The Politics of "Green" Finance: Risking it All

“Green” investing started as an ethically motivated niche endeavour within financial markets but has now advanced into the financial mainstream. Today, environmental considerations are increasingly being built into soft financial market (self-)regulation. Thus, by systematically integrating aspects of and knowledge about the environment into investment decisions, financial market actors are indirectly engaging in environmental governance. The rise of this new type of actors in environmental governance has been facilitated by socially re-constructing environmental issues and translating them into terms, symbols, and concepts compatible with the norms, rationalities, and technologies of mainstream finance. The specific expertise and technocratic identity of the financial industry left just one door open to bring in environmental concerns: risk-management. This exploratory study of the politics of “green” finance is based on data from central guidance documents issued by private and public regulatory agencies and semi-structured expert interviews conducted in Germany and the US. It identifies risk-management as the core rationality through which environmental issues are being built into commercial and regulatory financial market infrastructure. It attempts to map the central actors in this process and formulates a preliminary assessment of the implications the rationality of risk-management has for the governance and protection of the environment. The role of calculative and representative technologies used under this rationality are assessed in this regard as well. The translation of environmental issues into questions of risk-management has successfully depoliticized the natural environment and facilitated its integration into investment decisions. This process potentially incurs costs by decontextualizing, distorting, and radically re-interpreting the environment. While the infrastructure within finance for generating knowledge about the environment might further the interest of mainstream financial market actors, they might be unlikely to contribute to the goals of environmental protection or sustainable growth. The alignment of knowledge about the environment with financial norms and rationalities might therefore be both a curse and a blessing for indirect environmental governance through financial markets.