacts finance — has gradually filled with numerous propositions aimed at tackling this challenge (e.g. disclosure standards, green taxonomies, target setting frameworks, etc.). Yet, although parts of this “climate finance agenda” are already well identified and discussed by academics, we still lack a comprehensive picture of its unfolding, key influencers, main propositions, and underlying theories of change. This article addresses this gap through a longitudinal and abductive study of the climate finance agenda in Europe. First, we draw on a dataset made from publicly available information for the period 1997-2022 as well as ten semi-structured interviews to establish a chronology of the European climate finance agenda and its key propositions. Second, we inductively classify each proposition to distinguish: i) its motives and focuses (ranging from climate risk management to contributing to climate change mitigation) and ii) the type of intervention proposed (informational, prescriptive, incentive-based, etc.). Third, we identify the theories of change underlying each group of propositions through an abductive analysis of the historical data and interview transcripts. Our findings: i) illustrate how propositions relying on conflicting theories of change have coexisted and influenced each other over time, ii) show the pivotal influence of private initiatives in the unfolding of the climate finance agenda, iii) allow for future critical analysis of the propositions on the basis of the theories of change brought to light by this paper.