More than ever, the world needs a clear roadmap to change our global systems, and speed is key. This has been emphasized not only by the current war waged in Ukraine, but also by the COVID-19 pandemic that we are just starting to recover from.
Supply chains worldwide have been put to a test, as most States have and are still experiencing shortages in many sectors. Recently, the United States had to launch a military airlift operation to cope with the supply chain disruptions of baby formula, a first of its kind. The Ukrainian war also clearly showed how untenable our dependence on fossil fuels is, as exemplified by the staggering increase of oil prices that followed the Russian invasion. It comes with no surprise that the issue of transitioning our global systems to sustainability was at the heart of the 2022 World Economic Forum (‘WEF’) in Davos.
Sustainable Finance as an Ally
Guest speakers have demonstrated how essential it is for States to move away from fossil fuels and to invest in renewable energies and other green initiatives. Still today, 80% of the energy globally produced is coming from fossil fuels despite the repeated calls to tackle this crisis humanity faces. But the latter will never be effectively tackled if we don’t promote a holistic and “all-hands-on-deck” approach where all sectors of activities are truly transitioning, and where both the private and public sectors can play their respective role.
Finance is key in this regard, as it can help set up investment strategies based on maximizing the impact they can have in relation to the achievement of the 2030 Sustainable Development Goals.
Take the food industry for instance. As discussed during the WEF, 30% of the worldwide food production is either lost or wasted, partly because of inaccurate demand management, thus creating huge discrepancies between supply and demand. But local farmers, however, can’t contribute effectively to the transition as they don’t have the means to invest in new technologies to render their practices more sustainable.
Finance may provide such tools to channel the opportunities presented by the necessity to transition by making more attractive R&D investments in order to provide innovative solutions for the food sector. As farming as a livelihood operates on very thin margins, should the financial sector not take on a leading role, the transition of this sector is doomed.
But governments should demonstrate leadership as per the $ 500 billion annual agriculture subsidies they grant. The private actors in the food supply chain shall not wait on the sidelines either. Rather than being paid for the quality of their products and the sustainable practices they rely on, farmers are incentivized to supply an ever-growing quantity of products without any regard to the dire consequences their practices might have on the environment. Sustainable finance schemes should be revised accordingly to promote the exact opposite and foster partnerships that help build resilient local food systems, thus securing jobs and providing affordable nutrition.
Getting Rid of the “Degrowth” Taboos
Degrowth and Finance should not be met with fatalism. Transitioning to sustainability does not mean being forced to accept less profitable ventures. As argued during the WEF, transitioning to low-carbon, low-waste, low-inequality societies is not only a matter to correct the wrongs of the past that made our system function only for the very few, but it also means engaging in profitable fields that have yet to be developed to their full potential.
To win over the more skeptics, one should remember that the equity values of sustainable companies were up by 46 percent on average in 2021, and we were then still witnessing the impacts of the pandemic. Further, in Switzerland alone, sustainable financial investments went from CHF 141.7 Billion in 2015 to CHF 1 163 Billion in 2019. A worldwide momentum is thus clearly in the making. And it’s only the beginning.
Let’s all dare a bit more, and leverage the true potential of sustainable finance. Only then could we seriously envisage respecting the ambitious transition imperatives we established for the sake of humanity.