Indignity of Green Bonds: The Example of the ADB

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Recently the Asian Development Bank located in Manila, like most other banks and investment funds worldwide, proclaimed its commitment to climate change mitigation and climate change adaptation.

On page 60 of the report entitled A Region at Risk, Human Dimensions of Climate Change in Asia and the Pacific they suggest that we must invest in agriculture "where economic efficiency indicates investment to deliver adequate rates of returns". Recently also Christiana Figueres, ex Secretary of the United Nations Framework Convention on Climate Change, Hans Joachim Schellnhuber, director of the Potsdam Institute for Climate Impact Research, Germany, and three others, wrote an article in Nature magazine supporting this notion of a return on investment for climate finance. They claim that "The financial sector has rethought how it deploys capital and is mobilizing at least $1 trillion a year for climate action. (They) need to issue many more 'green bonds' to finance climate-mitigation efforts." It is an enormous shame that all these people are so deluded about the efficacy of the ideology of return on investment for mitigating and adapting to climate change.

One can illustrate very simply why it is delusional to keep on insisting that debt based money can get the world out of the climate crisis. A typical 10-year bond in the Asian Development Bank Green Bond portfolio has a coupon of 2.275% issued in USD 1000 units. Assuming these conditions are passed on in full to the borrower, assuming annual repayments and an exchange rate of Rs 62 per USD, this implies that if such money were issued as a Green Bond to an agriculturist in Bihar she would need to monetise the output from her field for the benefit of the ADB at the rate of an annual repayment of Rupees 8147 every year for 10 years, or Rs 679 per month.

In normal conditions in Bihar, biomass prices - whether cow dung or vermicompost or manure or other carbon rich matter used for soil conditioning, or vegetables at the farm gate - fetch a price of around Rs 4 per kilogram in the local market. So, to realise more than Rs 8000 per annum for bond repayments on a USD 1000 investment there is the need for the equivalent of 2 tonnes of biomass to leave the field every year and get monetised on international and national markets for the benefit of the ADB. In other words, if an agriculturist borrows Rs 62000 from the ADB under its Green Bond lending she will have to sell 2 tonnes of carbon rich matter from her field every year to pay the interest and capital. The effect of this is devastating.

Converting biomass into money is at the cost of soils. But the soils in the world, in India, let alone in Bihar, are so carbon poor that no field can afford such a loss of biomass from the local soils. Secondly, when biomass is returned to soil it sequesters carbon. Even if a Green Bond were forthcoming for agriculture, repayments would be at the cost of lost carbon sequestration to mitigate climate change. After all it is hardly as though manure, vegetables and soil carbon are getting used for sequestration in global markets. Most of the food arriving in Europe gets wasted. The argument cannot be made that helping a Bihari agriculturist sell biomass from her field to the global economy contributes to carbon sequestration indirectly. Thirdly, 2 tonnes of vegetables a year to pay off the ADB Green Bond, - if we include starchy vegetables in the mix, and which may have an average calorific value of 50 kilocalories per 100 grams, - will easily feed one person per year with much to spare. On the other hand, Green Bonds that extract biomass for money keep agriculturists undernourished, unable to save to build a house, or to pay taxes to their Gram Panchayats to build up a local economy that might educate their children. In fact, agriculturists are so landless and penniless from borrowing that entire generations are driven into penury in urban slums.

Out of the 53 projects on the list of ADB Green Bond Eligible Projects as of 31 March 2017, of which 14 are in India, not one covers agriculture. It is not difficult to understand why. If the ADB lends to agriculture either the Bank will go bust if the money is used for people and planet, or the Bank will be exposed as the exploitative and anti-climate and anti-agriculture and anti-people Bank that it is. This is precisely what is going on with banks in India right now.

On the rest of page 60 the ADB proposes the following responses to climate change in the agricultural sector: "(i) putting in place effective climate information systems, including early warning systems, to facilitate adequate responses by agricultural producers; (ii) promoting the dissemination of crop varieties which are climate (and especially heat) resilient; (iii) supporting investments in irrigation infrastructure, including water storage facilities where economic efficiency indicates such investment to deliver adequate rates of return regardless of future climate conditions; and (iv) exploring the possibility of putting in place risk sharing instruments."

There is not one peep about paying the agriculturists' labour and sustainable land use to sequester carbon even as we feed ourselves and contribute to reducing temperatures locally and globally by planting trees.

Green is a marketing ploy in finance. Bankers, financiers and their apologists promote green wash projects for their own financial survival. By lending to renewable energy, they have the utopian fantasy of buying themselves and all other banks and their investors, time: for their continued existence in la la land. Recently the Union Bank of Switzerland was permitted to start a wealth management branch in Shanghai. They are going for broke trying to perpetuate capitalism in Asia and the Pacific. The Green Climate Fund in Incheon is another such horrible finance creature. In May this year, it decided to give away grants totaling USD 500 million to "catalyse" climate finance opportunities in the private sector in developing countries. The Global Climate Fund is the ideological and financial parasite on bankers' money and has not the slightest interest in catalyzing the labour of agricultural workers and others in the care economy to ensure the safety and continued existence of the human species.

Banking money undermines the requirements of human subsistence, carbon sequestration, soil restoration and ecological regeneration at the point of production in agriculture. In India, of course, everyone knows that capitalism is incompatible with agriculture. But national decision makers are as deluded as international ones.

To cut a long story short, we already lost the period 1992 to 2017 for climate change mitigation and eradication of poverty due to industrialised country greed. In the next 25 years if Schellnhuber, Figueres, the ADB, UBS, GCF et al get their way with Asia, the human species is doomed.

What is actually needed is for bankers and investors to peacefully hand over the power of money creation to the Indian Government, the Chinese Government, the US Government, and all other Governments. Soon there will be ten billion people on Earth. Politicians need to have the brains to issue debt free high-powered reserve money into circulation directly to workers at the place of production for ecological and social work and to outlaw debt. With this right form of money - and abolition of the financial sector and its notions of return on investment, capital, debt, interest, repayments etc. - we can all do the necessary work to save ourselves.


Anandi Sharan was born in Switzerland, lives in Bangalore, and worked in Araria District in 2016. She mainly writes about India and how we need a better money policy to help agricultural labourers and women especially to adapt to man-made climate change. 

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