Environmental law might focus on front-line companies that visibly pollute or exploit natural resources, but it does little to address their financial backers like the banks, pension plans and mutual funds. And yet nothing will change unless they are brought into the picture.

A new paper from Canadian legal academic Benjamin Richardson says what's needed is a mix of legislation, changing directors' fiduciary duties which forces them to invest in the best interests of their shareholders, accounting rules and performance indicators.

The paper, Putting Ethics into Environmental Law: Fiduciary Duties for Ethical Investment says companies are fooling themselves if they say it's all too hard. If they fail to act, he says, worse might follow.

"If financial markets continue to ignore imperatives for reform, more radical solutions may have to be implemented to secure our future.186 Timothy Flannery, in The Weather Makers, warns of a hypothetical 'carbon dictatorship' where an 'Earth Commission for Thermostatic Control' controls the economy to safeguard a looming climate crisis,'' Richardson writes.

"Ethical investment, if followed seriously, could help avert such bitter alternatives. Financial markets have become the single most important sector of the global economy, and reducing their ecological footprint through credible legal standards for SRI (socially responsible investment) may yield a better dividend than any other environmental law strategy currently available."