Facilitator’s guide

Preparation and supplies needed

  • Name tags
  • Colored markers, large flip chart paper
  • Laptop, LCD projector and screen (or use flip chart paper to ‘draw’ slides)
  • On flip chart paper, prepare the following pages (see powerpoint slide show/facilitator’s guide for more info on the use of these pages):
    • Rules of the road for the conversation (Slide 1)
    • Workshop objectives (Slide 2)
    • Guiding questions (Slide 4)
  • Paper and pens/pencils for each participant
  • Print enough Activity 1 worksheets to give two examples to each person in each small group (i.e. each person in Group 1 should get a copy of questions 1 and 2); cut the questions into strips so that you can distribute each questions easily.
  • Identify examples of financialization in your country (and/or from participants’ home countries or regions. Identify any energy or climate-related examples of where environment and markets have intersected, and what the results have been. Identify any community response, resistance or alternatives to financilization in these regions or countries. If you think participants would find it helpful, use these to produce a reference sheet/handout for the session.


Suggested group activities

This activity is described in more detail in its accompanying slides.


Activity #1: Green Climate Fund Private Sector Facility design questions

                Accompanying materials: Activity #1 worksheet, Slide 33 & 34

Suggested time: 10-15 mins

  • In small groups, ask participants to review design questions for the GCF’s Private Sector Facility and identify ‘red flags’ with respect to financialization, financial sector power, policy capture, or subordination of public interest to private interests.


Suggested agenda and format for the session

This is a slide-by-slide guide to the accompanying powerpoint presentation. The notes here have been added to each slide and outline major themes, suggested discussion questions, activities, and citations. Because we expect facilitators to pick and choose content – not necessarily use every slide – we have formatted the guide as a work document. Feel free add content, write notes, or delete sections. If showing slides is not an option, this guide can help you think about what to present on flip chart paper. It is highly recommended that you work with a co-facilitator or enlist someone to scribe when using flip chart paper.


Slide 1 – What is Climate Finance?

Suggested activity (about 10 mins): Choose your favorite short warm-up game.

Have materials and name tags available for people as they arrive.

Welcome participants.

Introduce introduce yourself and the why you’re holding this workshop

Review logistics (like where the restrooms are)

Establish consensus on ‘rules of the road’ (like no cell phones, etc.)

Suggestion: Have the rules of the road posted on flip chart paper in the room

Slide 2 – Review the objectives of the session

Suggestion: Post objectives on flip-chart paper in a place where everyone can see them, leave space for additions.

Slide 3 – Introductions

Ask each participant to introduce themselves briefly (in 2 mins, adjust to size of the group and time available for session) and offer any additional objectives for the session; write these additions on the posted flip chart paper

Slide 4 – Guiding questions

Review guiding questions verbally. These are meant to help frame the session and can be kept in mind throughout the conversation, but don’t necessarily have to be answered directly. Reword these questions to meet your needs, and post on flip chart paper. Ask participants if they have anything guiding questions to add, write them on the flip chart paper

Slide 5 – There is no agreed upon definition of financialization, but people in and working with social movements concerned about climate, environmental, economic and social justice have some common ways of describing it.

Slide 6 – As a way help understand ‘financialization’ we use this visual tool to show that it is a process that involves several steps, and that it is a phenomenon made up of two concurrent processes – shifts in the reality and perception of the global economy and in the planet’s ecology. We’ll move through this graphic for the rest of the slideshow, highlighting each step. Facilitators might want to ask participants for questions and comments after each new concept is presented, and ask for observations and comments after each video.

Slide 7 – the “real” economy. Trade in goods and services to meet people’s needs and an active role of the state and regulation of economic and financial actors.

Slide 8 – But about 20 years the global economy started moving away from ‘real’ things like trading goods and services and became more ‘financialized.’

Slide 9 – Describes some of the ways that the economy became more and more financialized and the trends that went along with this transformation globally, like the growing share of the financial sector in the economy and its deregulation, complexity, profitability and growing power.

Slide 10 – As money and market share continued to concentrate in the hands of an increasingly powerful financial sector, they needed new investment opportunities to make bigger and bigger returns.

