The Latest Corporate Social Responsibility News - Melting Markets and Icecaps: Linking Subprime, Climate, CleanTech, and Spitzer

Subprime meltdown. Credit crisis. Global recession. Whatever you call the current state of the economy, the weekend buyout of Bear Stearns by JP Morgan -- at a fire-sale price due to the Bear’s exposure to junky subprime loans -- does not bode well for markets. As the light of day reveals what has been veiled by intransparency, analysts expose how the problem extends its tentacles in a web of interconnections that threaten to topple like a house of cards.

Doug Cogan of RiskMetrics noted "eerie similarities" between the subprime meltdown and the climate crisis, as both involve banks "failing to account for underlying risks to a huge class of assets." Melting icecaps threaten to flood coastal cities, so "[o]wners of long-lived coastal assets—and those who finance them—should take heed, as the value of this property far exceeds the amount exposed to the sub-prime lending crisis." Ceres commissioned Cogan to write a report rating banks on their climate risk management that found "only a handful . . . factoring a price for carbon in their lending and investment decisions."

However, JPMorgan Chase was among three banks that recently signed the "Carbon Principles," guidelines for evaluating carbon risks of new US power sector investments that call not only for investing in renewables but also "com[ing] clean about their continued financing of carbon-intensive energy sources like coal." Cogan asked what price the Principles will place on carbon emissions in lending decisions. "If the assumed price is set too low, the result may be business as usual investment strategies that keep real risks of climate change hidden from investors in carbon-intensive projects. If that happens, the mistakes of the current sub-prime lending crisis might pale in comparison."

James Murray of BusinessGreen reported, "experts warn the Bear Stearns crisis could curb cleantech growth." "Cleantech is not recession proof," noted Justin Adams of BP at the UK Technology and Growth Forum earlier this week, but "the drivers behind current interest in the sector are enduring and will remain with us whether we go through a shallow or deep recession--there remains a huge upside to cleantech investments." In fact, the financial crisis might remove “some of the froth” from the clean tech market and head off what could become a new speculative bubble, according to Greg Machou of venture capital firm Woodside Capital Partners.

Perhaps the most startling link comes from investigative journalist Greg Palast, who notes the coincidental timing of revelations of Eliot Spitzer’s hiring of a prostitute on the eve of Federal Reserve Chairman Ben Bernanke’s $200 billion bailout of banks implicated in the subprime meltdown. The former New York Governor was set to unveil plans to pursue prosecution of the banks for predatory lending that is illegal under New York State law, where most of the banks are headquartered, according to Palast. So instead of being busted by Spitzer, the banks behind the subprime mess were rewarded with a fifth of a trillion dollars, printed by the US government.

This article was written by CSRwire contributor Bill Baue.

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