Economic growth must be green from now on
A century ago, the main industry in Bahrain was pearl diving. Most could probably not have dreamed of the lifestyle of the average Bahraini in 2019 or imagined an air-conditioned office in the city center
In my lifetime, wealth has grown astronomically, lifting hundreds of millions, if not billions, out of poverty, creating jobs and new industries. A pearl diver in 1919 might be a fintech entrepreneur in 2019. But, whether you are in government, business or finance, like the pearl diver in 1919, the foundation of our prosperity lies in nature.
Just like the history of nature has determined the history of humanity, the future of nature will define our collective future. But the sad reality is that we are not paying enough attention to the signals from nature, and our economies have largely grown on the back of resource extraction and unbridled pollution. The booming prosperity that put last century’s pearl diver behind a computer screen today was not without cost.
In fact, over the last century, we have behaved as if our resources are cheap and inexhaustible. But they are not. Carbon dioxide emissions have, meanwhile, reached levels not seen in 8 million years. And now climate change is causing more frequent violent storms and disasters. Global disasters cost us $160 billion last year alone and devastated infrastructure. A few weeks ago, we received startling news from our colleagues working on biodiversity: A million species are under threat of extinction from human civilization. At this pace, the actual costs will be overwhelming before long.
It is time to turn our natural inclination for resilience, innovation and self-interest to good use. We have the social support for change. Climate marches draw millions to the streets and there is growing political support in some strategic areas. Every single country on the planet agreed to the Sustainable Development Goals, and broad support for the Paris Agreement points to an overwhelming international backing for climate action.
But, while the world rallies and public awareness rises, one of our biggest deficits is economic support to generate the $5 to $7 trillion needed each year to deliver the Sustainable Development Goals. It is clear this vast amount of financing cannot come only from governments. If we want to save the planet, finance must come from the private sector, at least in part.
Every year, all investment in the world amounts to $12 to $17 trillion. This is more than enough capital in the economy to achieve the global goals we have set for ourselves.
Carbon-intensive, environmentally devastating industry has taken us to incredible levels of prosperity. But its time is up.
The central challenge is reorienting these capital flows away from fossil fuels and investments that actively erode our natural foundations. The current playing field has been tipped in favor of unsustainable industry for centuries. Last week, UN Secretary-General Antonio Guterres called for an end to government subsidies for fossil fuels. I wholeheartedly support this. He also underlined that anything but a green economy has no future. He is not the only one saying so.
Central banks have started to recognize this fact. Notably, the Central Bank of France and its partners in the Network for Greening the Financial System, such as the People’s Bank of China and the European Central Bank, have made a coordinated effort to adjust the rules of the game.
But elevating green finance is not limited to the public sector. The UN Environment Programme has identified that, like central banks, there are more and more financial institutions adopting practices and standards that favor sustainability.
There is a “quiet revolution” happening in the financial system and there are three initiatives that demonstrate the truly global nature of this trend. Twenty-three of the world’s leading financial centers — New York, London and Abu Dhabi among them — are part of the International Network of Financial Centers for Sustainability, a platform that delivers research and strategic guidance to financial centers on green finance. The Bahrain Association of Banks recently held a sustainable finance forum that showed a clear appetite for addressing the regulatory changes that Bahrain’s financial institutions need to achieve in order to meet the sustainability and economic goals of its Economic Vision 2030.
The Sustainable Stock Exchanges Initiative — which counts the Bahrain Bourse as one of its 83 members — supports exchanges worldwide in implementing corporate sustainability reporting. It also shows securities regulators how they can support sustainable development and encourages stock exchanges to grow green finance. And, finally, the Principles for Responsible Banking, the Principles for Responsible Investment and the Principles for Sustainable Insurance aim to commit signatories to aligning business strategies with the Paris Agreement and the Sustainable Development Goals. Today, more than 70 percent of global investment and 25 percent of global insurance falls under the remit of these principles.
I think the takeaway from these efforts is that the financial community is recognizing its responsibility — and ability — to help fix the planet. The transition is happening, even if it does need to speed up. Old and august institutions like central banks and finance ministries are drawing up innovative frameworks to green the financial system. As these institutions shape and define the rules of the game, there will be huge market opportunities for frontrunners. And capital markets like Bahrain will play an important role. Played right, it can be enormously beneficial to a country and its people.
For governments around the world, there is one issue that tops them all: Jobs. And investing in the environment is one way to create good jobs. In 2017, 500,000 new jobs were created in the renewable energy sector alone, so clearly there is a strong link between a sustainable future and good jobs.
Carbon-intensive, environmentally devastating industry has taken us to incredible levels of prosperity. But its time is up. We must wave goodbye. Economic growth from now on must be green if we are to stand a chance of protecting the fragile foundations of our societies and economies.
I know we have the resilience and the innovation — great examples of which we have seen on display in Bahrain — and certainly the self-interest to make the shift. The transition to a green economy must happen urgently. Let us waste no time.
- Joyce Msuya is Acting Executive Director of the UN Environment Programme.