Slide 11 – In its search for ever more profitable investments, capital chased particular assets and sector, resulting bubbles and bursts.

There was increasingly concentrated capital chasing new profitable investment opportunities (think of all those banks that got bailed out!). So these investors started speculating in commodities, but then the search was for even higher rates of return on investment, and the best way they found was to create new asset classes. This need for capital to find newer and more profitably investment is sometimes referred to as part of the ‘crisis of capitalism’ or ‘crisis of accumulation.’

Why was this able to happen? In part because of deregulation of the financial sector, firms and traders could speculate on assets that they hadn’t been allowed to in the past.

Slide 12 – let’s pause to watch a short film where economist David Harvey describes this process and its relationship to the 2008 (and on going) financial and economic crisis. The film runs approx. 11 mins, but you could start at 5:03 which starts in the 1970s and excessive power of finance capital, or you could start at 7:50 where he begins explaining investment and how it’s changed in the past 20 years. The pace is quite fast, so it may be challenging for people for whom English is a second language. However, there appear to be translations in many languages in the right side bar. Also, it’s a good idea to download this to your computer before the session begins!

Slide 13 – Now let’s turn to the ecological realm (which you’ll see right away is still related to the economy).

Slide 14 – The economy was built on harvesting nature (or natural resources) for human use – like nutrients in the soil, plants for food and fiber, animals, water. At one point these things were valuable because we used them to survive. The value of food was to keep up fed. But as our economy changed, the value of these natural resources also came in their exchange value – I could turn wheat into bread and sell it to you for $2.00. But the market value might not reflect what people don’t know about that loaf of bread, or what people don’t consider important, or what isn’t made part of the price by law… like the cost of loss of soil fertility from planting too many wheat crops or the cost of health impacts for the farmer, family and neighbors when they are poisoned from the pesticides used on the fields. These costs are “external” to the market costs – they’re not considered in the value.

Slide 15 – If the price of environmental degradation is not accounted for, then it means that there’s no cost in polluting, destroying and otherwise compromising the environment.

Slide 16 – So people said “let’s put a price on nature to make it valuable!”

Slide 17 – If you internalize the costs of environmental harm, then it’s more expensive to destroy and degrade, and rational people and companies will be discouraged from destructive practices and products. There are a number of ways to price environmental harm – it can be with non-financializing tools like taxes or fines, or it could be by creating carbon credits for reducing pollution that can be traded on a market – a more financialized approach.

Slide 18 – Putting a value on something is not the same as commodifying it, but in the neoliberal ideological and institutional context of today’s economy, that is the tendency. Putting on a value on nature tends to take the form of producing new “ecological commodities” like carbon, forest offsets, etc.

Slide 19 – The process of creating a commodity takes the participation of many actors. National governments and global public institutions are not actually shrinking away from the economy, but there role has become to build and regulate markets for the benefit of the financial sector.

“Well-intentioned” attempts to put a price on nature (cost-benefit analyses as a guide to policy, carbon taxes, etc.) tend to be eclipsed by commodification. To place a “value” on the environment tends to involve recruiting whole armies of consultants and verifiers to create an exchangeable commodity. However, the prices that the market places on nature is fairly arbitrary compared to these measurement exercises. For example, within the current carbon market, the main determinants of offset prices (for example for tree plantations in Indonesia) tend to be projections of European Union economic growth, the relative prices of coal and gas, etc.

Slide 20 – The process of the tendency to move from commodification to financialization. These concepts do not have set definitions, and could be considered to be parts of the process of financialization. Some also say that financialization isn’t something new, it’s just a new form of an existing process.

In the case of carbon, biodiversity and ecosystem services there is some value to be gained from producing new ecological commodities. But a still greater proportion of the value of these products may come from speculation that floats free of the underlying commodity.

Slide 21 – Valuing isn’t necessarily commodifying, but it tends to lean that way in today’s economic reality.

Slide 22 – An example of how a major financial actor – Citi’s chief economist – envisions the financialization of water.

