European politicians, companies, lawmakers and activists are looking to restart growth after the COVID-19 pandemic with green investments because they believe that fighting climate change and promoting biodiversity will rebuild stronger and resilient economies.
In its original form. the EU’s plan of accelerating its greenhouse-gas-emissions reduction target to 50 to 55 per cent by 2030, compared with 1990 levels from the current 40 per cent1 target will entail massive funding. The deal aims to mobilise EUR1 trillion worth of public and private investment over the next 10 years.
The goals outlined in the deal’s growth strategy include clean energy; a circular economy (that has the reduction, reuse and recycling of resources as its guiding principle); energy-efficient building, plus reduced transport emissions, all of which offer investment opportunities to businesses across all sectors. It could also pave the way for new activities and job creation as industries move towards low-emission technologies and sustainable products and services.
The deal’s implications are expected to reach far beyond the EU’s borders. “If implemented successfully, it will enable Europe to play a leading role in redefining how the world achieves sustainable economic growth in the future,” Maarten Dubois, EY Belgium Climate Change and Sustainability Director has noted. It also shows world leaders that it is possible to boost opportunity, competition and regional prosperity while making the world a better place. This aligns with Standard Chartered’s view, as outlined in Opportunity2030: The Standard Chartered SDG Investment Map, which highlights the opportunity available in the private sector to deploy capital likely to generate strong returns while simultaneously enabling long-term sustainable development.
A wide range of industries across the globe should benefit from the clean technologies developed by EU members under the Green Deal, to facilitate sustainable manufacturing and consumption of goods. As a result, EU consumers and businesses could use their purchasing power to sway industries in other countries to embrace more sustainable manufacturing processes.
As the world’s largest single market, the EU has the power to set standards across global value chains, and therefore put pressure on countries to adopt climate-friendly business practices if they want a share of that market.
While the heightened goals on climate neutrality position the Green Deal as a game changer, there are several different initiatives across the world that are also raising the bar on sustainability. This highlights that the private sector is waking up to the business opportunity this presents.
Focusing on areas that include healthcare, social policy and industry, Indonesia is following a 20-year development plan first introduced in 2005. The government has also launched an integrated platform called SDG Indonesia One, which aims to raise funding from investors and donors for projects that will help the country reach its sustainable development goals.
The scope for collaboration and opportunity for investment is immense – which is why financial institutions and the private sector are increasingly playing an active role.
Financial institutions and the private sector are critical pillars of regional governmental and corporate sustainability initiatives.
Increasingly more companies now have a sustainability strategy in place, with goals that support green supply chains, waste minimisation, use of raw materials, and deployment of green energy manufacturing.
The financial community can support such corporate sustainability strategies by providing more sustainable finance solutions. It can also play a critical role when it comes to financing the massive investment required to fund sustainable development goal projects, which the United Nations Conference on Trade and Development (UNCTAD) has estimated at between USD3.3 trillion and USD4.5 trillion for developing countries.
However, these opportunities also present the need for a frictionless transition to sustainability – so how can this be achieved?
The path towards climate neutrality and sustainability will have its share of stumbling blocks. In the case of the EU Green Deal, there is a need to secure clean energy supply, especially as the power system decarbonises. It is also vital to safeguard competitiveness in light of the potential for cheaper subsidised imports from countries with less stringent emission targets.
To ensure a smooth transition, the plan’s overarching climate aim should be balanced by an industrial policy that would safeguard the global competitiveness of European industry, as well as an energy policy that ensures long-term energy security and affordability, as urged by the European Round Table for Industry’s (ERT) Energy Transition & Climate Change Committee.
To mitigate greenwashing and misleading corporate environmental claims, the EU is also adopting a taxonomy that establishes clear classifications for sustainable activities or financial products.
If the EU can uphold these criteria and standards and receives robust support from governments and financial institutions, the Green Deal could be a world-leading example of how sustainability can drive purpose and profit on a global scale.
