- We need to look beyond energy and transition to a circular economy if we want to achieve the decarbonization goals of the Paris Agreement
- Europe must use recovery from COVID-19 to accelerate the transition to a net-zero carbon economy
- AXA announces plan to shift $24 billion of investments into green bonds by 2023 and calls for more clarity on definition of “green”
- Learn more about the Sustainable Development Impact Summit and view sessions live
Geneva, Switzerland, 24 September 2020 – As political leaders seek to engage the private sector in making the European Union’s $1 trillion Green Deal initiative a reality, the focus should be on the whole circular economy, not just one sector.
“We need to look beyond energy if we want to attain the Paris Agreement goals,” said Stientje van Veldhoven, Minister for the Environment of the Netherlands, in her address today to the World Economic Forum’s Sustainable Development Impact Summit.
The minister pointed to a recent study by the Ellen MacArthur Foundation which reported that 45% of CO2 emissions are related to the production of goods and food. “We really need to link climate change and the circular economy because if we don’t, we’re not just neglecting half of the problem, we’re also neglecting half of the solution,” she said.
A focus on the circular economy offers much “low-hanging fruit” in the form of unnecessary waste and costs. “This is a great agenda to work on with industry,” she said. “It’s a very optimistic agenda…a lot can be done and we can manage this.”
The political legitimacy to take action on climate change has been enhanced by the rise of green parties across the European Union. Arancha Gonzalez Laya, Minister of Foreign Affairs, European Union and Cooperation of Spain, said: “What we now need is to accelerate this movement…in the form of the European Green Deal and use the recovery post-COVID to accelerate the change.”
She laid out the concrete steps to make this happen: legislating the plan; setting clear indicators to measure progress; generating the investment needed; and ensuring the transition to a greener Europe is inclusive, leaving no citizen behind. Working with the private sector is, she said, “essential in achieving this goal”.
AXA, the insurance giant, plans to shift $24 billion of its investments into green bonds by 2023, said Thomas Buberl, the company’s chief executive officer. He pointed out that AXA was the first large insurer to divest from coal but called for more clarity on how “green” is defined. “The criteria for what is green and what is not green needs to be rock solid and well-defined – there is still some work to be done,” he said.
Buberl questioned the European Commission’s silo approach to developing its green taxonomy and called for a new dialogue between business and government so companies can provide input very early in the process to ensure regulation heads in the right direction. He suggested that public and private sectors should co-develop standards and rules rather than the traditional, slow “proposal-feedback process”.
He contrasted the European Green Deal favourably with previous efforts to encourage green growth based on tax and production subsidies. “This new plan very much focuses on investment,” he said. “We are combining economic growth and decarbonization through investment – this is very important.”
Session participants explored how to turn the European Green Deal’s goals into action. These included the importance of encouraging the public to use new, green technologies as consumers need to change their behaviour as well as businesses. On top of incentivizing people to shift to more carbon-neutral choices, governments and companies need to invest in reskilling citizens for new jobs in the green economy. Small and medium-size enterprises generate 30%-40% of innovations but lack access to finance – and the Green Deal should channel more capital towards SMEs.
Europe needs to agree on a price for carbon and SwissRe’s working assumption is $100 per tonne. Standards, disclosures and metrics need more harmonization, and there needs to be more transparency around which products can be defined as green. The oil sector called for some recognition that their transition is not an overnight process – green bonds need to be supplemented by products and a taxonomy that encourage a transition in the right direction. Decarbonization is not the only goal requiring financing – natural capital also needs attention and infrastructure projects must be viewed through a green lens.
About the Sustainable Development Impact Summit 2020
The fourth World Economic Forum Sustainable Development Impact Summit comes at a time unlike any other. Under the theme, Realizing a Great Reset for Sustainable Development, this year’s summit brings together more than 3,800 leaders from government, business and civil society. From more than 141 countries, voices at the cutting edge of sustainable development are meeting virtually for the first time. They will share new perspectives to initiate, accelerate and scale-up entrepreneurial solutions that advance the Sustainable Development Goals and tackle climate change.
The World Economic Forum, committed to improving the state of the world, is the International Organization for Public-Private Cooperation. The Forum engages the foremost political, business and other leaders of society to shape global, regional and industry agendas. (www.weforum.org).