Slide 23 – When these two forces come together at the intersection of markets and the environment it can create the perfect storm sometimes called “the financialization of nature.”

Slide 24 – The risk is that this trend gives financiers even greater power over government policy, including climate, environment and energy futures. This is called “regulatory capture” – meaning that financial interests have captured public policy making.

Slide 25 – The results of financialization can already be seen in many aspects of the global economy. This short film tells the story of how financial speculation was a major factor in food price spikes. The film is 7:17 mins long, but you could probably stop at 6:15 mins.

Slide 26 – Since 1936 traditional speculators were 20-30% of commodity markets with farmers and their buyers (called physical hedgers) comprising 70-80%. Since around 2004, these ratios have reversed with speculators controlling 70-80% of commodity markets and farmers and buyers being pushed out of markets. Index funds are the tools that pension funds and other large investors use to speculate in commodities.

Slide 27 – There were real supply and demand crises in the early and late 1970s. In 2008, there was no real shortage of oil – full tankers were parked off the shore of England, Iran and elsewhere to take advantage of (and help increase) rising prices. And yet the price of oil increased far more dramatically in 2008 than during the real supply crises of the 70s. Shows that financialization can really throw markets off.

Slide 28 – This is a fun video recap of the financialization of nature. You could switch slide 28 and 25, but it’s a useful review and summary. The film is 6:14 mins long, and is also available in French and Spanish.

Summary –

  • Financialization means that the financial sector more power
  • The financial sector’s primary interests are not conservation, human health, ecological stability or equity

Suggested discussion (20 mins): You could break up into groups of 3 or 4 to answer the following questions (5 mins per question); then share and discuss in whole group.

  1. Where are you seeing the impacts of financialization in your struggles, movements or work now?
  2. What could financialization mean for how we fight climate change?

Slide 29 – this might be a good time for people to get up, stretch and get a snack – or maybe play an invigorating dinamica!

Slide 30 – What could financialization mean for how we fight climate change?

Facilitator might want to use this as a discussion prompt or simply as a transition slide.

Slide 31 – One way that financialization has already impacted climate finance is be setting a neoliberal narrative and policy frame. Basically, there’s no public money, so we need to use public money to move large private investors by making climate investments profitable for them (i.e. public assumes investment risks).

Slide 32 – This narrative is already shaping how countries are designing the Green Climate Fund. (for more information on the Green Climate Fund visit http://gcfund.net/home.html)

Slides 33 & 34 – These are questions that members of the Green Climate Fund board are asking themselves (and outside experts) about the design of the Fund’s Private Sector Facility. The facilitator could use this as background information, read through some examples of questions with the whole group, or use in a small group activity. The aim of the discussion would be to note ‘red flags’ of financialization, financial sector power, policy capture, or subordination of public interest to private interests.

Small group activity (10-15 mins): Divide participants into groups of 2 to 3. Give each each group one or two questions to analyze. Ask groups to report back to the large group about any ‘red flags’ they identified with respect to financialization, financial sector power, policy capture, or subordination of public interest to private interests.

Slide 35 – There’s a lot we can learn from existing funds that emphasize the private and financial sectors.

Suggested discussion (5 mins): What else can we learn from existing examples of development finance?

Slide 36 – Here are some of the existing strategies that movements, NGOs, policy makers and other are engaging as alternatives to financialization

Suggested discussion (15 mins): Can you identify other alternatives to financialization? What are your experiences with these strategies in terms of meeting community needs? How well have they worked?

Slide 37 – We need alternative policies and strategies, but we also need an alternative narrative to strengthen the role of public finance so that climate funds are designed in a way that meets the needs of people and the planet.

Slide 38 – Wrap-up. How does this discussion on financialization and climate finance inform our advocacy?

Suggested discussion (10 mins): Answer these questions as a large group, or break participants into groups of 4 or 5 and have them answer 2 of the four questions (5 mins each); then have share back as a large group. If relevant, record ideas for each point on flip chart paper. This could be part of notes or ‘next steps’ for your group.

Slide 39 – Evaluation. Have a pop-corn style discussion addressing these four points. Write responses on flip chart paper under categories of what went well “+”, and what could change, “delta”.

