international – Free Range Podcast

Season 2, Episode 11

On this episode of Free Range, host Mike Livermore is joined by UVA Law professors Quinn Curtis and Mitu Gulati, as well as UNC-Chapel Hill Law professor Mark Weidemaier, all experts in the regulation of financial markets, to discuss their new paper, “Green Bonds and Empty Promises.”

A wide range of institutions borrow within the bond market, including municipalities, corporations, and sovereign nations. The essence of a bond is a set of promises, which include repayment terms and limits on opportunistic behavior by debtors. One new feature of the bond market is the rise of ESG (Environmental, Social, and Governance) investing. ESG is widespread within the mutual fund industry but has found a place in the bond market as well. However, there is a difference between investing in the environment through stocks and through bonds. Stocks allow the investor to earn more as companies gain wealth by adapting to climate change, but bonds are paid back at a fixed rate of return, so the risk and return equation is different.

Green bonds are a type of bond that is associated with environmental projects, but the actual language in bonds dealing with sustainability or environmental performance is often vague. This was one of the major research findings in Green Bonds and Empty Promises – purportedly environmentally friendly bonds don’t actually limit how the borrower can spend the borrowed money (0:50-27:58).

To understand the market for green bonds, Gulati, Curtis, and Weidemaier began by defining the category “green.” For this, they relied on third-party databases that are used throughout the industry when investors are building ESG portfolios. Issuers likely determined their own categorization, essentially deciding whether their bonds would be listed as “green.” The green label matters because these bonds might have a lower interest rate, referred to as a green premium, although research indicates that any green premium that does exist is very small. However, green bonds do appear to enjoy some benefit in terms of liquidity because many investors want to show their clients environmental responsibility.

After collecting a sample of green bonds, the team then investigated the actual promises found in them. Interestingly, their research found that green bonds generally do not possess legally enforceable commitments to use proceeds for environmental projects. Interview research found that many know the “green” label is PR and don’t expect the status quo to improve (27:59-57:56).

The conversation wraps up with the methods in which the situation can be addressed, and all four provide their opinions. Weidemaier explains that legal enforceability would remove the market’s liquidity, transforming it into an affinity bond market that is no longer fungible. Another option is to simply kill the market since green branding can still happen, but then no one is misled on such a scale. Curtis believes that there is some room for improvement as certifiers can begin considering legal enforceability and the market would inevitably become smaller but more credible. This theory depends on the sincerity of the investors’ demand. Gulati considers the green bond market to have the potential to evolve into something better since it is currently booming and the way it operates is unique. Livermore describes significant environmental improvements as being made mostly through policy, so the value in private markets is mainly that they raise awareness for climate change and may aid in a cultural shift to support pro-environmental policy (57:57-1:09:20).

Season 2, Episode 7

Transcription

On this episode of Free Range, host Mike Livermore is joined by Paul Stephan, a comparative and international law expert at UVA Law and author of the new book, “The World Crisis and International Law: The Knowledge Economy and the Battle for the Future,” recently published by Cambridge University Press.

Stephan defines the concept of a knowledge economy as the increasing reliance on conceptual work rather than physical labor as a means of adding value to goods and services. He cites the example of container shipping and its impact on the distribution of goods around the world. Stephan argues that innovation is a driving force in the world economy and that international liberalism has emerged as a means of reducing barriers to talent and scalability, which are essential components of the knowledge economy (00:40-9:22).

Stephan discusses how global trade systems like the WTO and GATT were formed to promote international liberalism and reduce barriers to trade. He also discusses the “four freedoms” at the heart of the project of international liberalism, which are freedom of movement of goods, services, capital, and people. The expansion of Western liberal internationalism to other parts of the world after the end of the Cold War is also discussed. In the post-Soviet era, liberal internationalism and free trade institutions were expanded to other parts of the world, like Russia and China, in hopes they would follow (9:23-22:58).

Stephan discusses how the benefits of the knowledge economy are not spread evenly across the global economy with local distribution of winners and losers as well (22:58-28:32). In the 80s, Russia was a high human capital country but they chose a resource extraction pathway instead of disruptive innovation and production. For Stephan, China has a longer term perspective while Russia has pursued a strategy of using force in international relations and attempting to exploit divisions in competing polities (28:33-40:59).

In the context of climate change, Stephan emphasizes the importance of providing incentives for states to develop innovative technological solutions. He praises the transparency of the Paris Agreement and encourages the sharing of technological breakthroughs while still maintaining incentives to innovate (41:00-49:31).

Regarding the future of institutions like the WTO and the European Union, Stephan believes that these organizations can survive through adaptation. The conversation ends on a hopeful note, with the possibility of creating a world where incentives work to induce investment in carbon reduction, and where global cooperation is managed through an evolving but still robust international order.

Season 2, Episode 6

Transcription

On this episode of Free Range, host Mike Livermore is joined by Alex Wang, Professor of Law at UCLA, co-director of the Emmett Institute on Climate Change and the Environment, and expert on the law and politics of Chinese environmental governance.

