Professor Lesch, “Climate change – five minutes past midnight?” is the title of your presentation at BaFin’s “Sustainable Finance” event on 9 May 2019. Is there nothing left to do but wait for the end of the world? Or is there still something to save from a scientific point of view?

Something can still be done, but we do not have much time left. In 2018, CO2 emissions increased to 33.1 gigatonnes, setting a new negative record.¹ In other words, we have yet to get started – and we need to do it now.

In your opinion, what are the three biggest threats to Earth and humanity and what can we do to address these threats?

Climate change, climate change and climate change. If we are really serious about doing something about it, we need to be determined to take every step necessary to ensure the decarbonisation of our daily lives as quickly as possible. This cannot be limited to individual consumer behaviour – rather, we need to act resolutely as a community and change the way we live. One measure that is mentioned time and again is a carbon tax.² Some argue that introducing such a tax would bring disadvantages for our economy. But then again, someone has to start somewhere, and Sweden, the United Kingdom and other countries have already done it. Of course, Germany is just a small player in this area, but if we, as a large industrialised country, were to introduce such a tax, we could show others that industry and a carbon tax are not necessarily at odds with one another. This, too, could prompt other countries to follow suit relatively quickly. I also think that common standards within the European Union would be a good idea as well.

You once made a remark to the effect that the Anglo-Saxon way of doing business is set to fail within the next few decades. You have also said that only the European system can work in the long run. What exactly do you mean by this? Are you making the case for a social market economy?

Yes, for a much more cooperative social market economy. The concentration of wealth, which is obviously the result of an economy focused exclusively on competition, deprives us of the means to make investments that are indispensable to society. What do the rich have to gain from their money? They aren’t spending it anymore, and their ravenous appetite to invest in financial products is destroying our future. This is why we need a more cooperative mindset, and I mean that in an idealistic sense. And the wealthy should give up their salaries as a symbolic gesture. DAX³ managers are so rich anyway that they could work for a euro a year.

What role can or should the financial sector play?

The financial sector will play an extremely important role in the transformation towards an ecological, sustainable and decarbonised society. The expansion of renewable energies, including network and storage capacity, requires a great deal of money, and this needs to be invested now – not sometime soon! We should therefore invest in ethical and environmentally friendly projects and move away from coal, oil and too much mobility. I’m sorry to say this, but this is the only way forward.

If the financial sector commits to sustainability, financial supervisors not only want to know about the opportunities but also the risks this would entail. What is your view?

It is perfectly obvious that risks are part of the deal. Of course, sustainability investments are not risk-free either, but unfortunately, there is no other world where we can try things out. A business-as-usual approach in operations and risk management is doomed to fail because the risks we face in a world of global warming are completely unpredictable.

Socio-ethical components are also playing an increasingly important role in the debate surrounding the question of how companies are to meet environmental, social and governance (ESG) criteria. If we can establish the link between sustainability and the financial market, should financial supervisors place socio-ethical requirements on supervised institutions and undertakings?

Yes, of course! Immediately! There are plenty of things that financial institutions can do. They can create committees, e.g. an ethics committee that regularly evaluates financial products and business models to ensure that they comply with ESG⁴ criteria. For the financial sector, too, the top priority must be to allow for a phase-out of our carbon-intensive economy as quickly as possible. In this way, financial institutions can make a significant contribution to reducing the substantial increase in atmospheric carbon dioxide. If we fail to do this, it is pointless to even talk about any other measures.

Professor Lesch, thank you for the interview.

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