Environmental finance needs more jobs
Many voters now equate environmental protection with job losses, but investing in sustainability can boost employment.
In April the European Commission and the EIB announced a €6 million ($6.5 million) loan agreement to help ‘rewild’ Europe – investing in conserving and regenerating natural habitats in several countries. It is the first of its kind on the continent and is a cause for celebration for environmentalists, but what makes it particularly interesting is that it pushes hard the case that protecting the environment creates jobs.
The idea that positive environmental causes in some way threaten economic growth has been a constant hurdle for environmentalists to overcome – particularly in the US. A few weeks ago the head of a US multi-family office told me that some of his clients won’t touch environmental causes or invest in clean energy simply because their local communities rely on jobs within fossil fuel industries.
It is intriguing how protecting the environment and job reduction became synonymous. New research from Pew offers some clues. It shows that back in 1994 only 29% of Democrats thought that environmental regulation and laws would cost jobs and hurt the US economy and just 39% of Republicans shared that belief. That’s a consensus opinion across the US that helping the environment would not be detrimental to the economy. Today only 17% of Democrats believe environmental law to be harmful to job creation, yet 58% of Republicans now share that belief. How did two halves of a nation move so far apart on environmental policy?
According to the research, this divergence of opinion began to accelerate around 2007 to 2008 – obviously the result of the financial crisis, I thought initially. Jobs in manufacturing and construction fell off a cliff and people may have assumed that changes in environmental regulation might threaten a full-blown revival. Plus states most affected by those industries were also Republican or swing states.
But something else happened in 2008 that may better explain how job loss and the clean economy became entangled. Natural gas prices tanked and therefore the relative cost of coal sent the coal industry into free fall. Power provided by coal has dropped by three quarters since 2007 in the US. The decline in natural gas prices, however, had little to do with environmental regulation or a dedicated push to clean energy – rather it was driven by shale technology and increased supply – but it is easy to see why people would equate the two.
Jobs are going to have to become part of any environmental finance discussion, as is where those jobs are being created and for whom
But that is perhaps simplifying the matter. Because in 2009 there was the American Recovery and Reinvestment Act which gave $90 billion in grants and loans to clean energy. And the leap in Republican opinion from 55% to 58% in Pew’s research coincided with president Obama’s signing of the Clean Power Plan. It was shortly thereafter that coal employment fell sharply again. Jobs in coal have declined by 90,000 since 1994 to about 86,035 now, with a third of those jobs being lost since 2011. And where are the coal mines? Again red and swing states, which might possibly explain the Republican shift in opinion.
Correlation or causation aside, the data backs up the anecdotal evidence from the multi-family office head: for a large part of the US population (and presumably elsewhere too) jobs take priority over environmental protection. Additional Pew research shows 52% of Republicans feel the country should do what it takes to protect the environment – in 1994 that figure was 71%. And Democrats? 85% agreed in 1994 and 90% agree today.
To boost environmental finance or impact investment for the environment in the US, it is going to be crucial to put job creation centre stage – even more so with a new US president who is so desperate to prove he can create the jobs he promised, that he is prepared to pollute rivers and wield a larger carbon footprint.
That shouldn’t be hard. In the last two years more than 100,000 jobs have been created in solar and wind power in the US – but where are those jobs? Chiefly California. Texas is second, but then comes New York – another Democrat state.
Jobs are going to have to become part of any environmental finance discussion, as is where those jobs are being created and for whom.
Speaking about the rewilding loan in Europe, EIB’s Jonathan Taylor, who is responsible for climate and environment at the bank, said: “There is a great business case for investing in nature” and that “biodiversity and economic growth can go hand in hand”.
I want to believe this so that we can get more capital moving towards solving environmental challenges. But, as the two agencies then talk up the job creation from the project, it pains me to point out that it only involves an estimated 250 positions.
We need some new thinking if we want to move towards a cleaner and sustainable environment. How can we create more jobs in conservation projects? Can we create impact investment retraining programmes for those whose jobs relied on fossil fuels? Or is it feasible for impact investment managers or green bonds to include projects that create jobs in those regions with high unemployment in fields that have nothing to do with clean energy – as an indirect way to support the environment? That way we can get back to the 1994 consensus that it’s not either/or, but rather we can have jobs and a greener, cleaner planet too.