We are in the midst of an extraordinary crisis. The COVID-19 pandemic is primarily a health crisis – but one that has morphed into a burgeoning economic crisis, shining a light on inequalities and vulnerability in society. We have been plunged into a world with more uncertainty – and as we begin looking towards different stages of recovery, governments across the world are asking themselves some tough questions: how will they re-open the economy? How will they minimize the impacts of a potential recession? How can we get back to normal?
Herein lies the issue. We cannot afford to go back to normal. We must reinvent and renew our economy into one that is more resilient, inclusive, sustainable and zero-carbon. If we prop up the old system, against the backdrop of increasing and impending climate change hazards, we risk locking in a pathway of greater risk.
But we have a choice. We can set a better course: as governments pump trillions of dollars into long-term stimulus packages, they should ensure that climate action is fully embedded in them – through green ‘conditions’ and wider support for cross-industry transitions to net-zero emissions.
A critical juncture
As we emerge from this crisis, and look towards recovery, we will find ourselves at another junction in the road. The actions we take now will affect both current and future generations - and create a roadmap for both companies and economies to follow for many years to come.
Recovering and shifting towards a more sustainable, net-zero economy will be a challenge - but it’s important to note that this won’t be a standing start. We have been building momentum. We should take stock of the groundswell of actions by companies, investors, governments and other non-state actors thus far and take concrete steps to enhance and accelerate them. These enhanced climate actions must then become the norm.
For example, at CDP we have been mainstreaming corporate environmental disclosure for almost two decades, growing from a few hundred companies responding to our disclosure request to over 8,400 companies with over 50% of the global market capitalization now disclosing their environmental data through our platform. Over 870 companies have also joined the Science Based Targets initiative – a critical step towards aligning emissions reductions targets to the Paris Agreement.
We must continue to scale up corporate action. By attaching climate friendly ‘conditions’ to stimulus packages, governments can encourage and accelerate companies to ramp up investment into more low-carbon and circular business models.
To build further resilience, companies that receive long-term financial assistance should also be required to disclose risks and other climate related financial information aligned with TCFD recommendations and to set science-based targets in line with the goals of the Paris Agreement - in order to reach net-zero emissions by 2050.
The Canadian government has recently linked their recovery package with action on climate change by requiring companies that receive financial assistance to commit to publishing annual climate-related disclosures consistent with the TCFD framework.
Companies that disclose their environmental information, measure and manage risks, invest in the transition to a net-zero economy, and set robust science-based targets will increase their resiliency and thrive in the future.
Beyond necessary short-term measures to help businesses weather the sharp economic downturn, we urge governments to begin ‘future-proofing’ their economies and societies by investing in more resilient and sustainable measures – such as renewable energy, low-carbon infrastructure, sustainable agriculture, and ecosystem restoration and protection – which would improve the lives and livelihood of people and protect the economy from future shocks.
If we look back to the 2008 financial crisis and the subsequent economic recovery packages, we can find some helpful precedents and lessons, despite the difference in context. Some governments, including Europe and the United States, incentivized renewable energy – at a time when manufacturing was still small scale and costs were high. Now, wind and solar power are more cost-competitive and are ready to scale. Increased incentives would likely drive down costs and result in a reduction of emissions and improvement in air quality. What we must avoid is a COVID-19 renewal response that locks in high carbon emissions, rolls back any environmental protections in place, and ultimately unravels the climate ambition and momentum achieved thus far.
Without any long-term commitments and guidance from governments, the reopening of the economy may cause a rebound or a sharp spike in emissions from sectors looking to make up for lost time. And while there may be a temptation to green light business-as-usual, resource and emissions intensive projects to kick start the economy – we should favor longer term resilience and building a better economy for all.
At CDP, we found through disclosures that the potential value of sustainable business opportunities heavily outweighed the costs of realizing them (US$311bn in costs vs US$2.1tn in opportunities) – and the same principle can be applied here. With climate change along with pandemics, the costs of global crises are always likely to exceed the costs of its prevention.
