Hundreds of key figures from the world of asset management, banking and insurance gathered on Wednesday – virtually of course – to attend a special webinar on sustainable finance co-organised by the Irish Department of Finance and Sustainable Nation Ireland with the European Commission.
The webinar was an opportunity to hear first-hand from the Commission about how the current public consultation on the renewed sustainable finance strategy will feed into future policy development in this important space.
Here is an edited version of remarks given by Pat Cox, who gave deeply insightful overview of the financial system in the wake of the Covid 19 pandemic.
Mr Cox described the pandemic as a disruptive event whose scale and impact was unforeseen and unforeseeable, when “countries went into lockdown and economies into meltdown.” Read the rest of his remarks here:
“A short sample of recent forecasts confirms this observation.
“Two days ago the World Bank’s forecast observed that this will be: ‘the deepest global recession in decades, despite the extraordinary efforts of governments to counter the downturn with fiscal and monetary policy support.’
“The Spring forecast of the European Commission remarks that: ‘Despite the swift and comprehensive policy response at both EU and national level, the EU economy will experience a recession of historic proportions this year.’
“For Ireland the ESRI analysed three scenarios baseline, benign and severe and concluded that: ‘Regardless of the scenario, the Irish economy is set to experience the largest annual decline in its history.”
“Given the territorial extent of the Covid 19 pandemic, unlike the Eurozone crisis for example, this is not just a regional crisis but is truly global in scale. The two largest economies in the world, the USA and China, could be a G2 locomotive that together with a determined EU macroeconomic boost could speed up global recovery. The risk through blame game polemics, creeping protectionism and great power rivalry is that the G2 could be reduced to G-Zero thus prolonging the evolving socioeconomic crisis that threatens everyone.
“Public deficits everywhere are set to explode in the short term, facilitated to a degree by extremely low interest rates and by accommodating ECB monetary policy, but at a level that will be unsustainable.
“The comparative ease of entering lockdowns will contrast with hesitancy and experimentation associated with exiting them and the multiplicity of implications as citizens and not governments choose how to react, pending an effective mass vaccine, or spooked by new coronavirus outbreaks, or constrained by lower income arising from the unemployment consequences of the pandemic-induced downturn.
“At least in the short term and for the vast majority of people the pandemic has obliged us to pay attention to what our scientists are saying. The impact has been acute, accelerated, deadly and global, a virus invisible to the naked eye but totally visible in its devastating effects.
“In many ways it could be likened to climate change on speed.
“Climate change is ever present, pervasive and though spread out over locations, time and events remains deadly and disruptive in its effects.
“We are living in the anthropogenic age where human activity and not nature is the dominant force for climate change and biodiversity on the planet. The UN Secretary General, Antonio Guterres has said ‘preventing irreversible climate change is the race of our lives”, so far climate change is running faster than we are.
“Awareness has risen dramatically but as the last COP 25 held in Madrid showed there is some way to go to achieve the scale of ambition required. Challenges faced today pale into insignificance compared to what is likely to occur in coming decades on current trends, according to the scientists whose climate prediction record is unimpeachable.
“The Covid downturn is but a pause and not a trend change in greenhouse gas concentrations. The next business cycle and the next electoral cycle are horizons whose tragedy is that they fail to encompass the intergenerational and inequitable consequences of failing to act with determination now.
“To paraphrase the Schuman Declaration of May 9th 1950, seventy years ago, our planet “cannot be safeguarded without the making of creative efforts proportionate to the dangers which threaten it.”
“Climate action must be hardwired into everything we choose and plan to do together. This is what the EU proposes to do, expressed by the Commission President, Ursual von der Leyen, when introducing the Union’s most ambitious ever budgetary plan:
“The recovery plan, she said, turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal and digitalisation will boost jobs and growth, the resilience of our societies and the health of our environment.’
‘This’, she said, ‘is Europe’s moment. Our willingness to act must live up to the challenges we are all facing. With Next Generation EU we are providing an ambitious answer.’
“Next generation EU is the name of the front-loaded plan to raise €750 billion on the financial markets between 2021-2024 to be paid by new own resources/taxes. This has yet to be approved by the European Council and will need to be adopted legislatively by the Council and the European Parliament. All these procedures should be completed by year’s end to begin implementation in 2021. This will be in addition to a reinforced EU budget capacity of €1.1 trillion 2021-2027 and the €540 billion emergency package already announced.
“All this is not out of the blue but fits into a long-term strategy.
“Last December the European Commission adopted its Communication on a European Green Deal, which significantly increases the EU’s climate action and environmental policy ambitions.
“On 4 March 2020, the European Commission proposed a European Climate Law to turn the political commitment of climate-neutrality by 2050 into a legal obligation.
“This follows the European Parliament’s declaration of a climate emergency on 28 November 2019 and the European Council conclusions of 12 December 2019, endorsing the objective of achieving a climate-neutral EU by 2050.
“The ongoing COVID-19 outbreak in particular shows the critical need to strengthen the sustainability and resilience of our societies and the ways in which our economies function. The pandemic underscores some of the subtle links and risks associated with human activity and biodiversity loss which also led to the recent outbreaks of SARs, MERS, and avian flu.
“Experts suggest that degraded habitats coupled with a warming climate may encourage higher risks of disease transmission, as pathogens spread more easily to livestock and humans.
“Therefore, it is important – now more than ever – to address the multiple and often interacting threats to ecosystems and wildlife to buffer against the risk of future pandemics, as well as preserve and enhance their role as carbon sinks and in climate adaptation.
“But for us today and above all the transition to a sustainable economy will entail significant investment efforts across all sectors – meaning that financing frameworks, both public and private, must support this overall policy direction:
“Reaching the current 2030 EU climate and energy targets alone would already require additional investments of approximately €260 billion a year by 2030.
“And as the EU raises its ambition to cut emissions, the need for investment will be even larger than the current estimate.
“This is totally beyond the capacity of public spending, here or in any other EU state.
“If the climate and biodiversity crises are to be successfully addressed and reversed before potentially dangerous tipping points are reached, much of the investment needs to happen in the next 5-10 years.
“However, the financial system as a whole is not yet transitioning fast enough. Substantial progress still needs to be made to ensure that the financial sector genuinely supports businesses on their transition path towards sustainability, as well as further supporting businesses that are already sustainable.
“As the EU moves towards climate-neutrality and steps up the fight against environmental degradation, the financial and industrial sectors will have to undergo a large-scale transformation, requiring massive investment
“That is why the European Green Deal announced a Renewed Sustainable Finance Strategy. The renewed strategy will build on the 10 actions put forward in the European Commission’s initial 2018 Action Plan on Financing Sustainable Growth, which laid down the foundations for channeling private capital towards sustainable investments.
“And that is why we have this morning’s opportunity to listen to Martin Spolc, Head of the Sustainable Finance Unit in the European Commission.
“I thank Martin on behalf of Sustainable Nation Ireland for his willingness to participate today. This is not his first time to assist us and we are grateful to him for that.
“He and his colleagues are now engaged in a consultation process that closes on 15 July. This is your chance to help inform, influence and shape emerging European sustainable finance policy whose aim is to accelerate and deepen the EU’s green transition.
“You should avail of the opportunity because when this policy is formulated it inexorably will shape your business and regulatory environment for many years to come.”