Ricardo Hausmann resource rich countries like .Latin America victimized by those with superior technology Imahornfan/flickr

Financing Climate Safety

When the global financial system works properly, savings are channeled into investments that raise living standards; when it malfunctions, savings finance real-estate bubbles and environmentally harmful projects, including those that worsen climate change. Next year will be a turning point in the effort to create a better system.

NEW YORK – The purpose of the global financial system is to allocate the world’s savings to their most productive uses. When the system works properly, these savings are channeled into investments that raise living standards; when it malfunctions, as in recent years, savings are channeled into real-estate bubbles and environmentally harmful projects, including those that exacerbate human-induced climate change.

The year 2015 will be a turning point in the effort to create a global financial system that contributes to climate safety rather than climate ruin. In July, the world’s governments will meet in Addis Ababa to hammer out a new framework for global finance.

The meeting’s goal will be to facilitate a financial system that supports sustainable development, meaning economic growth that is socially inclusive and environmentally sound. Five months later, in Paris, the world’s governments will sign a new global agreement to control human-induced climate change and channel funds toward climate-safe energy, building on the progress achieved earlier this month in negotiations in Lima, Peru. There, too, finance will loom large.

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