a new environmental activism?

Enough, enough, enough.

The world’s oceans are dying. What else has to happen before environmental science communities decide to get serious about this?

In the last 30 or so years, pounding on political doors with ever larger stacks of scientific fact or increasingly shrill moral arguments has proven a remarkably and highly ineffective way of addressing the issue of climate change.

On the surface it seems that if the political process is not simply too broken to move then either it or the individual politician behind the targeted door has long ago been co-opted by business interests that simply have no real motivation to address the issue. They seem (are) too busy reporting the quarter’s earnings, or projecting those of the next quarter. Even if the chief executive recycles at home and drives a hybrid, in the office he/she  is the corporation and there he/she behaves accordingly.

While some may argue that progress has been made in the form of cap-and-trade schemes and so on, the real results speak more of a political two-step around the problem rather than of significant behavioral change.

Make no mistake though, at its core this is not the fault of the business community or even the calcified political structure. They are behaving exactly as they have been motivated to behave no more no less.

No, this is a clear failure of the scientific and environmental communities who, while standing in the middle of the jungle of Commerce insist on screaming at the natives in the languages of Politics and Science. The natives speak only business, but having failed to communicate, our well-meaning missionaries simply insist on speaking ever more loudly and making ever more wild gestures.

Enough already. Get a grip. If the natives do not understand you, changing their behavior is impossible.

Rather than continuing to chase increasingly unlikely initiatives or solutions in the language of politics (or worse the language of science)   it is perhaps time for a more direct approach, executed exactly in the language of commerce.

Before continuing here, let me say that I do not pretend that this proposal is flawless, without risk or even that the tools necessary all exist today. Neither though do I see it as impossible. Nothing if not first a dream.

Business 101.

Business speaks the language of profit and commonly uses that language to express the value of a business as being the risk-adjusted present value of future cash flows. In other words, the value of a business is the value in today’s dollars of future profits, adjusted for the risks associated with generating those profits.

While the mathematics of those calculations are charmingly simple they have powered commercial enterprise for a very long time. Forever really.

And so?

Well then, what if we think of those commercial risks in terms of the probability of the occurrence of specific future environmental events or changes?

What if a model could be built that could translate specific predicted effects of climate change, such as say the loss of specific species, the acidification of the ocean, or a predictable rise in sea levels into a probability-adjusted range of impact on the future cash flows of say, a specific publicly held corporation?

All right, that is an important and reasonably sized “what if”, but remember that we are talking about probability adjusted risks, not scientific or accounting risk and about specific changes that impact specific business activity. In that context it may not be that far a reach at all. The obviously over-simplified example is that if bees disappear, bee keepers also disappear. If the bee keepers were a corporation, the risk is direct and likely calculable.

If even a small portion of the incredible amounts of money being spent annually on measuring our planet’s peril were diverted to such a project, I cannot imagine not getting it done.

Now the gritty bits.

This is where, if you a scientist or environmental activist and you truly think that the ocean is dying, that our flimsy life bubble is in actual danger you will have to ask yourself, in the words of Sean Connery’s character in the movie “The Untouchables” :

What are you prepared to do?

If the proposed model produces probability-adjusted cash flow impact that are meaningful in relation to a corporation, then a shareholder in that corporation would have a legitimate right to ask what the corporation’s Board might be planning to do to mitigate the identified risk.

A small point yes, but if like-minded shareholders were sufficient in number and volume (10% might be enough) it seems entirely possible that the trading value of that corporation’s shares, and therefore the value of the corporation itself, could be impacted.

For the first time, the message would be directly delivered in the proper language. More succinctly screw the science, this is about dumping non-compliant board members and adjusting corporate behaviors one hybrid-driving C.E.O. at a time.

In short, we are describing an environmental activism expressed as targeted shareholder activism executed in the language of business.

A myriad of questions and uncertainties exist of course, but those are not the point.

The point is,

If you have been lobbying and placarding and letter-writing or producing environmental T.V. for the last 30 or 40 years, well – how is that working out for you?

Think we have time for another 30?

short link: http://wp.me/p1Dr2y-2H
Shareholder Activism: http://en.wikipedia.org/wiki/Activist_shareholder



Posted on December 8, 2012, in economics, Environment and tagged , , , . Bookmark the permalink. Leave a comment.

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