By Rear Admiral (Rtd.) Gary A. R. Best
Presidential Advisor on the Environment
TODAY, we will talk a little bit about options for financial sustainability as we move towards a good life in a green economy. If we use the Bruntland Report definition of sustainable development to mean ‘Development that meets the need of the present without compromising the ability of future generations to meet

their own needs,’ then we should also agree that financial sustainability will possess inter and intra-generational characteristics. Concurring that every good idea should be met by a corresponding good financial plan, means that one of the pillars of the promised good life must be sound financial structures and options.

Financial sustainability is driven by sound, long-term strategic financial planning. It is critical for leaders, at every level of the organisation, to routinely mobilise the entire financial staff so that they are aware of the financial planning expectations irrespective of whether there is a financial crisis or not. Leaders at all levels should stress and believe that a better future is available if planning is effected around the relevant community of actors. In the Guyana context, the community of actors operate at the village, local, regional, civil and national levels. Financial forecasts must be presented in such a manner as to achieve credibility and avoid speculation. The entire working staff of, for example, the Mayor and City Council, must be involved in the overall picture of the entity’s activities in order to be cognitively aligned to its outcomes. The financial system should also be decentralised for greater financial efficiency which will enable early feedback on forecasts with adjustments as necessary to the various financial streams. Therefore, all resources must be aligned and planning must be institutionalised to guarantee financial sustainability. However, reliance on flawed financial indicators will impact negatively on social, environmental and good-life issues.

Sustainable investments and assessments include and require energy use, resource and waste management, climate control, building design, health and safety planning, shipping, marketing, personnel benefits and transportation. However, the incorporation of sustainability into the company’s financial practices requires more than the above elements. Accordingly, sustainability accounting, a method developed by the United Kingdom-based Forum for the Future, is a useful tool to examine internal and external rates of return through an organisation’s environmental and social performance. Further, and as an example, risks associated with climate change will include a valuation of carbon footprints from fossil fuels use in electricity, heating and transportation. Of course, environmental and social performance and climate change solutions are key ingredients of the green economy. In that context, ecosystems services valuation and natural capital valuation are useful, financially sustainable activities in terms of developing and enhancing public environmental planning policies.

The concept of micro financing is also useful in attaining financial sustainability, especially for low-income households, which are usually left out of the banking system due to absence of collateral. Micro financing can mitigate this negative and actually result in low- income households saving, but one has to be careful that one’s oranges are not being compared to another’s apples. Even though it sounds like a win-win, difficulties abound. The target group should be the poor and then up the scale as progress is identified. There is a real risk, however, that if not well mamaged, micro financing will end up serving citizens further up the income scale. There is also an argument, with which I agree, that micro financing provides more opportunities for growth and savings than donor-driven, subsidised programmes. Contrastingly, however, there are those who instead posit that the best practices of the win-win, non-subsidised approach has not manifested in increased micro financing over subsidised financing. Micro financing is a good option for generating and driving the village and micro economy towards the promised good life.

At the international level, financial sustainability could well entail charging for the use of the global commons which includes the oceans beyond the Exclusive Economic Zones, the electromagnetic spectrum, biodiversity and outer space, including the geostationary lower orbits. International taxation is another method of achieving financial sustainability in that, it is justifiable because transnational activities such as tourism and use the global commons encourage free-riders in the international system. Every nation should pay its fair share for use of the global commons. An air tax, for example, might be relevant to the ‘polluter pay principle’. The difficulty here, however, is that it would require an organisational-type international agreement that is GATT/ WTO compatible which may prove difficult and out of reach of the developing states, since such an agenda may well be dominated by the developed countries. But we must push the developed world in that direction.

It is also clear that at the national level environmental taxes and other ecosystem charges can be implemented by governments to drive a form of sustainable financing. It is also clear that insecure property rights over natural resources can be a key factor in the loss of biodiversity in developing countries. To this extent, Guyana must be careful to ensure that rights over large concessions for mining and foresting do not emerge later into inalienable property rights in favour of international entities. In addition, property rights over natural resources should be temporal and reviewable.

We should note also that the private sector can be encouraged to look at green’ businesses and bio prospecting in the area of provision of drugs from forest resources, even though weak country capacities may initially affect regulating the sector. However, an international system of property rights and royalties may be necessary to ensure compliance and protect private sector business investments. Finally, the non-governmental organisations can initiate activities such as ‘debt- for- nature’ swaps which are characterised by exchanging debt in hard currency for local currency or equity in local enterprises as additional measures to attain financial sustainability. While attractive in principle, the nature of the property rights that accrue using debt- for-nature swaps should be carefully worked out to benefit Guyana as a whole.
Next week, we shall look at institutional sustainability.(Comments can be sent to towardsagoodlife@gmail.com)
[box type=”shadow” align=”aligncenter” ]Mr Gary A R Best is a retired Rear Admiral and former Chief of Staff of the Guyana Defence Force. He is an Attorney at Law and the Presidential Advisor on the Environment. He is a PhD candidate at the University of the West Indies and holds a BSc in Nautical Science (Brazil) and Masters Degrees from the University of the West Indies and the University of London. His research areas include climate change governance, climate change finance, international relations and environmental law.[/box]