Interaction between the financial world and the environment is a crucial area where comprehensive global knowledge and action are currently limited. A start has been made – studies conducted within the framework of the Commission on Sustainable Development have led to several new proposals, including Tobin-type taxes which would raise money for the environment through an international tax on financial transactions. Canada took this idea a step further when its House of Commons voted, in March 1999, to authorize the federal government to promote the Tobin tax internationally. In addition, many banks and lending organizations, including the World Bank, have incorporated environmental considerations into their operations.
The insurance industry is one part of the financial sector taking an active interest in environmental and sustainability issues. Liability for clean-up costs is one risk, and climate change from global warming is seen as a potentially serious threat to the industry's financial stability. Economic damage from weather-related disasters exceeded US$200 000 million during 1990-96, four times the total losses for the previous decade (Worldwatch Institute 1997). In 1995 the insurance industry, aided by UNEP, produced a Statement of Environmental Commitment which promised – or warned of – greater attention to environmental risks in core activities such as loss prevention, product design, claims handling and asset management (UNEP 1998).
The UNEP Financial Services Initiative on the Environment is intended to help integrate environmental considerations into all aspects of the financial service sector's operations. A core part of the initiative is to foster endorsement of both the UNEP Statement by Financial Institutions on the Environment and Sustainable Development (written in 1992, revised 1997) and the Statement of Environmental Commitment by the Insurance Industry (1995), which commit signatories to incorporating environmentally-sound practices into their operations. More than 100 financial institutions and 80 insurance companies, from more than 25 countries, have signed their respective statements.
A number of environmental and social rating providers are offering rating systems based on eco-efficiency and other indicators. Pilot projects of a number of investment banks offering environmentally-screened funds in the market have achieved competitive, three year track records in profitability.
It has been estimated that 3 per cent of gross domestic product is the minimum amount needed for environmental protection and restoration. In addition, industry and the public currently allocate more than US$450 000 million a year towards environmental protection. Yet there are still no global-level tools to assess – and, if required, improve – the ways in which such huge amounts of money are spent.