With an eye to the future, these long-term packages can also create millions of ‘green’ jobs, increase resiliency within our systems, address socio-economic inequalities and combat climate change. Our recent Europe report with Oliver Wyman, a leading management consultant firm, found that investments in a variety of green infrastructure projects could amount to over €1.2 trillion in new business opportunities – equaling to more than six times the amount needed for the investment to realize them.
Millions of people across the world have had to accept varying forms of lockdowns and social distancing measures as the ‘current normal’. Increasing frequency and severity of extreme weather have also been described as the ‘new normal’. With the right economic stimulus packages and accompanying forward-thinking policies, governments can help turn the next iteration of the ‘new normal’ into a society and economy that works for both people and planet.
We are seeing the right signals from many. The European Commission has indicated that their European Green Deal would play a “central and priority role in relaunching and modernizing our economy”. At the recent Petersberg Climate Dialogue, calls for a green recovery were made by various international leaders and organizations – such as Angela Merkel, Dominic Raab, António Guterres, Huang Runqiu - the newly appointed Minister of Environment for China, and the IMF.
The G20 have also signaled their intent to achieve “strong, sustainable, balanced and inclusive growth” through the recovery. As debates on recovery packages progress, we are encouraged to hear the growing calls for a green recovery, but it must go beyond rhetoric and must progress into concrete actions and policies which can provide a step-change across industries – for example, the EU Commission followed through on their earlier signals by releasing a proposal that places the Green Deal at the center of their economic recovery package.
Enhanced global cooperation
Beyond long-term economic stimulus packages – we will need greater global cooperation, coordination and commitment. The COVID-19 pandemic is a global issue – one that “does not respect borders or ideologies” - the same can be said about climate change. We will need innovative global solutions. Traditional business models and supply chains will need to evolve to be more low-carbon, resilient and circular. Cities will need to pivot towards more sustainable and equitable infrastructure – such as more energy efficient housing, increased pedestrian and cycle lanes, and improved access to urban green space.
Regarding global climate action, the good news is that we already have the frameworks in place: The Paris Agreement and the Sustainable Development Goals (SDG). Governments must maintain and strengthen their commitments under the Paris Agreement, which remains the best multilateral instrument to accelerate emissions reductions, ensure a just transition and reduce the economic risks from climate change. Incorporating the SDG framework in renewal packages will also enable the transition to be more equitable and inclusive. COP26 has been moved to November 2021 and we must all work together to ensure it generates greater ambition and action.
An ambitious vision
It would be a failure of leadership, vision and governance if we separate the response to the pandemic-induced economic crisis from the climate change emergency. Therefore, the long-term recovery process must catalyze the transition towards a net-zero and more sustainable economy. The mechanisms to achieve this are firmly held by decision-makers around the globe: whether they are in boardrooms, in parliaments or in capital markets.
Although state-level actors around the world are faced with a challenge to design “once-in-a-generation” stimulus packages, likely to represent some US$ 20 trillion, they should be emboldened by the breadth of different stakeholders calling for a green recovery – a recent paper by Oxford University surveyed over 200 senior economists across the world and found that “green policy initiatives [as part of recovery] could shift the world closer to a net-zero emissions pathway and offer the best economic returns for government spending”.
Likewise, over 50 signatories from the finance sector have joined various MEPs, CEOs and NGOs in calling for a green recovery . 152 companies, with a combined market capitalization of over US$2.4 trillion, have published a letter through the Science Based Targets initiative urging governments around the world to align the socio-economy recovery with climate science. Similar calls have also been made by major French and German companies - and most recently over 200 leading UK businesses.
While many of us suspected 2020 would be a critical year for environmental action, no-one could have foreseen the extraordinary circumstances we now find ourselves in. Perhaps we can hope to remember COVID-19, not for its immensely tragic human impact, but for the fact that we collectively responded to this crisis by accelerating our transition towards a net-zero economy, and building a future that works for both people and planet.
Every stakeholder has a role to play in calling for a green recovery.