A New ‘Subprime’?

What with all the current investing hoopla about mortgages, ‘subprime’ has become a buzz word. Even Al Gore is jumping on the bandwagon – at a recent UN-sponsored event for investors and financial advisors, he used the word to describe investments which relied heavily on carbon use. The idea behind his speech relates to the spirit of capitalism-money is the means to effect change.

A similar pull was seen from the ground up in protests regarding investments that supported genocide in Darfur the past few years. Many school endowments were put under pressure to withdraw from investments which supported the regime. While this movement awoke people to the possibility of investment as a tool for change, it remains to be seen how much impact such change really imparted. I know at the Oven Glove, though a policy of not supporting genocide was put in place, very little of our invested money was withdrawn. Mostly we were already not investing in genocide, yay! But the overall result was to make me wonder how much impact happened in Darfur overall.

A part of what Al Gore is trying to do here is commendable. He’s going to the source. If the high-power investors themselves see a higher cost in investing in carbon now and dealing with the problems it causes later, they will make investment changes and many people will follow their lead. But again I wonder how much impact even high-power investment changes will have.  South American countries have always been between the rock and hard place of the US historical expansion model and current morals of rain forest preservation and rural protectionism. China, with its burgeoning industry and development, was notorious during the Darfur issue for not removing many of its investments from that area. With the need to modernize, can a growingly consumptive population giant like the PRC afford to ignore carbon? Should they have to?