As the global economy struggles to regain a semblance of normality under the challenges of the Covid-19 pandemic, the call that the policy tools required to enable recovery must be delivered along fully sustainable lines is loud. That call is being heeded from the United States to Europe to China and within Asia-Pacific, with US President Joseph Biden’s call to “build back better” via a dynamic rooted in sustainability and focused on the green economy exemplifying the rapid shift in mindset thanks to the colossal disruption inflicted by the pandemic.
But with such a heft of pressure to deliver recovery, there is also the need for concerted policy coordination among multilateral institutions and groupings, based on an urgency which mirrors that last manifested during the ending of the Second World War and its aftermath.
We are now apparently seeing the dynamic in action at the government level, with dramatic economic stimulus policy interventions from the US and the European Union in the works.
Alongside a US$1.9 trillion spending package designed to help the US economy rebound from the effects of Covid-19, the Biden administration is discussing plans to invest between US$3 trillion and US$4 trillion via direct spending and tax credits, partially through an infrastructure bill that will be designed to reduce global warming.
The key features of the bill are rooted in clean energy transformation, from building more efficient power lines to deliver renewable energy, building electric vehicle charging infrastructure, and capping oil and gas wells.
In America, it all adds up to a “Green New Deal”, echoing the dramatic interventions by the Roosevelt government of the 1930s to address the Great Depression of that era. The aim is to achieve net zero carbon emissions by 2050 while in the process, according to Biden, to also build a “more resilient, sustainable economy” with the job creation that goes with that process.
Meanwhile, last month, the European Union passed a 672.5 billion euro (US$791.4 billion) “recovery and resilience” package, entrenched in a fund that will reserve 37% of the cash within the fund for spending on climate-friendly measures.
That investment will be made according to the criteria laid out in the EU’s green finance taxonomy, a framework which is fast becoming standard orthodoxy for governments globally in relation to the economics of sustainability.
The new EU stimulus package came on the heels of of the 27-nation bloc’s Green Deal which was passed into law in December 2019, before the onset of the pandemic.
But what is missing in all of this frantic activity? One answer would be concerted multilateral action involving an unprecedented coordinated policy response, given the gravity of the pandemic’s decimation and the parallel destructive course of fast-moving climate change.
The stakes are high, much as they were when the convenors gathered for the conferences at Yalta and Bretton Woods as the smoke hovered in the air thanks to six years of destruction wrought by World War II.
Potentially historic gatherings are waiting in the wings in the form of upcoming G7 and G20 summits, scheduled for June and October respectively. The hope is that the participants will grasp the profundity of the current state of the world, and act in due concert with action rather than words.
“At a multilateral level, the topic [of sustainability] has either been overlooked, or led by environment or development departments. At the G7 and G20, finance ministers do not address sustainable finance and investment topics as part of their core agenda,” say analysts from the UN-supported Principles for Responsible Investment (PRI), in a recently published white paper. “Globally, multilateral organizations need to step up their engagement to align traditional financial policy frameworks with sustainability and climate goals.”
Perhaps there has been a step in the direction of concerted international action – as a preamble to the G7 and G20 meetings – in the form of the US government convening a Leaders Summit on Climate, scheduled to take place in late April.
The event underscores the country’s new commitment to tackling climate change under the strictures of the Paris Agreement, rejoined by the Biden administration in January after president Donald Trump withdrew from the agreement at the start of his tenure.
Senior leaders from China and Russia, including Xi Jinping and Vladimir Putin, have been invited to attend the virtual gathering, which arguably represents the US attempting to take ownership of the sustainability agenda as a global power.
The hope is that the event will set the stage of anticipation for the subsequent G7 and G20 meetings, as well as the COP26 conference scheduled to take place in Glasgow in November, and represent a call for concerted multilateral action.
At the national government level, the growth pace of sustainability-oriented financial policy has been rapid – according to the PRI, there were 124 new or revised policy instruments in place globally last year, the highest according to its records and a 26% increase on the previous year.
“With the [United Kingdom] and Italy co-hosting COP26, as well as the G7 and G20 meetings respectively, convening leaders have a unique opportunity to align the agendas of all three events and prioritize actions that adequately factor in ESG goals, such as Covid recovery and climate solutions,” says PRI chief executive officer Fiona Reynolds.
Within Asia, the multilateral mindset was on display last November when the Association of Southeast Asian Nations (Asean) committed to promoting a “sustainable recovery” from the pandemic via the Asean Comprehensive Recovery Framework, which is built around the mission statement of “advancing towards a more sustainable and resilient future”.
“The ongoing public health crisis presents Asean with an opportunity to reset and recalibrate the region’s growth trajectory on a more sustainable, accelerated, and resilient track,” stated the parties at the Asean virtual conference, hosted by Vietnam, when the framework was unveiled.
Much as is the case in the US and the EU, the focus in the framework is on decarbonization, in Asean’s case with the explicit aim of achieving a minimum 23% share of renewable energy and 30% energy intensity reduction by 2025.
“The post-pandemic recovery will not be a return to business as usual for Asean… Creative solutions are needed and this would require a new set of thinking from all stakeholders involved in the recovery process,” was the conclusion stated in the framework.
In all this, the hope is fervent that words will be matched by concerted material action, underpinned by a multilateral mindset.
The components of such actions will range from wealth transfer via debt forgiveness or lending – directly or with the help of MDBs (multilateral development banks) and the provision of credit guarantees from government agencies – and the mass mobilization of public-private partnership capital under the aegis of the public sector. Words alone will not do.