Ours is not an era of change, but rather the change of an era, and the state of the art is that of a sick planet whose costs are impacting the economy as well. The latest IPCC report estimates climate change damages at 0.25% of world GDP. Moreover, the damage is not uniform since its effects have been more pronounced in emerging countries, even though predictions point to a rise in more developed countries. Indeed, no one can claim to be immune from the problems at hand.
Two key factors could steer the transition to a Green World. The principal one is complexity and the second is time. Complex problems require complex solutions; moreover, events are moving very fast and the delays that have accumulated are enormous – although the worst mistake would be to move hastily and badly. Thus, the collective consciousness needs to make a leap in quality.
Rather than sustainability, a somewhat over-used term these days, it would be more appropriate to speak about ecological conversion. A triple conversion, in fact: environmental, social and economic. Accomplishing it will require the marriage of ecology and economy, which share the same etymological root: the Greek oikos, or house(hold). Solutions do exist and they involve the environment, in the broadest sense of the word, enterprises and the finance that backs them.
On the environmental front, the future lies in a “one health” concept centered on the interlocked health of the individual and the planet. Today’s threats are pivotal and transnational and mainly concern pathogenic agents, antimicrobial resistance and the circulation of toxic materials. There are international responses in the making, such as the Global Pandemic Treaty being negotiated by the WHO, for instance. Moreover, the ageing of the population is bringing with it an increase in chronic illnesses, approximately half of which can be traced to lifestyle. Styles of life call for changes in behavior that must be taught and disseminated from the earliest years onward. All these health risks are capable of being confronted and managed as long as the conviction that the resources earmarked for health are an investment rather than an expense remains solid.
To ensure that the importance of health becomes the object of daily attention in business spheres as well, it is necessary to ask whether it would be advisable to add a fourth “H” (Health) to the ESG (Environmental, Social and Governance) triad. Certainly, the social dimension incorporates health but should foreground it so as to underscore its importance. With reference again to ESG, the metrics available today are still highly heterogeneous and, at times, both unclear and removed from actual environmental impact. The European Union’s current efforts at regulation – for instance, with the launch of a new Green Taxonomy – should also consider ESG standardization.
On the business front, models need revolutionizing in the sense that they need to go from extractive to (re)generative. Certainly, businesses that advance positively toward the transition to a Green World are likely to benefit in terms of greater resilience, lower capital costs and greater capacity to attract talent; at the same time, however, the transition will not be cost-free. Moreover, the costs will impact sectors in different ways, thus implicating the need to adopt policies of redistribution and accompaniment that permit businesses and individuals to comprehend the benefits of the transition and manage it rather than passively endure it.
Finance can play a pivotal role on this scenario. First of all, by channeling capital toward those projects most appropriate to the transition. At the same time, it can accompany businesses – even small to medium-sized ones – by providing ESG consulting. In this context, ECB policies, such as those that include climate effects as a factor in capital stress testing by banks, will accelerate the transition.
In general, the European Union is moving like a leader in the context of the green transition, and that is a factor in its favor. Nevertheless, since the EU contributes only 7% to global greenhouse gas emissions, it cannot act alone; it needs to be able to persuade other major nations, ideally the entire G20. In conclusion, the hope is that the Union manages to assume a position of leadership in this crucial area where the future of humanity is at stake.