Responsible Investor

Green economy and post-pandemic sustainability

How the Covid-19 pandemic may incentivise a “green” shift in the global economy

The majority of governments around the world have so far been struggling to deal with the Covid-19 pandemic in a truly effective way. But even before the pandemic, many countries had come up with very few ideas on how to address the challenges we are currently facing, particularly the climate emergency. For this reason, and to ensure that we do not return to our old ways once the pandemic is over, we need to maintain the good habits we have picked up over recent months and that have slowly become part of our everyday lives, such as smart working and the use of digital platforms. But, above all, what matters most is that the pandemic does not overshadow the need for a shift towards a green global economy. On the contrary, we need to accelerate towards a green economy and way of life by encouraging new public and private investments, sustainability and renewed consumer commitment.

As we all know, for many years scientists and environmental organisations have been warning about a possible climate catastrophe during the 21st century that could overwhelm the planet. But governments seem to have only partially understood the gravity of the message. Considering the crisis level we have now reached, this is the time to replace appeals with concrete examples that we can take as models for a real global shift towards a green economy. The Net-Zero Asset Owner Alliance, which counts Generali among its members, is the perfect example: it has launched a protocol aiming to send a strong message to businesses on the need to make extensive cuts in CO2 emissions. The target is to reduce greenhouse gases by 16-29% over the next five years. This way, the members of the Alliance aim to have “transparent and unique” goals that are adaptable to each institution. However, substantial government action will be required if this goal is to be met.

According to the protocol, in the first quarter of 2021, the members of the Alliance will establish their portfolio targets from different starting points depending on the level of carbon emissions currently contained in their portfolios. Some of them will set large reduction targets while others have already made substantial progress in their journey to “net-zero” and a green economy, and will require reductions at the lower end of the range. For others, a lower 2025 target may reflect geographic or political restrictions – as in the case of developing countries – that require them to decarbonise more gradually during the first years. The protocol has been designed to allow Alliance members to use the combination of approaches that best suits their individual decarbonisation strategies. Each member is unique and, as such, may identify existing levers within its own institutions to accelerate the decarbonisation process. Members also have room to manoeuvre with regard to investments and strategies.

To achieve a real shift towards a green economy, we must enhance the places where the battle for a sustainable recovery can be won: cities. A shining example is the initiative launched by the United Nations Environment Programme (UNEP) in collaboration with the World Resources Institute, Local Governments for Sustainability (ICLEI) and the C40 network. This collaboration links 97 of the world’s largest cities committed to sharing knowledge and leading concrete action on climate change with the aim of adopting integrated urban approaches that also include sustainable, nature-based solutions. The initiative is based on the following conviction: since around 75% of global CO2 emissions come from cities, the key to the transition towards a green economy is essentially in the hands of city mayors and authorities. A perfect example of nature-based green recovery strategies is that of the Centenary Park at Chulalongkorn University in Bangkok, whose innovative design reduces the risk of flooding by absorbing and storing water, which is then used for irrigation during the dry season. Another example is in Medellin, Colombia, where the “Green Corridors” project has transformed 18 roads and 12 waterways into green oases that have reduced the city’s surface temperature by 2-3°C, helping to improve air quality and protect biodiversity.

It is thus clear that addressing global issues such as climate change, air and water pollution, biodiversity loss, ocean degradation and the inefficient use of resources has become even more important as countries attempt to rebuild their economies that have been brought to their knees by the pandemic and improve their resilience against future shocks. As highlighted in a recent OECD analysis, integrating environmental and inclusion issues into recovery measures is a mutually beneficial strategy. It allows governments to progress towards achieving sustainability and environmental targets and commitments while stimulating economic activity in the short term and reducing inequality. If well designed and implemented, green economy measures can generate income, create jobs, improve general wellbeing and strengthen resilience. It is therefore crucial to integrate environmental sustainability and social justice in order to mitigate the regressive impact of environmental policies and ensure equal opportunities in order to contribute to, and benefit from, economic growth.