Covid-19: a threat to sustainable development or an opportunity?
The global coronavirus pandemic is far more than a health crisis. It is impacting nearly every area of our lives – from politics and the economy through to society and the environment. The financial sector could assume a key role in this. Are opportunities now appearing that will accelerate the transformation to more sustainable development?
The pandemic is speeding up the debate about sustainability
The coronavirus pandemic has reignited the societal debate about sustainability: harmful emissions have declined as a consequence of the global restrictions on movement and contact with other people, reduced economic activity and the slump in travel by air and other modes of transport, while water quality has improved. Many people now have a greater appreciation of the benefits of a more intact natural environment. At the same time, though, they have also become aware of how susceptible the world is to disasters caused by our way of life and doing business to date.
Will 100 million more people soon drop below the poverty line?
However, sustainability entails more than protecting the environment and the climate. Measured against the United Nations Sustainable Development Goals things look more bleak: the World Bank estimates that up to 100 million more people could drop below the poverty line this year. On top of that, coronavirus is proving a stiff test for many of the accomplishments of recent years, such as progress in public and private educational initiatives across the entire globe – especially in countries that were already digital also-rans.
What are the Sustainable Development Goals?
Within the framework of its Agenda 2030 the United Nations defined Sustainable Development Goals (SDGs). They provide a template for sustainable development at the national and international levels and can serve as a shared compass for international organisations, companies and public authorities. They incorporate economic, ecological and social criteria.
These social and economic disasters threaten to halt the world on its march towards greater sustainability. So can the world allow itself to value ecological and social criteria so highly when the focus should actually be on kick-starting the economy using every conceivable means? The answer is: yes, it must! The world cannot endure any further plundering of its resources.
Key role for the financial sector
In the debate surrounding sustainability those that bear major responsibility – besides every individual for their sustainable actions – are companies and banks in particular. Society is now focusing more attention on social and ecological criteria, in addition to profit targets. Business models in many sectors need to be completely rethought and geared towards a more sustainable economy. A company’s mission can no longer be growth alone. What is required is responsible growth that treats resources sparingly. The financial sector has a special role to play here. It generates important incentives for the real economy via sustainable finance products and can support companies in their transformation. In a few years a company’s ESG rating could be just as important as a traditional credit rating.
ESG factors are important pieces in the jigsaw
In the economy not only small and large investors, but also regulators are attaching more and more importance to ESG factors that take environmental (E), social (S) and good governance (G) matters into account. We have talked to experts from various sectors, for example about how Covid-19 will change the economy, which opportunities will present themselves and what role the financial industry can play. Take a look and read which actions these experts prescribe for the world – and what they find encouraging with regard to economic, social and ecologically sustainable development.
What are ESG criteria?
Environmental, social and governance criteria is the umbrella term for sustainable activities in the economy. ESG factors have become established within financial reporting as indicators to investors of how sustainably a company does business.
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