By Bronagh Loughlin
The covid-19 pandemic poses the question how we can recover economically. The pandemic has triggered a global slowdown and leaders are always trying to discover ways to stimulate their countries’ economies.
The approaches they take in order to stimulate economic growth will indeed have long-lasting effects. Therefore, these approaches need to be chosen with caution.
What governments need to avoid is trying to boost their economies in the wake of one global health crisis by exacerbating another, that being air pollution. A stimulus package that entails ramping up fossil fuel production will do exactly that.
Governments and companies considering stimulus packages essentially have two choices. They can opt to lock in decades of polluting, inefficient, high-carbon and unsustainable development. Alternatively, they can use this opportunity to accelerate the inevitable shift to low carbon and affordable energy and transport systems that will bring about long-term economic benefits.
There are serious health dangers when it comes to doubling down on fossil fuels. According to the World Health Organisation, air pollution kills roughly seven million people worldwide each year.
This number is staggering. During the previous economic crises, many countries quickly turned their attention to stimulus packages that entailed investments in ‘shovel-ready’ infrastructure projects.
In most cases, this translated to building more coal or other fossil fuel power plants, upgrading roads, investing in heavy industries such as automobile manufacturing and much more.
Following the old playbook to respond to the covid-19 pandemic would be a terrible mistake as it would only amplify the air pollution health crisis. It does not make sense to come back from covid-19 with another health crisis.
What is the solution here? Well, the green recovery approach is one we would recommend. There are many societal benefits of a green recovery. For instance, a green recovery provides us with an opportunity to future proof our workforce and to put people at the heart of the recovery response.
However, recovery plans must adopt just transition principles in order to ensure jobs are created across society that match with investment in net-zero emissions energy, industrial building and transportation systems and include climate resilience measures.
To ensure that this people-centric approach goes forth, workers and communities that are most affected by the move to a net-zero economy need to be given a central voice in planning the transition.
Much evidence has revealed that pursuing low-carbon and climate resilient growth is the best way to unlock economic and social benefits.
According to the New Climate Economy, bold climate action could deliver at least $26 trillion in net global economic benefits between now and 2030 compared with business-as-usual.
In addition, this includes creating more than 65 million new low-carbon jobs in 2030. Sustainable, low-carbon infrastructure needs to be central to any government-led stimulus responding to the COVID-19 outbreak.
There are countries backing this approach that are planning to implement a green recovery. For example, The European Union has announced a stimulus package for its member states to help them recover from the economic downturn caused by COVID-19.
A key pillar of the 750-billion-euro economic recovery plan is meeting the climate-neutrality goal. The plan aims to accelerate the transition toward clean transport, increase energy savings and increase the production of renewable energy.
In addition to the European Union, Canada is making efforts to create a recovery plan that keeps the environment in mind. As part of their recovery plan, large businesses with revenues higher than $300 million that apply for Canadian Government Loans must publish Annual Climate Disclosure Reports.
This is a vital measure as it will help in identifying the business and economic risk being faced by the climate crisis.
Along with governments, business leaders and the finance sector are also waking up to the risks of increasing high-carbon activities and the benefits that are associated with shifting to a low-carbon resilient economy.
More than 16 major asset owners with nearly $4 trillion in investments globally have committed to transition their full investment portfolios to net-zero emission investments by 2050 and many others are rapidly shifting away from fossil fuel investments.
It makes economic sense after all as the sustainable companies are already outperforming their peers. For example, companies who committed to 100% renewable power have better net profit margins and earning than those without this commitment.
In addition, the corporations who are actively managing and planning for climate change secured an 18% higher return on investment than the companies that aren’t and 67% higher than the companies who refuse to disclose their emissions.
In addition to governments and corporations, individuals can also help in fighting the threats posed by climate change. They can do this by investing in sustainable funds and divesting from funds that invest money in fossil fuel companies.
If you have a pension fund or investment with a fund manager, you should consider talking to them about moving your investment to an Environmental, Social and Governance Fund. ESG criteria are becoming a popular way for investors to evaluate companies in which they wish to invest in.
In addition, many mutual funds and brokerage firms are now offering products that employ ESG criteria. This criteria can also help investors to avoid companies that pose a greater financial risk due to their environmental or other practices.
When thinking about how we can build back our economies, we need to keep the environment in mind. Afterall, if we continue to ignore the environment’s needs, we will have no planet to live on.
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