Recent crises have exposed the shortcomings of our growth-obsessed international institutions and economic models, pointing to the need for fundamental reforms. The situation calls for a new global commission to reorient our systems towards sustainable and ‘nature-positive’ development.
Washington DC – Russia’s invasion of Ukraine is a humanitarian catastrophe that violates the United Nations Charter and international humanitarian law, and has exacerbated the world’s socio-economic and environmental crises. It is also the latest manifestation of a world system that does not improve the human condition. Our imperfect responses to climate change, biodiversity loss, the Covid-19 pandemic, rising energy and food costs, and war reveal the urgent need to redesign international systems.
An economic model based on the search for indeterminate production and consumption confronted us with climate and ecosystem collapse. The latest reports from the Intergovernmental Panel on Climate Change highlight the seriousness of the climate crisis and the dwindling opportunities for climate-resilient development.
Governments can deliver on their promises to align public support for clean energy investments and implementation, and the phasing out of fossil fuel subsidies. But the war in Ukraine increases the pressure on fiscal authorities to maintain and even increase support for fossil fuels and protectionist and intensive agriculture. Policymakers must therefore recognize that the current crisis is an opportunity to invest in a faster transition to clean energy and resilient agriculture, and that green jobs can be created in the process.
Climate finance must be focused on those who are most affected by climate change and least able to cope with it. Rising food and energy prices were already creating difficulties for the poorest countries before the war. Now, even higher prices threaten a food security crisis that the World Food Program may have a hard time solving, considering that it historically sourced more than half of Ukraine’s wheat.
Peace is necessary to ensure that all societies and nature prosper. But long-term peace and prosperity depend, in turn, on our ability to create a nature-positive, equitable, net-zero emissions global economy. This week and in the coming months, governments and multilateral organizations such as the World Bank and the International Monetary Fund will have the opportunity to lay the foundations for achieving this vision.
The IMF’s proposed Trust Fund for Resilience and Sustainability can help ensure that the newly allocated $650 billion in special drawing rights (the Fund’s reserve asset) will channel more flexible and efficient financing to the most vulnerable countries . At the same time, increased development finance can help scale up green industrialization and jobs, while supporting countries embarking on a transition away from carbon-intensive industries.
For its part, the World Bank must use its financial clout to finance a faster and more equitable transition to clean energy. It must support countries suffering from the pandemic, the physical effects of climate change, and the economic impacts of war by increasing their commitment to finance adaptation, facilitating preferential loans, and implementing their risk mitigation tools to attract more private finance.
Beyond supporting a just transition, transforming the global economic and financial system implies changing the “rules of the game”. Natural resources and nature’s services must be properly valued, externalities properly disclosed, prices set, and incorporated into financial markets.
We also need to change the way we measure progress, because GDP is no longer adequate for it. Instead of helping us solve our biggest problems, it makes them worse by encouraging excessive consumption. Replacing GDP with a new measure that reflects well-being and prosperity across generations would encourage investment in natural and social capital, as would a transition to a nature-positive global economy that respects the boundaries of the biosphere and work within them. The UN Sustainable Development Goals sought the same thing, but we have not yet achieved actions in accordance with those commitments.
Forging a consensus on the new rules will require a new global commission on economics and nature: a new Bretton Woods bringing together governments, business, finance, academia and civil society. We must recognize that our economies depend on nature and function within it. And we must update the governance structures of the IMF and the World Bank to recognize the economic power of emerging markets by giving underrepresented countries a greater voice (and votes).
To persuade companies and investors to shift capital towards low-carbon, socially inclusive and nature-positive activities, governments must integrate natural and social systems into decision-making. That is the only way fiscal and other economic policies can be aligned with international climate, natural, and development goals.
The process should include the publication of information on the stock of natural capital, environmental risks and liabilities, and investment requirements in the annual budget reports. In addition, corporate reporting on climate and nature-related risks needs to be standardized (according to the recommendations of the Working Group on Climate-Related Financial Disclosure and, eventually, the Working Group on Climate-Related Financial Disclosure). Nature) and oblige companies and financial institutions to provide them.
We must increase investment in zero-emission and nature-positive stocks, and eliminate environmentally harmful subsidies. Reversing losses to nature will require $700 billion a year, but that’s just a fraction of the $5.9 trillion cost of fossil fuel subsidies.
Against climate change and biodiversity loss we must implement bold economic interventions similar to those we used to manage the pandemic. Now that many countries are increasing their indebtedness to recover from the pandemic, it is time to expand the global financial safety net, cultivate green sovereign debt markets, and encourage new financial instruments such as nature-related compliance bonds.
By lowering the cost of capital for those who invest in resilience, we can also drive broader economic reforms to accelerate progress toward greener, more inclusive prosperity. With more than $44 trillion in economic value at risk from nature loss and a transition to zero emissions that requires investments in nature-based solutions, initiating reform for a fairer, greener world must be a priority. .
While dealing with the immediate food and energy crisis, finance ministers and central bankers at the IMF and World Bank Spring Meetings must also pave the way for longer-term reforms. That way, world leaders who meet in June for Stockholm+50 and the COP15 biodiversity conference in Kunming will have a solid foundation on which to start building the equitable, zero-emissions, nature-positive global economy we need. .
The author
Margaret Kuhlow is Global Finance Practice Leader at WWF International.
Copyright: Project Syndicate 1995 – 2022