Environmental Finance: A Guide to Environmental Risk Assessment and Financial Products. Sonia Labatt and Rodney R. White, 2002, ISBN 0-4711-2362-5, Wiley Finance Series, John Wiley and Sons, New Jersey, USD 79.95. To order write to info@environmental-finance.com 

Corporations are beginning to recognize that sound environmental management is profitable, and are quickly changing the way they manage their businesses. This has brought about a complete paradigm shift in the way businesses are being run.

Environmental Finance is perhaps the first book to explore this emerging and important field of study. It explains market-based instruments designed to deliver environmental quality and transfer environmental risk. According to the authors, “Environmental Finance is different from environmental economics and ecological economics, which focus on social values. Environmental finance tackles environmental problems from the perspective of the corporation. Corporate interests are framed by the personal ambitions, expectations and values of the managers and owners of firms, and by the regulatory systems through which society obliges them to respond to environmental challenges.”

The fact is, corporations may be better positioned than governments to respond to environmental challenges, make appropriate plans and take actions to protect their own interests.

The book begins with an overview of what and how the field emerged and how environmental finance can help us face the challenges ahead. It discusses the tools for developing environmental finance, and further explores the changes in the financial services sector as a result of globalization and deregulation. A following chapter provides in-depth descriptions of the three key areas of finance; banking, insurance and investment, that have been impacted by environmental issues and how these sectors have risen to the challenges by coming up with products such as green mortgages, insurance for cost-cap overruns for cleaning up polluted sites, catastrophe bonds for earthquakes and weather risks, and markets for greenhouse gas reduction credits.

Chapter seven is of special interest to disaster risk managers. It deals with the financial implications of climate change. Climate change is what drove environmental issues to the fore. The chapter leads us through the main turning points in mainstreaming environmental issues. It also explains the effects of extreme climate events on the economy and human response to them, such as taxes on energy and carbon emissions, and trading credits for carbon dioxide emissions reduction.

Chapter eight covers environmental reporting and verification, and the evolution of corporate environmental reporting in annual and financial reports. The last two chapters discuss strategies for managing environmental change and the way forward.

Insightful and lucidly written, the book is replete with real-life examples. It is an equally valuable guide to newcomers to field and to professionals interested in learning about issues that are intrinsically woven into our daily lives. I highly recommend this book to all disaster risk management professionals.

Ambika Varma is Information and Knowledge Manager at ADPC and can be contacted at ambika@adpc.net