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Unusual Suspects Challenging Usual Thinking On Climate Change

26/11/2015 9:34 AM AEDT | Updated 15/07/2016 12:51 PM AEST
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Large cracks in rock hard earth of water hole during dry season drought.

"The greatest trick the devil ever pulled was convincing the world he didn't exist."

Twenty years ago Kevin Spacey uttered this famous line about his alter ego, Keyser Söz, in The Usual Suspects. Keyser Söz isn't climate change, but he might as well be.

Since the film was released an inordinate amount of money has been spent to trick the world that human-induced climate change doesn't exist.

Recent data from the CSIRO suggests the 'trick' is yet to be completely foiled in Australia. Although almost 80 percent of people believe climate change is occurring, every second person routinely changes their mind and there is considerable divergence on whether human activity is a causal factor.

Thankfully, someone who requires no more convincing is Mark Carney, the Canadian Governor of the Bank of England.

"There is a growing international consensus that climate change is unequivocal," Carney said in September.

"Human drivers are judged extremely likely to have been the dominant cause of global warming since the mid-20th century."

Carney, like his Chief Economist, Andy Haldane, is what I call an unusual suspect, someone who looks beyond the parapet and leads on an issue when we don't expect them to.

Think doctors and nurses on children in detention and sporting heroes like David Pocock on marriage equality.

Although we might deem these interventions 'unusual' given their infrequency, they can be perfectly natural for the individual speaking out. Often they are based on experience or expertise.

This makes unusual suspects particularly insightful, and especially powerful.

Carney's incursion into the climate change debate shouldn't be taken lightly. He also heads up the global Financial Stability Board, established after the Global Financial Crisis.

It was no coincidence Carney gave his speech at Lloyd's of London.

Insurers know full well the rising cost of weather-related events, aggravated by climate change, from around $10 billion per year in the 1980s to $50 billion today. These losses, Carney conceded, will "pale in significance" to those on the horizon when we consider "broader global impacts on property, migration and political stability, as well as food and water security".

Carney and Haldane argue the physical, liability and transition risks posed by climate change threaten financial stability.

They are progressives amongst a hitherto conservative central banking set.

Haldane in particular has bemoaned "quarterly capitalism", which sees public companies over-discounting future income streams by 5-10 percent per year.

He believes "shareholder short-termism may have had material costs for the economy, as well as for individual companies, by constraining investment".

Haldane is not alone. Larry Fink, Chairman and CEO of BlackRock, wrote to S&P 500 CEOs in April, accusing them of prioritising actions to deliver immediate returns and "underinvesting in innovation, skilled workforces or essential capital expenditures necessary to sustain long-term growth".

Where are Australia's unusual suspects in business and finance?

One would find it difficult to locate seminal speeches on climate change and quarterly capitalism by our central bankers or the Business Council of Australia

Much has been made of our tepid growth outlook. Reserve Bank Governor Glenn Stevens challenged the National Reform Summit to ask: "how do we generate more growth? Not temporary, flash in-the-pan growth, but sustainable growth".

The adjective -- sustainable -- is key. Focusing on growth at all costs risks missing the wood for the trees. To engineer sustainable growth, one requires a sustainable economy. And that is what Australia lacks most of all.

It is a shame, because sustainability is in Australia's DNA.

In fact, in 2011, then Treasury Secretary Martin Parkinson told us "the theme of sustainability will need to shape the approach to policy development of this generation".

Parkinson was and remains spot on: his focus was on how each generation could bequeath to the next a productive base for sustainable wellbeing at least as large as the stock of capital inherited.

How shortsighted it was for one of our best unusual suspects to be dumped by the Abbott government.

His likely reemergence as head of the Department of Prime Minister and Cabinet is timely.

At his alma mater, Princeton, in September, Parkinson echoed Carney by saying company boards and financial market regulators give scant attention to climate change risks. Equally absent was examination of the "knock-on effects to macroeconomic stability of falling demand for carbon-intensive exports".

Accelerating Australia's transition to a sustainable economy will require those in business, finance, government and civil society to embrace unusual suspects on climate change and sustainability as the new normal, not the exception. If anyone can do this knitting, it's Parkinson. Welcome back.

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