Beginning with Wang’s initial experience in environmental issues in China, the US, and the NGO community, he discusses the generational and globally formative transformation he witnessed over his three decades in the field (1:37 – 9:36). After China’s entry into the WTO, there were some expectations for a broader economic and political liberalization. While there has been an increase in marketization and economic freedom, the Communist Party has maintained tight political control (9:37-14:26). Although formal political freedom is limited in China, Wang emphasizes that there are many mechanisms through which politics occurs; he also discusses important developments in the state’s administrative law and responsiveness to citizen demands in the past several decades. Wang discusses protests, concessions, and accountability that operate through less formal means, which can be effective at mediating social conflict, even if lacking traditional procedural fairness (14:27-22:18).

The conversation highlights the difference between the US and China in regard to responsiveness to recent large-scale protests which also speaks to the extremity of Chinese policy. While rapid change is possible in China, it is core to the design of the US political system to diffuse power, which limits capacity for rapid change (22:19-35:24).

Over the last two decades, there has been a large shift toward greater prioritization of eco-civilization and environmental protection in China. This transition is at the intersection of environmental, political, and economic change. Pollution began to be seen as a governance and social stability problem. Regarding the shifting geopolitics and the changing relationship between the US and China, the level of respect towards China has gradually changed throughout Wang’s experience over the past three decades. Globally, China has taken on a much more substantial leadership role, and power in the global system has shifted away from the United States and the single dominant player. Politics, energy security, and economic opportunities played a large role in China’s investment into green technologies, where they are now dominating the supply chain (35:25-53:47).

Wang covers the human rights story, symbolic politics versus implementation, and the issue of achieving climate goals in light of economic consequences (53:48-56:41). The US and China may be in competition for the foreseeable future, so maybe this competition can be socially beneficial. But is it an open question whether this proxy battle will be enough to fuel serious decarbonization (56:42-1:04:59).

Season 1, Episode 3

Transcription

On this episode of Free Range, Mike Livermore speaks with sovereign debt experts Lee Buchheit and Mitu Gulati. Buchheit is a retired partner at international law firm Cleary Gottlieb Steen & Hamilton, whose practice centers on international debt restructuring and project finance. He has worked on more than two dozen sovereign debt restructuring deals, including leading the team that advised the Greek government during its 2012 debt crisis. Mitu Gulati is the John V. Ray Research Professor of Law at the University of Virginia School of Law. In addition to his academic work, he is the host of Clauses and Controversies, a podcast which examines the intersection of international finance and contract law.

To start off, Buchheit and Gulati provide a bit of background into their careers and how the field of sovereign debt restructuring re-emerged in the 1980s, fifty years after it first appeared in the wake of the Great Depression. Buchheit then provides a detailed explanation of what, exactly, sovereign debt is, how it functions on the international stage, and its advantages and drawbacks, and then describes the kinds of circumstances that can cause nations to seek to restructure their debts (1:15 – 21:22).

Continuing on from this, Buchheit explains the sovereign debt restructuring process, like the one Greece went through in the early 2010s, when the situation was so dire that some even suggested Greece sell the Acropolis (22:10 – 27:40). The conversation then shifts to analyzing broader questions about the current structure of global debt, and the potential sovereign debt crisis that looms over the global economy (28:52 – 41:00).

The podcast concludes with a long discussion about a recent debt restructuring deal Buchheit worked on for the government of Belize, which incorporated certain environmental conservation goals as conditions of the restructuring. The specifics of the deal lead Gulati and Livermore to raise questions about whether sovereign debt contributes to economic disparities between the Global North and Global South (42:00 – 1:20:18).

Season 1, Episode 2

Transcription

On today’s episode, Mike Livermore speaks with Assistant Professor Camilo Sánchez, the Director of the University of Virginia School of Law’s International Human Rights Clinic. Their conversation covers everything from Latin American history to the intersection of constitutional law and international law. These threads come together in the Guapinol Case, one of the clinic’s major projects. In that matter, Professor Sánchez and his students collaborate with international organizations to advocate on behalf of a group of eight illegally-detained environmental defenders in Honduras.
The conversation begins with Professor Sánchez talking about his background and what sparked his interest in international law (00:40 – 2:40).

Professor Sánchez explains the importance of international law in the Latin American context, and describes how domestic politics and international law interact with each other in the region (2:45 – 10:35). The discussion examines the intersection of human rights and environmental law issues by looking at the work being done by UVA Law’s International Human Rights Clinic in the Guapinol Case (10:45 – 29:00).

Livermore and Sánchez discuss environmental rights in constitutional and international law. Professor Sánchez describes and summarizes three distinct approaches to this idea: philosophical, legal, and practical, and then explains how rights litigation has played a role in establishing norms that allow for distinct commercial and social interests to coexist (29:53 – 49:45).

The conversation concludes with an affirmation of the importance of cooperation between legislatures and courts to ensure development that is sustainable and equitable (50:35 – 1:04:30).