The Green Finance Illusion

Julien Lefournier and Alain Grandjean publish in the Editions de l’Atelier “L’illusion de la Finance Verte” (“The Green Finance illusion”).

They both have a real legitimacy on the subject: Julien Lefournier has spent his entire career in market activities. Alain Greandjean is a recognized specialist in these subjects. With Pascal Canfin, in June 2015 the last submitted to the then French President of the Republic a report entitled “Mobilizing finance for the climate”.

This work was proposing an integrated roadmap for financing a 2 ° C economy around four pillars: carbon price signal, financing of low-carbon infrastructure, the role of development banks and integration of climate risk into financial regulations. It included concrete proposals concerning the IMF, the World Bank, the Financial Stability Board, the Basel Committee or the Central Banks, which, whatever may be said, did not completely go unheeded …

But paradoxically enough, the work of the time and its very large spectrum is the source of many misunderstandings that “L’illusion de la Finance Verte” denounces today.

Name the object correctly

We must first forgive the co-authors for this term of “Green Finance”, and with two capital letters please! Even if, as my dear Camus wrote in a study published in 1944, “to name an object incorrectly is to add to the misfortune of the world”, the marketing is what it is, and the term is all the same more selling than that of “sustainable finance” (“finance durable” in French, both words in lowercase), used by professionals in the sector.

The real term, therefore, is that of “sustainable finance”, which designates a finance integrating into its considerations a concern for so-called ESG criteria (for Environment, Social and Governance), mainly from two toolboxes:

  • a more complete and transparent information (known as “disclosures”)
  • a shared understanding of what is “sustainable” and what is not (the so called “taxonomy”).

Obviously, this lowercase word “sustainable finance” is less “Grand Soir” than the capitalized “Green Finance”, but it better designates an already very ambitious objective: to solve, through increased transparency, this “tragedy of horizons” that ‘Mark Carney mentioned in his speech to Lloyds in 2015 (see “Greening” the Finance, published here in June 2019).

Transparency above all

Starting from the premise that financial markets are not efficient, Alain Greanjean and his co-author can hardly give credit to initiatives such as the TCFD (Taskforce on Climate-related Financial Disclosure) or TNFD (Taskforce on Nature-related Financial Disclosure). ), which not only start from a partly opposite premise, but also emanate largely from the private sector.

Same harsh vision with regard to the efforts of the regulator which fall under the same search for greater transparency: article 173-VI of the Energy and Ecological Transition law, past overhaul of the Non-Financial Reporting Directive (NFRD) or more recently decree of application of article 29 of the Energy-Climate law, and announcement of a future Corporate Sustainability Reporting Directive (CSRD) …

Of course, we have the right not to believe in the efficiency of markets, we have the right not to be big fans about private initiative, we even have the right to dislike financiers.

But the “narrative” that the authors dispute – rightly – of a finance supposed to bring about the ecological and energy transition, even save the world, in truth, no one serious holds it.

At the time of the consultation on the EU’s sustainable finance strategy, a year ago, I published here three position papers to the attention of the European Commission: two on sustainable finance itself (taxonomy and disclosures) , and one on the internalization of the carbon price in the economy, the title of which was in fact quite explicit: “The carbon price: the only real question”

So I have many points of agreement with this book even if I leave it to Gaël Giraud to qualify it as “a beacon in the fog and confusion constantly maintained around financial markets and ecology”.

But as you have understood I guess, I am a little more nuanced … and less negative than them, as soon as we specify what we are talking about.


Iconography: December 3, 2015, “Ice Watch”, by Olafur Eliasson and Minik Rosing, Place du Panthéon, Paris © Martin Argyroglo


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