- If we get our policy responses to COVID-19 wrong, we risk exacerbating the climate crisis.
- But it also provides us with a massive opportunity to build back better.
- Here’s how policy-makers and business leaders can set the right example for others to follow.
Coronavirus is a catastrophic health emergency that has sparked the worst economic crisis in a century. My fear now is that if we try to beat this pandemic with the wrong policy responses, we will deepen the climate emergency, too.
While everyone welcomes clearer skies and a sizeable fall in CO2 emissions during the pandemic, these benefits are transitory, insufficient in scale and impose too high a price in terms of lives, jobs and economic growth.
Putting ourselves on a truly sustainable path will require levels of ambition, coordination and a mobilisation of finance (public and private) that dwarfs anything we have done before. We will succeed only by growing ourselves out of trouble – not with a thankless choice between sustaining livelihoods or sustaining the planet.
Five months ago, it felt like we were finding the answers. Davos was buzzing with a real energy and conviction that we could turn the climate change tanker around. Although sustainable finance is proving remarkably resilient to the economic crisis, it is also the case that governments across the world are backsliding on their environmental, social and governance (ESG) commitments, or putting them on the back burner. The number of countries that re-affirm their goals towards the Paris climate agreement later this year will be a serious litmus test of commitment.
A reset moment for humanity
Undoubtedly, we are at a point of real danger. And yet … we are also at a moment of incredible opportunity.
The pandemic is providing humanity with a reset moment. Many of us are rediscovering our connection to the natural world and realising we don’t want to go back to the old status quo. Economically, we are living through a unique moment in which governments are rewriting the textbooks on politics and the economy with a level of state intervention not seen in decades.
We may well never see such a confluence of factors again – where governments are set to deliver loans, guarantees and income support collectively worth more than $8 trillion at the same time as humanity needs to spend up to $7 trillion a year on renewable investments. The way we rescue our economies today will determine our success or failure in averting a climate catastrophe in a decade’s time.
Powers of persuasion
Given our fractured global order, consensus won’t be easy. The hope must be that, as enlightened nations make a stand, others are cajoled into action. For example:
1. Central banks could prioritise the purchase of bonds issued by green-tech, renewable energy companies and energy companies with transitional plans.
2. State support should prioritise sustainability-focused, or high-ESG-scoring companies and sectors – whether via tax breaks, credits or guarantees. The European Commission’s €750 billion ($849 billion) recovery plan is a model for others in putting climate action at its core.
3. Financial assistance for companies should be conditional on hitting future ESG targets. For example, France has made money for Air France subject to the airline halving emissions per passenger by 2030 and in removing many domestic flight routes that can be served by train.
4. Governments could commit, or further commit, to emission trading systems – China is creating a system that will dwarf Europe’s.
5. Employers and governments should encourage and incentivise more environmentally friendly work models. Remote working is here to stay, and that is already reducing emissions from transport. But when travel is necessary, we need simple green alternatives to the car and plane.
6. Regulators and industry groups could encourage or mandate greater disclosure of ESG data so markets have the transparency they need to efficiently channel capital towards sustainable investments. Of the 7,300 listed firms in Refinitiv’s ESG database, 57% still don’t disclose their direct and indirect CO2 emissions.
7. Lockdown-related shortages are prompting companies to reassess the sustainability of supply chains. Shorter and simpler supply lines not only reduce operational risk but also emissions.
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