The world must invest now to build a green, resilient, inclusive economy. A Green, Resilient and Inclusive Development (GRID) approach pursues poverty reduction and shared prosperity with a long-term sustainability lens.Here’s how to invest to support this transition.
Reposted from World Economy Forum , originally published on 18 January 2023. Image: Johann Siemens/Unsplas
By investing now to build a green, resilient and inclusive economy, countries can turn the challenges of COVID-19 and climate change into opportunities for a more prosperous and stable future.
RELEVANT SUSTAINABLE GOALS
The decade following the 2009 global financial crisis was characterised by growing structural weaknesses in developing countries, which have been further aggravated by the COVID-19 pandemic and climate change, worsening poverty and inequality. These weaknesses include slowing investment, productivity, employment, and poverty reduction; rising debt; and accelerating destruction of natural capital. The pandemic has already pushed over 100 million more people into extreme poverty and worsened inequality. The effects of climate change are expected to push an estimated additional 130 million people into extreme poverty by 2030.
COVID-19 and climate change have starkly exposed the interdependence between people, the planet, and the economy. All economic activities depend upon ecosystem services, so depleting the natural assets that create these services, eventually worsens economic performance.
A business-as-usual recovery package that neglects these interlinkages would not adequately address the complex challenges that confront the world nor its structural weaknesses and would likely result in a lost decade of development. Targeting socioeconomic, climate change and biodiversity challenges in isolation is likely to be less effective than a coordinated response to their interacting effects. A continuation of current growth patterns would not address structural economic weaknesses and would erode natural capital and increase risks that affect long run growth. As the depletion of forests, oceans, and other natural assets worsen, the cost of inaction is becoming more expensive than the cost of climate action and it is the poor and vulnerable who are most disadvantaged by it.
THE GRID APPROACH
The solution is to adopt a Green, Resilient and Inclusive Development (GRID) approach that pursues poverty reduction and shared prosperity with a long-term sustainability lens. This approach sets a recovery path that maintains a line of sight to long-term development goals; recognizes the interconnections between people, the planet, and the economy; and tackles risks in an integrated way. Research from the University of Oxford, World Economic Forum and Observer Research Foundation has all shown that a green recovery will not just be beneficial for combating climate change but also offer the best economic returns for government spending and yield development outcomes. The GRID approach is novel in two respects.
First, though development practitioners have long worried about poverty, inequality and climate change, the GRID approach pays particular attention to their interrelationships and thus, on the cross-sectoral nature of critical development policies. Second, achieving GRID implies simultaneously and systematically addressing sustainability, resilience and inclusiveness. GRID is a balanced approach focused on development and sustainability and tailored to each country’s needs and its Nationally Determined Contributions (NDC) objectives. Such a path will achieve lasting economic growth that is shared across the population, providing a robust recovery and restoring momentum on the Sustainable Development Goals (SDGs).
Recovering from COVID-19 with GRID
The pandemic has inflicted a particularly harsh blow on developing economies. Most urgently, a fast and fair vaccine rollout is critical to an L-shaped recovery. Vaccine access and deployment presents challenges unprecedented in scale, speed and specificities, which will require strong coordination.
Looking ahead, setting a path to GRID will require urgent investments at scale in all forms of capital (human, physical, natural, and social) to address structural weaknesses and promote growth. Special attention is needed on human capital development to rebuild skills and recover pandemic related losses, especially amongst marginalised groups. While the pandemic has amplified the challenges of providing education for all, it has also highlighted how disruptive and transformational technologies can be leveraged in addition to traditional in person learning to help education services withstand the unique pressures of this time.
Women must be at the center of the GRID agenda as powerful agents of change. Education for girls, together with family planning, reproductive and sexual health, and economic opportunities for women will accelerate the green, resilient and inclusive dimensions of development.
Technology and innovation will play an essential role in promoting low carbon growth. Recovery packages are an opportunity to prioritise investments in the infrastructure needed to develop and roll out transformative technologies.
One takeaway from Glasgow has been that securing green finance at scale will be essential for the GRID agenda. However, developed countries found it difficult to secure the necessary funding for developing countries to implement the green transition to sustainable and equitable development.
But there may be a silver lining. The global economy is awash with excess savings estimated at around $3.9 trillion that are earning negative or low returns and there are $46 trillion of pension funds in search of reasonable returns. The low carbon transition may offer an opportunity for investors, especially as the returns to green investments begin to exceed investments in more conventional technological choices.
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