Slide 40 – Thank you!

Thank the participants for their time and engagement.

Thank you for facilitating this session!

We would love your feedback, or any feedback from participants you would like to pass on. Please contact Janet at janet@ips-dc.org.


Annotated resource list

Gómez-Baggethun, E., R. De Groot, et al. (2010). “The history of ecosystem services in economic theory and practice: from early notions to markets and payment schemes” Ecological Economics 69: 1209-1218. http://www.eco.unrc.edu.ar/wp-content/uploads/2010/09/ecosystem-services-history.pdf

This academic paper reviews the conceptual history of “ecosystem services,” in terms of both economic theory and their practical incorporation into markets and payment schemes. It relates the trend towards monetization and commodification of ecosystem services to a conceptual shift from a Classical to Neoclassical economics framework.

Mandel, J. T., C. J. Donlan, et al. (2010). “A derivative approach to endangered species conservation” Frontiers in Ecology and the Environment 8(1): 44-49, http://siansullivan.files.wordpress.com/2010/08/mandel_etal_2009-biodiv-derivatives.pdf

An academic paper that proposes the use of financial derivatives to protect endangered species. It highlights various mechanisms for achieving this, and raises many of the issues that have drawn criticisms concerning the “commodification of nature.”

Jason Moore. (2011), “Wall Street is a Way of Organizing Nature”, http://www.jasonwmoore.com/uploads/Moore__Wall_Street_is_a_Way_of_Organizing_Nature__2011.pdf

A philosophically-grounded critique of the commodification of nature, placing it within a broader history of capitalism’s appropriation of new “resource frontiers.”

Costanza, R., R. d’Arge, et al. (1997). “The value of the world’s ecosystem services and natural capital.” Nature 387(6630): 253-260, http://www.esd.ornl.gov/benefits_conference/nature_paper.pdf

An academic assessment by a number of leading environmental economists estimating the monetary value of the services of ecological systems and the natural capital stocks that produce them. For the entire biosphere, the value (most of which is outside the market) is estimated to be in the range of US$16–54 trillion (1012) per year. At the time of writing, the global gross national product total was around US$18 trillion per year.

Daily, G. C., T. Söderqvist, et al. (2000), “The Value of Nature and the Nature of Value” Science 289: 395-396, http://www.ci.uri.edu/ciip/FallClass/Docs_2008/Daily_etal2000.pdf

The world’s ecosystems are capital assets that should be “properly valued” by estimating their economic worth, according to this paper. It suggests that such a task can help institutions to frame their decisions in ways that better take account of ecosystem services.

Munden, L. (2010). REDD and Forest Carbon: Market-Based Critique and Recommendations, http://www.mundenproject.com/forestcarbonreport2.pdf

An influential market-based critique of proposals to establish Reducing Emissions from Deforestation and Degradation (REDD) forest carbon markets.

Palmer, M. A. and S. Filoso (2009). “Restoration of Ecosystem Services for Environmental Markets,” Science 325(31): 575-576, http://palmerlab.umd.edu/Palmer_and_Filoso_2009.pdf

Ecological restoration is an activity that ideally results in the return of an ecosystem to an undisturbed state. Ecosystem services are the benefits humans derive from ecosystems. The two have been joined to support growing environmental markets with the goal of creating restoration-based credits that can be bought and sold. However, the allure of these markets may be overshadowing shortcomings in the science and practice of ecological restoration. This paper argues that without new science and an oversight framework to protect the ecosystem service assets on which people depend, markets could actually accelerate environmental degradation.

Robertson, M. “No Net Loss: Wetland restoration and the incomplete capitalization of nature”, http://dl.dropbox.com/u/21234345/Financialization/Robertson.pdf

A critical take on ecosystem services payments, focusing on wetlands restoration. It introduces debates on the concept of “no net loss” and “commodification.”

Sullivan, S. (2010), Banking Nature? The Spectacular Financialisation of Environmental Conservation, http://siansullivan.files.wordpress.com/2010/12/sullivan-banking-nature-submission-to-antipode.pdf